Noble Energy Announces Second Quarter 2010 Results and Updated 2010 Guidance

Press Release

Jul 29, 2010
Noble Energy Announces Second Quarter 2010 Results and Updated 2010 Guidance

HOUSTON, July 29, 2010 /PRNewswire via COMTEX News Network/ -- Noble Energy, Inc. (NYSE: NBL) reported today second quarter 2010 net income of $204 million, or $1.10 per share diluted, on revenues of $751 million. Net income for the quarter included an unrealized commodity derivative gain, as well as a rig contract termination expense. Excluding these items, which would typically not be considered by analysts in published estimates, second quarter 2010 adjusted net income(1) was $198 million, or $1.07 per share diluted. For the second quarter of 2009, the Company reported a net loss of ($57) million, or ($0.33) per share diluted, on revenues of $491 million. Adjusted net income(1) for the second quarter of 2009 was $116 million, or $0.66 per share diluted.

Discretionary cash flow(1) for the second quarter 2010 was $480 million, compared to $374 million for the similar quarter in 2009. Net cash provided by operating activities was $256 million. Organic capital expenditures for the second quarter of 2010 were $519 million, which excluded a non-cash accrual for construction progress on the Aseng FPSO.

Key highlights for the second quarter of 2010 include:

  • Total sales volumes of 219 thousand barrels of oil equivalent per day (MBoe/d), up substantially from the first quarter of 2010 and second quarter of last year
  • Israel sales volumes increased 27 percent from the second quarter of 2009
  • Announced agreement to sell certain non-core U.S. onshore assets, representing 5,700 Boe/d of production and 29 million barrels of oil equivalent reserves, for approximately $550 million
  • Added a second rig to horizontal Niobrara drilling program in Central DJ Basin
  • Completed maintenance project at Alba, offshore Equatorial Guinea, bringing the field back to full production

Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "The second quarter was very strong for Noble Energy, as we experienced robust volumes and good cost control across the business. We continued to move forward our major-project developments, with significant field development drilling at Aseng and expectations for a Tamar sanction in the near future. In the U.S., we recently received a completion permit for Santa Cruz in the deepwater Gulf of Mexico, and we have increased our horizontal Niobrara drilling in the Central DJ Basin. We remain encouraged by the strength of our current production, the progress of our major projects, and the opportunities in our worldwide exploration programs."

Noble Energy's sales volumes for the second quarter of 2010 averaged 219 MBoe/d. Production was 214 MBoe/d, with additional liftings in Equatorial Guinea and the North Sea accounting for the higher sales volume. Internationally, average daily sales were 99 MBoe/d, a five percent increase from the second quarter of 2009. Significantly higher natural gas sales in Israel resulted from increased demand for electricity and improved market share. At the Alba field in Equatorial Guinea, scheduled maintenance downtime, which was completed in mid April 2010, resulted in lower natural gas volumes versus the second quarter of 2009. Equipment modifications at the Dumbarton FPSO in the North Sea required the field to be shut in for the first half of the second quarter of 2010. Despite the downtime, total North Sea volumes were up versus the second quarter of 2009. Prior to field shut-in, a second well at Lochranza came online.

The Company's U.S. volumes were 120 MBoe/d, up over seven percent from the second quarter of 2009. Onshore volumes totaled 102 MBoe/d for the quarter versus 90 MBoe/d in the same quarter last year. The increase is a result of ongoing development work primarily at Wattenberg, combined with the Central DJ Basin asset acquisition that closed in the first quarter of 2010. Offshore volumes were down 4 MBoe/d, primarily due to third-party processing downtime impacting the Swordfish field in the deepwater Gulf of Mexico during the second quarter of 2010.

Commodity prices were substantially higher than during the second quarter of 2009, with the Company's average crude oil and natural gas realizations up 45 and 37 percent, respectively. Noble Energy's U.S. crude oil averaged $75 per barrel in the second quarter of 2010, which included a reduction of $1.35 per barrel as a result of previously deferred hedge losses. In Israel, natural gas realizations increased to $4.33 per thousand cubic feet for the second quarter of 2010 and continue to benefit from strong global liquid markets. The Company's natural gas liquid (NGL) pricing in the U.S. averaged $39.37 per barrel for the second quarter of 2010, approximately 50 percent of West Texas Intermediate.

Lease operating expenses averaged $5.02 per barrel of oil equivalent (Boe), relatively flat with the second quarter of 2009. Production and ad valorem expenses for the second quarter of 2010 were 4.8 percent of oil, gas, and NGL revenues, and transportation expenses were $0.80 per Boe. Depreciation, depletion, and amortization per Boe increased slightly from the second quarter of last year to $10.79, primarily related to higher unit rates in the Rocky Mountains. Exploration expense includes $15 million of dry hole costs in the deepwater Gulf of Mexico which was incurred early in the second quarter of 2010. General and administrative expenses were up modestly due to increased staffing for the development of the Company's major projects.

Included in other operating expense for the second quarter of 2010 is a $26 million pre-tax charge for the termination of a rig contract resulting from the Federal Deepwater Moratorium. Non-operating other expense for the second quarter 2010 includes a $13 million pre-tax deferred compensation gain relating to the quarterly value change of Noble Energy stock held in a benefit program.

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

UPDATED 2010 GUIDANCE

Organic capital expenditures are currently estimated at $2.2 billion for the year, down from the original capital budget of $2.5 billion. Two-thirds of the reduction is related to lower activity in the deepwater Gulf of Mexico as a result of the Federal Deepwater Moratorium. The remaining $100 million is due to cost reductions and timing changes on various major projects. The Company has lowered its 2010 exploration expense guidance to a range of $265 to $325 million.

Noble Energy's full-year volume guidance is now 211 to 217 MBoe/d, updated to include the impact of the U.S. onshore asset sale. Expected to close in early August, the sale will reduce full year volumes by over 2 MBoe/d and lower per barrel lease operating expenses by approximately ten percent. The Company's 2010 lease operating expense guidance has been lowered to range from $4.80 to $5.10 per Boe.

For the third quarter of 2010, the Company estimates average daily sales volumes to be between 212 and 220 MBoe/d. Noble Energy anticipates slightly lower crude oil and natural gas production in the U.S. versus the second quarter of 2010, primarily as a result of the onshore asset sale. In Equatorial Guinea, crude oil and condensate volumes should be down sequentially due to the expected timing of liftings. In Israel, natural gas sales should be up significantly due to the strengthening market and seasonal period demands.

WEBCAST AND CONFERENCE CALL INFORMATION

Noble Energy, Inc. will host its second 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 888-293-6950 and 719-325-2143. 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 includes projections and other "forward-looking statements" within the meaning of the federal securities laws. Such projections and 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. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-07964, available from Noble Energy's offices or website, http://www.nobleenergyinc.com. These forms can also be obtained from the SEC by calling 1-800-SEC-0330.

For additional information - website www.nobleenergyinc.com


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



                                 Three Months Ended      Six Months Ended
                                      June 30,                 June 30,
                                  ------------------     ----------------
                                  2010        2009       2010        2009
                                  ------------------     ----------------

    Net Income (Loss)             $204        $(57)      $441       $(245)

      Unrealized (gains)
       losses on commodity
       derivative instruments      (63)        277       (210)        358
      Rig contract
       termination expense
       (1)                          26           -         26           -
      Gain on sale of
       Argentina assets              -         (24)         -         (24)
      Asset impairments (2)          -           -          -         437
      Other adjustments              -           -          -          (1)
                                   ---------------        ----------------
      Total Adjustments
       before tax                  (37)        253       (184)        770

      Income Tax Effect of
       Adjustments  (3)             31         (80)        79        (306)
                                   ---------------         ---------------

    Adjusted Earnings (4)         $198        $116       $336        $219
                                  ----------------       ----------------

    Adjusted Earnings Per
     Share
      Basic                      $1.13       $0.67      $1.92       $1.27
      Diluted (5)                 1.07        0.66       1.85        1.25

    Weighted average number
     of shares outstanding
        Basic                      175         173        175         173
        Diluted                    178         175        178         175

    (1) Amount represents costs to terminate a deepwater Gulf of Mexico
    drilling rig contract due to Federal Deepwater Moratorium.

    (2) Impairments for 2009 related to Granite Wash, an onshore US area, and
    our Main Pass asset located in the Gulf of Mexico shelf.

    (3) 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.

    (4) 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.

    (5) The diluted earnings per share calculations for the three and six
    months ended June 30, 2010 include decreases to net income of $9 million
    and $7 million, net of tax, 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 2
                                Noble Energy, Inc.
                          Summary Statement of Operations
                (in millions, except per share amounts, unaudited)


                                Three Months Ended          Six Months Ended
                                     June 30,                    June 30,
                                 ------------------       ------------------
                                 2010         2009        2010          2009
                                 ------------------       ------------------
    Revenues
      Crude oil and
       condensate                $460         $296        $867          $497
      Natural gas                 202          143         432           326
      NGLs                         48           21          99            43
      Income from
       equity method
       investees                   24           16          50            27
      Other revenues               17           15          36            39
                                  ----------------       -------------------
        Total revenues            751          491       1,484           932
                                  ----------------       -------------------
    Operating
     Expenses
      Lease operating
       expense                    100           93         188           193
      Production and
       ad valorem
       taxes                       34           23          67            42
      Transportation
       expense                     16           13          34            25
      Exploration
       expense                     52           33         132            75
      Depreciation,
       depletion and
       amortization               215          196         431           396
      General and
       administrative              63           60         129           119
      Asset
       impairments                  -            -           -           437
      Other operating
       (income)
       expense, net                41           (3)         55           (11)
                                  -----------------      -------------------
        Total operating
         expenses                 521          415       1,036         1,276
                                  ----------------       -------------------
    Operating Income
     (Loss)                       230           76         448          (344)
    Other (Income)
     Expense
      (Gain) loss on
       commodity
       derivative
       instruments                (96)         139        (242)           66
      Interest, net of
       amount
       capitalized                 19           23          39            41
      Other (income)
       expense, net               (13)           4         (13)           12
                                  ----------------         -----------------
        Total other
         (income)
         expense                  (90)         166        (216)          119
                                  ----------------        ------------------
    Income (Loss)
     Before Taxes                 320          (90)        664          (463)
    Income Tax
     Provision
     (Benefit)                    116          (33)        223          (218)
                                 ------------------       -------------------
    Net Income
     (Loss)                      $204         $(57)       $441         $(245)
                                 ------------------       -------------------

    Earnings (Loss)
     Per Share
      Basic                     $1.17       $(0.33)      $2.53        $(1.42)
      Diluted (1)                1.10        (0.33)       2.44         (1.42)

    Weighted average
     number of
     shares
     outstanding
        Basic                     175          173         175           173
        Diluted                   178          173         178           173

    (1) The diluted earnings per share calculations for the three and six
    months ended June 30, 2010 include decreases to net income of $9 million
    and $7 million, net of tax, 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 3
                                 Noble Energy, Inc.
                             Volume and Price Statistics
                                     (unaudited)


                                         Three Months Ended   Six Months Ended
                                                June 30,            June 30,
                                         ------------------   ----------------
                                            2010        2009   2010       2009
                                         ------------------   ----------------
    Crude Oil and Condensate Sales
     Volumes (MBpd)
      United States                           38          37     39         36
      Equatorial Guinea                       16          15     12         14
      North Sea                                9           6      9          7
      Other International                      4           5      4          4
                                             ---------------     -------------
        Total consolidated operations         67          63     64         61
      Equity method investee                   2           2      2          2
                                             ---------------    --------------
        Total sales volumes                   69          65     66         63
                                             ---------------    --------------
    Crude Oil and Condensate Realized
     Prices ($/Bbl)
      United States                       $75.00      $51.85 $74.39     $43.92
      Equatorial Guinea                    76.10       51.63  75.16      46.19
      North Sea                            75.22       56.57  76.15      50.81
      Other International                  76.05       48.87  74.24      43.28
                                          ------------------  ----------------
        Consolidated average realized
         prices                           $75.36      $52.05 $74.77     $45.17
                                          ------------------ -----------------

    Natural Gas Sales Volumes (MMcfpd)
      United States                          414         394    399        403
      Equatorial Guinea                      224         244    209        243
      Israel                                 121          95    104        103
      North Sea                                7           5      7          5
      Other International                     27          16     28         23
                                             ---------------    --------------
        Total sales volumes                  793         754    747        777
                                             ---------------    --------------
    Natural Gas Realized Prices
     ($/Mcf)
      United States                        $3.89       $3.09  $4.64      $3.52
      Equatorial Guinea                     0.27        0.27   0.27       0.27
      Israel                                4.33        2.76   4.28       2.78
      North Sea                             4.53        5.20   4.97       6.72
                                           -----------------  ----------------
        Consolidated average realized
         prices                            $2.91       $2.13  $3.32      $2.39
                                           -----------------  ----------------

    Natural Gas Liquids (NGL) Sales
     Volumes (MBpd)
      United States                           13          10     13         10
      Equity method investee                   5           6      5          6
                                              --------------     -------------
        Total sales volumes                   18          16     18         16
                                              --------------     -------------
    Natural Gas Liquids Realized
     Prices ($/Bbl)
      United States                       $39.37      $23.94 $42.12     $24.33

    Barrels of Oil Equivalent Volumes
     (MBoepd)
      United States                          120         112    118        113
      Equatorial Guinea                       54          56     47         55
      Israel                                  20          16     17         17
      North Sea                               10           7     10          8
      Other International                      8           8      9          8
                                             ---------------    --------------
        Total consolidated operations        212         199    201        201
      Equity method investee                   7           7      7          7
                                                                           ---
        Total barrels of oil equivalent
         (MBoepd)                            219         206    208        208
                                             ---------------    --------------
        Barrels of oil equivalent volumes
         (MMBoe)                              20          19     38         38
                                             ---------------    --------------



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


                                                (unaudited)
                                                  June 30,     December 31,
                                                  --------     ------------
                                                    2010            2009
                                                    ----            ----
    Assets
      Current Assets
        Cash and cash equivalents                 $1,017          $1,014
        Accounts receivable, net                     538             465
        Assets held for sale                         375               -
        Other current assets                         257             199
                                                   ---------------------
            Total current assets                   2,187           1,678
      Net property, plant and equipment            9,566           8,916
      Goodwill                                       757             758
      Other noncurrent assets                        503             455
                                                 -----------------------
         Total Assets                            $13,013         $11,807
                                                 -----------------------

    Liabilities and Shareholders' Equity
      Current Liabilities
        Accounts payable - trade                    $751            $548
        Other current liabilities                    464             442
                                                   ---------------------
            Total current liabilities              1,215             990
      Long-term debt                               2,584           2,037
      Deferred income taxes                        2,162           2,076
      Other noncurrent liabilities                   511             547
                                                   ---------------------
         Total Liabilities                         6,472           5,650

        Total Shareholders' Equity                 6,541           6,157
                                                 -----------------------
         Total Liabilities and Shareholders'
          Equity                                 $13,013         $11,807
                                                 -----------------------



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


                                      Three Months             Six Months
                                         Ended                   Ended
                                       June 30,                June 30,
                                   ---------------        ---------------
                                   2010       2009        2010       2009
                                   ---------------        ---------------

    Adjusted Earnings (1)          $198       $116        $336       $219
    Adjustments to reconcile
     adjusted earnings to
     discretionary cash flow:
      Depreciation, depletion
       and amortization             215        196         431        396
      Exploration expense            52         33         132         75
      Capitalized interest          (16)       (12)        (31)       (18)
      (Income)/distributions
       from equity method
       investments, net              11        (11)         (2)       (22)
      Deferred compensation
       adjustment                   (13)         5         (11)        10
      Deferred income taxes          17         21          25         45
      Stock-based compensation
       expense                       13         12          27         24
      Other                           3         14           5        (16)
                                   ---------------        ----------------
    Discretionary Cash Flow
     (2)                           $480       $374        $912       $713
                                   ---------------        ---------------

    Reconciliation to
     Operating Cash Flows
      Net changes in working
       capital                     (187)       (35)         21        (51)
      Cash exploration costs        (37)       (26)        (78)       (66)
      Capitalized interest           16         12          31         18
      Current tax expense of
       earnings adjustments         (19)        22         (47)       (76)
      Gain on disposal of
       assets                         -        (24)          -        (24)
      Other adjustments               3        (10)          5        (16)
                                   ----------------       ----------------
    Net Cash Provided by
     Operating Activities          $256       $313        $844       $498
                                   ---------------        ---------------

    Capital expenditures
     (accrual based)               $519       $323        $928       $709
    DJ Basin asset
     acquisition                      -          -         509          -
    Increase in obligation
     under FPSO lease                68          -         108          -
                                   ---------------      -----------------
    Total Capital
     Expenditures (Accrual
     Based)                        $587       $323      $1,545       $709
                                   ---------------      -----------------

    (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             Six Months
                                           Ended                   Ended
                                         June 30,                 June 30,
                                     ----------------       ----------------
                                     2010        2009       2010        2009
                                     ----------------       ----------------
    Reclassification from
     Accumulated Other
       Comprehensive Loss (AOCL)
        to Revenue (1)
      Crude Oil                       $(4)       $(15)       $(9)       $(32)
      Natural Gas                       -           -         (1)          -
                                      ----------------      -----------------
    Total Revenue Decrease            $(4)       $(15)      $(10)       $(32)
                                      ----------------      -----------------

    Gain (Loss) on Derivative
     Instruments
      Crude oil
         Realized                     $(3)        $66        $(5)       $162
         Unrealized                   107        (189)       110        (271)
                                     -----------------      -----------------
           Total crude oil           $104       $(123)      $105       $(109)
                                     -----------------      -----------------
      Natural gas
         Realized                      36          72         37         130
         Unrealized                   (44)        (88)       100         (87)
                                      ----------------       ----------------
           Total natural gas           (8)        (16)       137          43
                                      ----------------       ---------------
    Total Gain (Loss) on
     Derivative Instruments           $96       $(139)      $242        $(66)
                                      ----------------      -----------------

    Summary of Cash
     Settlements
    Realized gain on
     derivative instruments           $33        $138        $32        $292
    Amounts reclassified from
     AOCL                              (4)        (15)       (10)        (32)
                                      ----------------       ----------------
    Cash settlements received         $29        $123        $22        $260
                                      ---------------        ----------------

    (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.

Copyright (C) 2010 PR Newswire. All rights reserved