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Press release from PR Newswire

Noble Energy Announces Third Quarter 2012 Results

Thursday, October 25, 2012

Noble Energy Announces Third Quarter 2012 Results07:28 EDT Thursday, October 25, 2012HOUSTON, Oct. 25, 2012 /PRNewswire/ -- Noble Energy, Inc. (NYSE: NBL) reported today third quarter 2012 net income of $221 million, or $1.23 per share diluted, and net income from continuing operations(1) of $164 million, or $0.91 per share diluted.  Excluding the impact of unrealized commodity derivative losses and certain other items, third quarter 2012 adjusted net income from continuing operations(2) was $167 million, or $0.93 per share diluted.  Net income from continuing operations for the third quarter 2011 was $491 million, or $2.67 per share diluted and adjusted net income from continuing operations(2)  was $191 million, or $1.01 per share diluted.  Discretionary cash flow from continuing operations(2) for the third quarter 2012 was a record $714 million, compared to $563 million for the same quarter in 2011.  Net cash provided by operating activities was $924 million, and capital expenditures were $724 million.Key highlights for the third quarter 2012 include:Record quarterly sales volume of 242 MBoe/d, up 11 percent year over year Horizontal net production within the DJ Basin increased to 31 MBoe/d, up 29 percent from last quarter and more than double from the third quarter of 2011 Marcellus production grew to 102 MMcfe/d, an increase of 38 percent over last quarter Initiated production from the wet gas area of the Marcellus Shale that indicates a portion of our acreage is within the "super rich" area of the play Entered into new positions offshore Falkland Islands and Sierra Leone Secured a service contract for a new-build drillship capable of both reaching deep oil targets in the Eastern Mediterranean and supporting our global drilling program Received over $1.1 billion in proceeds from divestments of non-core assets Exercised option to increase credit facility from $3 billion to $4 billion, enhancing the Company's strong liquidity position Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "Strong liquids growth in both the DJ Basin and Gulf of Mexico contributed to our standout performance this quarter.  Discretionary cash flow grew to a record level, up 27 percent over the comparable period last year, driven by a 42 percent increase in crude oil sales.  Despite the impact of Hurricane Isaac in the Gulf of Mexico and unscheduled third party downtime in the DJ Basin, volumes grew by eight percent over last quarter and 11 percent year over year.  Our major international projects at Tamar and Alen remain on schedule, and we expect to initiate sales from Tamar in less than six months."  Third quarter 2012 sales volumes from continuing operations totaled 242 thousand barrels of oil equivalent per day (MBoe/d), up 11 percent from the third quarter 2011.  Production volumes from continuing operations for the quarter were 247 MBoe/d, with the difference attributable to the timing of crude oil liftings in Equatorial Guinea.  Sales volumes of crude oil and natural gas liquids increased 42 percent and 10 percent respectively, while natural gas declined 3 percent.  Overall volumes consisted of 35 percent crude oil, 10 percent natural gas liquids, 25 percent international natural gas and 30 percent domestic natural gas.  U.S. sales volumes were 141 MBoe/d, up 25 percent from the third quarter last year.  The growth was primarily attributable to the acceleration of the Company's horizontal drilling program in the DJ Basin, the addition of the Marcellus Shale and the startup of Galapagos in the Gulf of Mexico. Divestments and natural production declines in non-core onshore properties offset a portion of the gains. International sales volumes totaled 101 MBoe/d for the quarter, down five percent from the same period last year.  The impact was primarily driven by lower natural gas sales in Israel partially offset by strong operational performance of the Aseng field in Equatorial Guinea.  The average realized price for crude oil and condensate was $99.30 per barrel for the third quarter, up three percent from the prior year period.  Natural gas realizations in the U.S. averaged $2.61 per thousand cubic feet (Mcf) and $4.43 per Mcf in Israel.  Natural gas liquids pricing in the U.S. averaged $29.71 per barrel, which equates to 32 percent of the average price for West Texas Intermediate (WTI - NYMEX) crude oil.Total production costs per barrel of oil equivalent (Boe), including lease operating expense (LOE), production and ad valorem taxes, and transportation and gathering expenses were $7.10 per Boe, up slightly from the third quarter of 2011.  LOE was $4.63 per Boe and depreciation, depletion, and amortization (DD&A) was $16.53 per Boe.  The unit rates were impacted mostly by the growing contribution from new high-value crude oil production in the Gulf of Mexico and West Africa. Exploration expense includes leasehold costs associated with our exit from Senegal and dry hole cost associated with the Trema well, offshore Cameroon.  The Company's adjusted effective tax rate for the third quarter 2012 was 33 percent, with 60 percent deferred.OPERATIONS UPDATEIn the DJ Basin, the horizontal development program delivered strong performance in the third quarter with net production reaching 31 MBoe/d, a 29 percent increase from the second quarter of 2012.  Total basin net volumes averaged 75 MBoe/d of which 59 percent was comprised of crude oil and other liquids.  Production this quarter was adversely effected by 5 MBoe/d related to third-party processing plant downtime and hot weather.  During the quarter, 57 horizontal wells were completed, up from the 43 wells last quarter.  Three recent extended-reach lateral wells have been online over 60 days and are tracking a 750 MBoe type curve.  In a new development area in Northern Colorado, 11 wells are online producing 5,500 Boe/d with 80 percent oil content.  Three of the wells, part of an 80-acre pilot test, have 30-day production rates averaging 720 Boe/d.  Operated rig count is expected to end the year at eight rigs with three working in the extension area and two in the core area of Wattenberg, and the remaining three in northern Colorado.  In the Marcellus Shale, activity continued to be focused in the highest return areas of the play. Volumes for the quarter were up 38 percent from the previous quarter and averaged 102 million cubic feet equivalent per day (MMcfe/d) net.  Wet gas production began from the Company's first pad, SHL-1, in late July and the SHL-3 pad in early September.  Both liquid yield, which ranged from 65 to 80 barrels per million cubic feet, and natural gas rates were higher than expected from these pads.  With the addition of two new-build rigs, operated rig count stands at three, two in the Majorsville area and one delineating a large JV acreage position in the Normantown area of West Virginia.  In the dry gas area, our partner is operating two rigs in southwest Pennsylvania and continues completion operations in central Pennsylvania and Northern West Virginia.    In the Gulf of Mexico, production was shut-in for several weeks related to Hurricane Isaac lowering third quarter volumes by nearly 7 MBoe/d to an average of 21 MBoe/d.  The Company's Gulf of Mexico production has returned to pre-hurricane levels.  Big Bend, an exploration well located on Mississippi Canyon 698, commenced drilling in September and is expected to reach total depth before year end.In West Africa, the Aseng field produced an average of 64 thousand barrels per day (MBbl/d) or 22 MBbl/d net for the quarter, with minimal downtime.  The Alba field performed as expected and had one lifting in the third quarter versus two in the second quarter.  Overall underlifting for the third quarter was 5 MBbl/d in West Africa.In the Eastern Mediterranean, Noa and Pinnacles performed better than expected and, combined with Mari-B, average production for the quarter was 116 million cubic feet per day (MMcf/d) net.  The Tamar platform left Corpus Christi en route to Israel for installation in the fourth quarter and is on schedule to begin sales in less than six months.   UPDATED GUIDANCENoble Energy expects fourth quarter 2012 volumes to average 248 to 252 MBoe/d.  In the U.S., crude oil volumes will be up from the third quarter 2012 with continued activity in the DJ Basin.  Domestic natural gas and natural gas liquids will be reduced by the onshore divestments that closed in the third quarter.  Internationally, crude oil volumes in Equatorial Guinea will be higher as compared to the underlifted third quarter while natural gas sales in Israel and Equatorial Guinea are expected to be down slightly. The Company provided the following fourth quarter cost guidance:Lease Operating Expense ($/Boe)       5.15 ? 5.45DD&A ($/Boe)                                    17.10 ? 17.60Exploration Expense ($MM)                 160 ? 200(1)Noble Energy has divested the majority of its North Sea properties and has reclassified the results of its entire North Sea operations as discontinued operations for all accounting periods presented in this release. See Schedule 7 for a financial summary of discontinued operations.(2)A Non-GAAP measure, see attached Reconciliation SchedulesSUPPLEMENTAL OPERATIONS INFORMATIONFor additional information on Noble Energy's operations, please refer to the third quarter earnings slides that are accessible on the 'Investors' page at WEBCAST AND CONFERENCE CALL INFORMATIONNoble Energy, Inc. will host a webcast and conference call at 9:00 a.m. Central time today. The webcast is accessible on the 'Investors' page at Conference call numbers for participation are 888-438-5493 and 719-457-2081, passcode 6437891.  A replay will be available on the website.  Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Further information is available at news release contains certain non-GAAP measures of financial performance that management believes are good tools for internal use and the investment community in evaluating the company's overall financial performance. These non-GAAP measures help facilitate comparison of company operating performance across periods and with peer companies.This news release contains certain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "expects," "intends," "will," "should," "may," and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Noble Energy's current views about future events. They include estimates of oil and natural gas reserves and resources, estimates of future production, planned drilling activity, future results of operations, projected cash flow and liquidity, business strategy and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this news release will occur as projected, and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other actions, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are discussed in its most recent annual report on Form 10-K and in other reports on file with the Securities and Exchange Commission. These reports are also available from Noble Energy's offices or website, Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Noble Energy does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change. Schedule 1Noble Energy, Inc.Reconciliation of Net Income to Adjusted Earnings from Continuing Operations(in millions, except per share amounts, unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012Per DilutedShare 2011Per DilutedShare [6]2012Per DilutedShare [6]2011Per DilutedShare [6]Net Income$    221$     1.23$    441$     2.39$    776$     4.30$    749$     4.12Discontinued Operations, Net of Tax(57)(0.32)500.28(89)(0.49)(22)(0.13)Income from Continuing Operations1640.914912.676873.817273.99Unrealized (gains) losses on commodity derivative instruments1310.73(300)(1.66)(74)(0.42)(140)(0.78)Gain on divestitures [1](157)(0.87)--(167)(0.93)(26)(0.14)Asset impairments [2]----730.411370.77Drilling rig expense [3]--(1)(0.01)--180.10Other adjustments----10.0150.03Total adjustments before tax(26)(0.14)(301)(1.67)(167)(0.93)(6)(0.02)Income Tax Effect of Adjustments [4]290.1610.01730.40(95)(0.53)Adjusted Earnings from Continuing Operations [5]$    167$     0.93$    191$     1.01$    593$     3.28$    626$     3.44Weighted average number of shares outstandingDiluted180180180179[1] During the third quarter of 2012, we completed the sale of certain non-core onshore U.S. properties as well as certain North Sea properties. During the second quarter of 2011, we completed the transfer of assets and exit from Ecuador.[2] Amount for 2012 represents impairments of our South Raton assets in the Deepwater Gulf of Mexico, due to declines in near-term crude oil prices, as well as our Piceance development onshore U.S., because of recent declines in realized natural gas prices. Amount for 2011 represents primarily impairments of certain of our onshore U.S. developments, primarily in East Texas due to field performance combined with a low natural gas price environment.[3] Amount for 2011 represents stand-by rig expense incurred prior to receiving permits to resume drilling activities, which were suspended under the Federal Deepwater Moratorium, in the deepwater Gulf of Mexico.[4] The net tax effects are determined by calculating the tax provision for GAAP Net Income, which includes the adjusting items, and comparing the results to the tax provision for adjusted earnings from continuing operations, which excludes the adjusting items. The difference in the tax provision calculations represents the tax impact of the adjusting items listed here. The calculation is performed at the end of each quarter and, as a result, the tax rates for each discrete period may be different.[5] Adjusted earnings from continuing operations should not be considered a substitute for net income as reported in accordance with GAAP. Adjusted earnings from continuing operations is provided for comparison to earnings forecasts prepared by analysts and other third parties. Our management believes, and certain investors may find, that adjusted earnings from continuing operations is beneficial in evaluating our financial performance as it excludes the impact of significant non-cash items. We believe such measures can facilitate comparisons of operating performance between periods and with our peers.[6] The diluted earnings per share calculation for the nine months ended September 30, 2012 includes a decrease to net income of $1 million, net of tax, and the three and nine months ended September 30, 2011 includes decreases to net income of $12 million and $10 million, net of tax, respectively, related to deferred compensation gains from NBL shares held in a rabbi trust. Consistent with GAAP, when dilutive, the deferred compensation gain or loss, net of tax, is excluded from net income while the NBL shares held in the rabbi trust are included in the diluted sharecount. Schedule 2Noble Energy, Inc.Summary Statement of Operations(in millions, except per share amounts, unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012201120122011RevenuesCrude oil and condensate$     751$     513$     2,339$     1,464Natural gas159246429670NGLs4470157194Income from equity method investees5150137146Other revenues1--33Total revenues1,0068793,0622,507Operating ExpensesLease operating expense10389309251Production and ad valorem taxes3138112108Transportation and gathering expense24157147Exploration expense9556322193Depreciation, depletion and amortization368215987619General and administrative9389286253Gain on divestitures(157)-(167)(26)Asset impairments--73137Other operating (income) expense, net(1)21945Total operating expenses5565042,0121,627Operating Income4503751,050880Other (Income) Expense(Gain) Loss on commodity derivative instruments135(322)(46)(179)Interest, net of amount capitalized36149551Other (income) expense, net4(16)2(16)Total other (income) expense175(324)51(144)Income from Continuing Operations Before Taxes2756999991,024Income Tax Provision111208312297Income from Continuing Operations164491687727Discontinued Operations, Net of Tax [1]57(50)8922Net Income$     221$     441$        776$        749Earnings Per ShareBasicIncome from continuing operations$    0.92$    2.78$       3.87$       4.11Discontinued operations, net of tax0.32(0.28)0.500.14Net Income$    1.24$    2.50$       4.37$       4.25DilutedIncome from continuing operations$    0.91$    2.67$       3.81$       3.99Discontinued operations, net of tax0.32(0.28)0.490.13Net Income$    1.23$    2.39$       4.30$       4.12Weighted average number of shares outstandingBasic178177178176Diluted180180180179[1] Represents our North Sea operations reclassified as held for sale at June 30, 2012. See Schedule 7: Discontinued Operations. Schedule 3Noble Energy, Inc.Volume and Price Statistics(unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012201120122011Crude Oil and Condensate Sales Volumes (MBbl/d)United States52384737Equatorial Guinea27153213China3444Total consolidated operations82578354Equity method investee2222Total sales volumes84598556Crude Oil and Condensate Realized Prices ($/Bbl)United States$     93.67$     91.21$       96.20$     95.10Equatorial Guinea108.90108.11110.68108.40China107.61108.57117.44104.99Consolidated average realized prices$     99.30$     96.82$     102.90$     98.98Natural Gas Sales Volumes (MMcf/d)United States440358435373Equatorial Guinea251250232244Israel11622895180Total consolidated operations807836762797Natural Gas Realized Prices ($/Mcf)United States$       2.61$       3.98$         2.44$       4.09Equatorial Guinea0. average realized prices$       2.14$       3.18$         2.06$       3.11Natural Gas Liquids (NGL) Sales Volumes (MBbl/d)United States16161614Equity method investee7565Total sales volumes23212219Natural Gas Liquids Realized Prices ($/Bbl)United States$     29.71$     49.57$       34.87$     49.19Barrels of Oil Equivalent Volumes (MBoe/d)United States141113135114Equatorial Guinea70577154Israel19381630China3444Total consolidated operations233212226202Equity method investee9787Total barrels of oil equivalent from continuing operations242219234209Total barrels of oil equivalent from discontinued operations5579Total barrels of oil equivalent247224241218 Schedule 4Noble Energy, Inc.Condensed Balance Sheets(in millions, unaudited)September 30,December 31,20122011AssetsCurrent AssetsCash and cash equivalents$               1,617$               1,455Accounts receivable, net686783Other current assets422180Total current assets2,7252,418Net property, plant and equipment12,87512,782Goodwill635696Other noncurrent assets625548Total Assets$             16,860$             16,444Liabilities and Shareholders' EquityCurrent LiabilitiesAccounts payable?trade$               1,243$               1,343Other current liabilities1,014925Total current liabilities2,2572,268Long-term debt3,7474,100Deferred income taxes2,1572,059Other noncurrent liabilities691752Total Liabilities8,8529,179Total Shareholders' Equity8,0087,265Total Liabilities and Shareholders' Equity$             16,860$             16,444 Schedule 5Noble Energy, Inc.Discretionary Cash Flow from Continuing Operations and Reconciliation to Operating Cash Flow(in millions, unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012201120122011Adjusted Earnings from Continuing Operations [1]$     167$        191$        593$        626Adjustments to reconcile adjusted earnings from continuing operations to discretionary cash flow from continuing operations:Depreciation, depletion and amortization368215987619Exploration expense9556322192(Income)/Dividends from equity method investments, net1128423Deferred compensation (income) expense7(18)(1)(15)Deferred income taxes4978117173Stock-based compensation expense16154943Other1(2)(1)-Discretionary Cash Flow from Continuing Operations [2]$     714$        563$     2,070$     1,661Reconciliation to Operating Cash FlowsNet changes in working capital20540141103Cash exploration costs(29)(44)(141)(138)Current tax expense of earnings adjustments(4)(41)(18)(5)Drilling rig expense [3]-1-(18)Impact of Discontinued Operations312594162Other adjustments7122520Net Cash Provided by Operating Activities$     924$        556$     2,171$     1,785Capital expenditures (accrual based)$     724$        738$     2,546$     1,985Marcellus Shale Asset Acquisition [4]$        -$     1,233$           -$     1,233Increase in FPSO lease obligation-5-56Total Capital Expenditures (Accrual Based)$     724$     1,976$     2,546$     3,274[1] See Schedule 1: Reconciliation of Net Income to Adjusted Earnings from Continuing Operations.[2] The table above reconciles discretionary cash flow from continuing operations to net cash provided by operating activities. While discretionary cash flow from continuing operations is not a GAAP measure of financial performance, our management believes it is a useful tool for evaluating our overall financial performance. Among our management, research analysts, portfolio managers and investors, discretionary cash flow from continuing operations is broadly used as an indicator of a company's ability to fund exploration and production activities and meet financial obligations. Discretionary cash flow from continuing operations is also commonly used as a basis to value and compare companies in the oil and gas industry.[3] Amount for 2011 represents stand-by rig expense incurred prior to receiving permits to resume drilling activities, which were suspended under the Federal Deepwater Moratorium, in the deepwater Gulf of Mexico.[4] Includes $73 million representing our initial investment in CONE Gathering LLC. Schedule 6Noble Energy, Inc.Effect of Commodity Derivative Instruments(in millions, unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012201120122011(Gain) Loss on Commodity Derivative InstrumentsCrude OilRealized$      17$          4$      68$        36Unrealized112(292)(97)(168)Total Crude Oil129(288)(29)(132)Natural GasRealized(13)(26)(40)(75)Unrealized19(8)2328Total Natural Gas6(34)(17)(47)Total (Gain) Loss on Commodity Derivative Instruments$    135$    (322)$     (46)$    (179) Schedule 7Noble Energy, Inc.Discontinued Operations(in millions, except volume amounts, unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012201120122011Summary Statement of Operations:Oil and gas revenues$        54$        45$      194$      271Production expense14113943Exploration expense-132Depreciation, depletion and amortization1103362General and administrative1-21Asset impairments---2Income Before Income Taxes3823117161Current tax expense36964144Deferred tax expense-4(14)(5)Operating Income, Net of Tax$        35$       (50)$        67$        22Gain on Sale, Net of Tax$        22$          -$        22$          -Income From Discontinued Operations$        57$       (50)$        89$        22Volume and Price Statistics:Crude Oil and Condensate Sales Volumes (MBbl/d)5468Crude Oil and Condensate Realized Prices ($/Bbl)$ 106.03$ 115.67$ 113.11$ 112.99Natural Gas Sales Volumes (MMcf/d)3446Natural Gas Realized Prices ($/Mcf)$     8.37$     8.41$     8.31$     7.90 SOURCE Noble EnergyFor further information: Investor Contacts, David Larson, (281) 872-3125,, or Eric Schneider, CFA, (281) 872-2640,, or Media Inquiries, Communications and Government Relations, (281) 876-8873,