Noble Energy Announces First Quarter 2010 Results

Press Release

Apr 29, 2010
Noble Energy Announces First Quarter 2010 Results

HOUSTON, April 29, 2010 /PRNewswire via COMTEX News Network/ -- Noble Energy, Inc. (NYSE: NBL) reported today first quarter 2010 net income of $237 million, or $1.34 per share diluted, on revenues of $733 million. Excluding a $99 million after-tax unrealized commodity derivative gain, which would typically not be considered by analysts in published estimates, first quarter 2010 adjusted net income(1) was $138 million, or $0.78 per share diluted. For the first quarter of 2009, the Company reported a net loss of ($188) million, or ($1.09) per share diluted, on revenues of $441 million. Adjusted net income(1) for the first quarter of 2009 was $103 million, or $0.59 per share diluted.

Discretionary cash flow(1) for the first quarter 2010 was $432 million, compared to $339 million for the similar quarter in 2009. Net cash provided by operating activities was $588 million. Organic capital expenditures for the first quarter 2010 were $409 million, which excluded capital associated with the DJ Basin asset acquisition and a non-cash accrual for construction progress on the Aseng FPSO.

Key highlights for the first quarter 2010 include:

  • Record legacy Wattenberg and onshore U.S. volumes
  • Closed DJ Basin asset acquisition which enhanced the Company's largest onshore U.S. property at Wattenberg
  • Expanded Central DJ Basin position to over 730,000 net acres
  • Successful high bidder on 16 deepwater lease blocks in Central Gulf of Mexico (GOM) lease sale 213
  • Initiated field development drilling at the Aseng oil project in Equatorial Guinea
  • Completed acquisition of 3D seismic in the Eastern Mediterranean

Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "During the first quarter, Noble Energy made solid progress towards its 2010 goals of maintaining a strong base of operations, moving forward our major projects, continuing significant investments in exploration, and retaining our strong financial capacity despite significant impacts on our volumes from the scheduled maintenance in Equatorial Guinea. We continue to benefit from exposure to crude oil and natural gas liquids, and our portfolio diversity remains a source of strength in the current commodity environment. Looking forward to the remainder of 2010, we are focused on growing our Wattenberg production and continuing to evaluate the potential in our expanding position within the Central DJ Basin, while advancing new long-lived projects on budget and on schedule. On the exploration and appraisal front, our programs will remain active throughout the year as we appraise the large Gunflint discovery and continue testing the potential in all three of our key offshore basins: the deepwater Gulf of Mexico, West Africa, and the Eastern Mediterranean."

Total sales volumes for the first quarter 2010 averaged 197 thousand barrels of oil equivalent per day (MBoe/d). Production volumes for the quarter were 201 MBoe/d, higher than sales volumes due to the timing of crude oil liftings in Equatorial Guinea and the North Sea.

Internationally, total sales volumes were lower than the first quarter 2009, resulting primarily from facility maintenance downtime and the timing of liftings in Equatorial Guinea, as well as lower natural gas sales in Israel. The associated maintenance downtime in Equatorial Guinea reduced the Company's first quarter 2010 volumes by four thousand barrels per day (Bbl/d) of liquids and 49 million cubic feet per day (Mmcf/d) of natural gas. Natural gas volumes in Israel declined from the first quarter 2009 primarily as a result of increased natural gas imports. Unseasonal weather, which was slightly warmer than the first quarter 2009, also resulted in lower sales volumes. In the North Sea, the completion of facility enhancements at Dumbarton and the impact of the first well at Lochranza coming online led to increased oil volumes versus the first quarter 2009.

The Company's United States volumes were up three percent from the first quarter of 2009 to 116 MBoe/d, with liquids comprising 46 percent of total domestic volumes versus 39 percent in the 2009 period. The increase in oil and natural gas liquid volumes is primarily attributed to ongoing development drilling at Wattenberg, which produced approximately 50 MBoe/d for the quarter. In addition, oil volumes in the deepwater Gulf of Mexico were up versus the first quarter 2009 as a result of a new well completion at Swordfish that came online early in 2010, combined with hurricane shut-ins that impacted the 2009 period. Natural gas volumes in the U.S. were lower than the first quarter of 2009 due primarily to natural declines in the Mid-Continent and deepwater GOM regions, as well as the impact of a Swordfish gas well that watered out in the second half of 2009. The closing of the DJ Basin asset acquisition in March 2010 added over one thousand Bbl/d of crude oil and 12 Mmcf/d of natural gas on average for the quarter.

Crude oil price realizations were up significantly to $74.12 per barrel for the first quarter 2010. In the U.S., the Company's average crude oil price was $73.80, which included a reduction of $1.32 per barrel as a result of previously deferred hedge losses. Domestic natural gas price realizations were up from the same period in 2009, averaging $5.46 per thousand cubic feet (Mcf). In Israel, natural gas realizations continue to be benefitted by strong global liquid markets, with pricing averaging a record $4.20 per Mcf for the first quarter 2010. The Company's natural gas liquid pricing in the U.S. strengthened to $44.98 per barrel for the quarter.

Lease operating expenses for the quarter were down six percent from the first quarter of 2009 to $4.96 per barrel of oil equivalent (Boe). Lower lease operating costs, primarily due to the abandonment of the Company's remaining Gulf of Mexico Shelf properties during the first quarter of 2009, as well as lower onshore repairs and maintenance, offset higher production taxes resulting from stronger commodity prices. Depreciation, depletion, and amortization was $12.18 per Boe for the first quarter 2010. The Company's mix of production, impacted largely by the Alba field and plant downtime in Equatorial Guinea, primarily resulted in a higher DD&A rate versus the first quarter of 2009. Exploration expense for the first quarter 2010 includes dry hole costs associated with the Double Mountain well located in Green Canyon 555, which encountered noncommercial quantities of hydrocarbons. General and administrative expenses were up mostly related to increased staffing for the development of the Company's discovered major projects.

SECOND QUARTER VOLUME GUIDANCE

The Company expects second quarter 2010 volumes to average 208 to 214 MBoe/d. In the United States, onshore volumes should be up from the first quarter 2010 primarily as a result of the impact from the DJ Basin asset acquisition for a full quarter. Internationally, volumes in Equatorial Guinea will be up substantially as the maintenance projects at the Alba field and associated facilities were completed in mid April. Natural gas sales in Israel are expected to be up sequentially as well. Using the midpoint of the range, second quarter 2010 volumes should be up approximately seven percent from the first quarter 2010. Noble Energy's full year volume guidance remains 211 to 224 MBoe/d.

(1) A Non-GAAP measure, see attached Reconciliation Schedules

WEBCAST AND CONFERENCE CALL INFORMATION

Noble Energy, Inc. will host its first quarter 2010 webcast and conference call at 9:00 a.m. Central time. The webcast is accessible on the 'Investors' page at www.nobleenergyinc.com. Conference-call numbers for participation are 888-505-4388 and 719-325-2295. A replay of the conference call 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 operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with significant international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.

This news release may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Risks, uncertainties and assumptions that could cause actual results to differ materially from those projected 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 action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are detailed in its Securities and Exchange Commission filings. Words such as "anticipates," "believes," "expects," "intends," "will," "should," "may," and similar expressions may be used to identify forward-looking statements. Noble Energy assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.

This news release may also contain certain forward-looking 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 are broadly used to value and compare companies in the crude oil and natural gas industry.


                                 Schedule 1
                             Noble Energy, Inc.
          Reconciliation of Net Income (Loss) to Adjusted Earnings
             (in millions, except per share amounts, unaudited)


                                                              Three Months
                                                                  Ended
                                                               March 31,
                                                               ---------
                                                            2010         2009
                                                            ----         ----

    Net Income (Loss)                                       $237        $(188)

        Unrealized (gains) losses on commodity
         derivative instruments                             (147)          80
        Asset impairments (1)                                  -          437
                                                             ---          ---
        Total Adjustments before tax                        (147)         517

        Income Tax Effect of Adjustments (2)                  48         (226)
                                                             ---         ----

    Adjusted Earnings (3)                                   $138         $103
                                                            ----         ----

    Adjusted Earnings Per Share
      Basic                                                $0.79        $0.60
      Diluted                                               0.78         0.59

    Weighted average number of shares outstanding
        Basic                                                174          173
        Diluted                                              177          175




    (1) Impairments for first quarter 2009 related to Granite Wash, an
    onshore US area, and our Main Pass asset located in the Gulf of
    Mexico shelf.
    (2) The net tax effects are determined by calculating the tax
    provision for GAAP Net Income (Loss), which includes the adjusting
    items, and comparing the results to the tax provision for Adjusted
    Earnings, 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.
    (3) Adjusted earnings should not be considered a substitute for net
    income as reported in accordance with GAAP.  Adjusted earnings 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 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.

                            Schedule 2
                        Noble Energy, Inc.
                 Summary Statement of Operations
        (in millions, except per share amounts, unaudited)


                                                 Three Months Ended
                                                     March 31,
                                                     ---------
                                                 2010          2009
                                                 ----          ----
    Revenues
      Crude oil and condensate                   $407          $202
      Natural gas                                 229           183
      NGLs                                         52            21
      Income from equity method investees          26            11
      Other revenues                               19            24
        Total revenues                            733           441
                                                  ---           ---
    Operating Expenses
      Lease operating expense                      88           100
      Production and ad valorem taxes              34            18
      Transportation expense                       17            12
      Exploration expense                          80            42
      Depreciation, depletion and
       amortization                               216           200
      General and administrative                   66            59
      Asset impairments                             -           437
      Other operating expense, net                 14            (6)
                                                  ---           ---
        Total operating expenses                  515           862
                                                  ---           ---
    Operating Income (Loss)                       218          (421)
    Other (Income) Expense
      Gain on commodity derivative
       instruments                               (145)          (73)
      Interest, net of amount capitalized          20            18
      Other expense, net                            -             8
                                                  ---           ---
        Total other (income) expense             (125)          (47)
                                                 ----           ---
    Income (Loss) Before Taxes                    343          (374)
    Income Tax Provision (Benefit)                106          (186)
    Net Income (Loss)                            $237         $(188)
                                                 ----         -----

    Earnings (Loss) Per Share
      Basic                                     $1.36        $(1.09)
      Diluted                                    1.34         (1.09)

    Weighted average number of shares
     outstanding
        Basic                                     174           173
        Diluted                                   177           173


                              Schedule 3
                          Noble Energy, Inc.
                      Volume and Price Statistics
                              (unaudited)

                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                          2010          2009
                                                          ----          ----
    Crude Oil and Condensate Sales Volumes
     (MBpd)
      United States                                         40            35
      Equatorial Guinea                                      8            13
      North Sea                                              9             7
      Other International                                    4             4
                                                           ---           ---
        Total consolidated operations                       61            59
      Equity method investee                                 2             2
                                                           ---
        Total sales volumes                                 63            61
                                                           ---           ---
    Crude Oil and Condensate Realized Prices
     ($/Bbl)
      United States                                     $73.80        $35.65
      Equatorial Guinea                                  73.34         39.41
      North Sea                                          77.06         45.91
      Other International                                72.34         36.89
        Consolidated average realized prices            $74.12        $37.81
                                                        ------        ------

    Natural Gas Sales Volumes (MMcfpd)
      United States                                        384           411
      Equatorial Guinea                                    194           243
      Israel                                                87           112
      North Sea                                              7             5
      Other International                                   30            30
        Total sales volumes                                702           801
                                                           ---           ---
    Natural Gas Realized Prices ($/Mcf)
      United States                                      $5.46         $3.93
      Equatorial Guinea                                   0.27          0.27
      Israel                                              4.20          2.81
      North Sea                                           5.42          8.17
        Average realized prices                          $3.79         $2.64
                                                         -----         -----

    Natural Gas Liquids (NGL) Sales Volumes
     (MBpd)
      United States                                         13             9
      Equity method investee                                 4             7
                                                           ---           ---
        Total sales volumes                                 17            16
                                                           ---           ---
    Natural Gas Liquids Realized Prices
     ($/Bbl)
      United States                                     $44.98        $24.74

    Barrels of Oil Equivalent Volumes
     (MBoepd)
      United States                                        116           113
      Equatorial Guinea                                     41            53
      Israel                                                15            19
      North Sea                                             10             8
      Other International                                    9             9
                                                           ---           ---
        Total consolidated operations                      191           202
      Equity method investee                                 6             8
        Total barrels of oil equivalent (MBoepd)           197           210
                                                           ---           ---
        Barrels of oil equivalent volumes (MMBoe)           18            19
                                                           ---           ---


                             Schedule 4
                         Noble Energy, Inc.
                      Condensed Balance Sheets
                            (in millions)


                                                   (unaudited)
                                                                     December
                                                    March 31,        31,
                                                    ---------       ---------
                                                          2010            2009
                                                          ----            ----
    Assets
      Current Assets
        Cash and cash equivalents                       $1,031          $1,014
        Accounts receivable, net                           380             465
        Other current assets                               186             199
                                                           ---             ---
            Total current assets                         1,597           1,678
      Net property, plant and equipment                  9,596           8,916
      Goodwill                                             757             758
      Other noncurrent assets                              502             455
         Total Assets                                  $12,452         $11,807
                                                       -------         -------

    Liabilities and Shareholders'
     Equity
      Current Liabilities
        Accounts payable - trade                          $570            $548
         Other current liabilities                         435             442
                                                           ---             ---
            Total current liabilities                    1,005             990
      Long-term debt                                     2,366           2,037
      Deferred income taxes                              2,104           2,076
      Other noncurrent liabilities                         582             547
                                                           ---             ---
         Total Liabilities                               6,057           5,650

        Total Shareholders' Equity                       6,395           6,157
         Total Liabilities and Shareholders'
          Equity                                       $12,452         $11,807
                                                       -------         -------


                                 Schedule 5
                             Noble Energy, Inc.
      Discretionary Cash Flow and Reconciliation to Operating Cash Flow
                          (in millions, unaudited)


                                                               Three Months
                                                                  Ended
                                                                March 31,
                                                                ---------
                                                            2010         2009
                                                            ----         ----

    Adjusted Earnings (1)                                   $138         $103
    Adjustments to reconcile adjusted earnings to
     discretionary cash flow:
      Depreciation, depletion and amortization               216          200
      Exploration expense                                     80           42
      Capitalized interest                                   (15)          (6)
      (Income) /distributions from equity method
       investments, net                                      (13)         (11)
      Deferred compensation adjustment                         2            5
      Deferred income taxes                                    8           24
      Stock-based compensation expense                        14           12
      Other                                                    2          (30)

    Discretionary Cash Flow (2)                              432          339
                                                             ---          ---

    Reconciliation to Operating Cash Flows
      Net changes in working capital                         208          (16)
      Cash exploration costs                                 (41)         (40)
      Capitalized interest                                    15            6
      Current tax expense of earnings adjustments            (28)         (98)
      Other adjustments                                        2           (6)
                                                             ---          ---
    Net Cash Provided by Operating Activities               $588         $185
                                                            ----         ----

    Capital Expenditures (Accrual Based)                    $409         $386
    DJ Basin Asset Acquisition                               509            -
    FPSO Capital Lease Additions                              40            -
                                                             ---          ---
    Total Capital Expenditures (Accrual Based)              $958         $386



    (1) See Schedule 1, Reconciliation of Net Income (Loss) to Adjusted
    Earnings.
    (2) The table above reconciles discretionary cash flow to net cash
    provided by operating activities. While discretionary cash flow 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 is broadly used as
    an indicator of a company's ability to fund exploration and
    production activities and meet financial obligations. Discretionary
    cash flow is also commonly used as a basis to value and compare
    companies in the oil and gas industry.

                            Schedule 6
                        Noble Energy, Inc.
            Effect of Commodity Derivative Instruments
                     (in millions, unaudited)


                                                   Three Months Ended
                                                       March 31,
                                                       ---------
                                                   2010          2009
                                                   ----          ----
    Reclassification from Accumulated
     Other
       Comprehensive Loss (AOCL) to Revenue
        (1)
      Crude Oil                                     $(5)         $(17)
      Natural Gas                                    (1)            -
    Total Revenue Decrease                          $(6)         $(17)
                                                    ---          ----

    Gain (Loss) on Derivative Instruments
      Crude oil
         Realized                                   $(3)          $95
         Unrealized                                   3           (81)
           Total crude oil                            -            14
                                                    ---           ---
      Natural gas
         Realized                                     1            58
         Unrealized                                 144             1
           Total natural gas                        145            59
                                                    ---           ---
    Total Gain (Loss) on Derivative
     Instruments                                   $145           $73
                                                   ----           ---

    Summary of Cash Settlements
    Realized gain (loss) on derivative
     instruments                                     (2)          153
    Amounts reclassified from AOCL                   (6)          (17)
                                                    ---           ---
    Cash settlements received (paid)                $(8)         $136
                                                    ---          ----



    (1) The amounts in accumulated other comprehensive loss represent
    deferred unrealized hedge gains and losses.  These deferred gains
    and losses are recognized as an adjustment to revenue when the
    associated derivative instruments are cash settled.


SOURCE Noble Energy, Inc.

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