Noble Energy Announces Third Quarter 2010 Results, Including Record Sales Volumes

Press Release

Oct 28, 2010
Noble Energy Announces Third Quarter 2010 Results, Including Record Sales Volumes

HOUSTON, Oct 28, 2010 /PRNewswire via COMTEX News Network/ -- Noble Energy, Inc. (NYSE: NBL) reported today third quarter 2010 net income of $232 million, or $1.31 per share diluted, on revenues of $755 million. Net income for the quarter included an unrealized commodity derivative gain, a gain on the sale of certain non-core assets, as well as an asset impairment charge. Excluding these items, which would typically not be considered by analysts in published estimates, third quarter 2010 adjusted net income(1) was $225 million, or $1.27 per share diluted. The Company reported net income of $107 million during the third quarter of 2009, or $0.61 per share diluted, on revenues of $621 million. Adjusted net income(1) for the third quarter of 2009 was $193 million, or $1.10 per share diluted.

Discretionary cash flow(1) for the third quarter 2010 was $485 million compared to $499 million for the similar quarter in 2009. Net cash provided by operating activities was $608 million. Organic capital expenditures for the third quarter of 2010 were $619 million, which excluded a non-cash accrual for construction progress on the Aseng FPSO.

Key highlights for the third quarter of 2010 include:

  • Record total sales volumes of 230 thousand barrels of oil equivalent per day (MBoe/d)
  • Record Israel natural gas sales of 178 million cubic feet per day (Mmcf/d)
  • Sanctioned Tamar project, offshore Israel
  • Completed two new Mari-B wells, offshore Israel, maintaining field deliverability of 600 Mmcf/d, gross
  • Produced Central DJ basin liquid volumes of 30 thousand barrels per day, up over 35 percent from the third quarter 2009
  • Increased Central DJ basin position to over 830,000 net acres
  • Closed on the previously announced sale of certain Mid-Continent and Illinois basin assets for $552 million
  • Commenced completion activities at Santa Cruz and Isabela in the deepwater Gulf of Mexico
  • Concluded field drilling and initiated completions at Aseng, offshore Equatorial Guinea

Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "It was an outstanding quarter for Noble Energy, with significant results in all areas of our business. Strong liquid production in the Central DJ basin, deepwater Gulf of Mexico, and the North Sea, along with record natural gas volumes in Israel, delivered robust financial results. Operationally, we continued to progress the major project developments in all four of our core areas. We advanced our horizontal Niobrara drilling program in the Central DJ Basin and were able to perform completion activities in the deepwater Gulf of Mexico at Galapagos, despite the offshore Moratorium. In addition, our international teams furthered the development work at Aseng and sanctioned the Tamar project. All of the Company's efforts are maintaining this strong momentum as we move towards a future of sustained production and cash flow growth."

Noble Energy's sales volumes for the third quarter of 2010 averaged 230 MBoe/d. Total Company production was 232 MBoe/d, exceeding sales for the quarter as a result of the timing of international oil liftings. For the third quarter of 2010, the mix of sales volumes was 38 percent global liquids, 33 percent international natural gas, and 29 percent U.S. natural gas.

Onshore U.S. volumes totaled 100 MBoe/d for the quarter versus 93 MBoe/d in the same quarter last year, with the majority of the increase attributable to higher crude oil and natural gas liquids from the Central DJ basin. Total Central DJ basin volumes grew to 55 MBoe/d in the third quarter 2010, with liquids increasing to 54 percent of total volumes. Continued development of Wattenberg and the horizontal Niobrara play, along with the asset acquisition earlier in 2010, accounted for the increases. The closed asset sale of mature oil assets reduced onshore U.S. volumes by nearly 3 MBoe/d in the third quarter 2010. Offshore U.S. volumes were 20 MBoe/d, down slightly as a result of lower natural gas production in the deepwater Gulf of Mexico at Raton and Swordfish. Total U.S. volumes were 120 MBoe/d for the third quarter 2010, up four percent from a year ago.

Internationally, average daily sales were up eight percent from the third quarter 2009 to 110 MBoe/d. Strengthened market and seasonal demand led to a 24 percent increase in natural gas sales in Israel. Crude oil volumes in the North Sea were significantly higher, primarily as a result of increased deliverability at the Dumbarton complex, which included the addition of two Lochranza wells in 2010. At the Alba field in Equatorial Guinea, liquid sales were lower due to the timing of liftings, which resulted in an underlifted position for the third quarter 2010 of nearly 4 MBoe/d.

Third quarter 2010 commodity prices were up significantly from the 2009 period. The Company's global crude oil averaged $73.41 per barrel, up 16 percent. Natural gas realizations in the U.S. averaged $3.87 per thousand cubic feet (Mcf) versus $3.05 per Mcf in the third quarter 2009. Natural gas liquid pricing in the U.S. averaged $36.30 per barrel for the third quarter of 2010, representing 51 percent of the Company's average U.S. crude oil realization.

Total production costs per barrel of oil equivalent (Boe), including lease operating expenses, production and ad valorem taxes, and transportation were relatively flat with the third quarter of 2009 at under $6.70 per Boe. Lease operating and transportation expenses averaged $4.49 and $0.80 per Boe, respectively, for the third quarter 2010. Depreciation, depletion, and amortization per Boe was $10.92 for the third quarter 2010, up slightly as a result of increased sales volumes in the DJ basin and the North Sea. General and administrative expenses were up due to increased staffing for the development of the Company's major projects.

Other operating income/expense for the third quarter 2010 includes a $13 million pre-tax gain on the sale of a portion of the Company's interest in the White Cliffs pipeline that transports crude oil from Platteville, Colorado to Cushing, Oklahoma. Included in other income/expense is a $15 million pre-tax deferred compensation charge relating to the quarterly value change of Noble Energy stock held in a benefit program.

The adjustment items to net income for the third quarter 2010 include a $5 million pre-tax gain on the mark-to-market of unsettled commodity derivatives, as well as a $114 million pre-tax gain on the sale of certain Mid-Continent and Illinois basin assets that closed in the period. Offsetting these items was a $100 million asset impairment, primarily related to onshore U.S. developments at Iron Horse and the New Albany shale.

2010 VOLUME GUIDANCE INCREASE

Noble Energy increased its 2010 annual volume guidance range to between 214 and 217 MBoe/d, which represents the upper half of the Company's prior guidance. Strong sales volumes year-to-date have resulted in the increase. The Company expects fourth quarter 2010 volumes to average 212 to 222 MBoe/d. In the U.S., volumes will be impacted by the onshore divestiture for a full quarter, as well as natural declines in the Mid-Continent and onshore Gulf Coast areas. Central DJ basin volumes should be modestly higher than the third quarter. Oil volumes in Equatorial Guinea will likely be higher as compared to the underlifted third quarter. In addition, North Sea oil volumes should be slightly lower and natural gas sales in Israel are expected to be reduced due to seasonal demands. All other annual guidance metrics remain unchanged.

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

WEBCAST AND CONFERENCE CALL INFORMATION

Noble Energy, Inc. will host its third quarter 2010 webcast and conference call at 9:00 a.m. Central time today. The webcast is accessible on the 'Investors' page at www.nobleenergyinc.com. Conference call numbers for participation are 877-545-1403 and 719-325-4746. 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 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.

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.

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



                                          Three Months          Nine Months
                                              Ended                Ended
                                         September 30,        September 30,
                                         -------------        -------------
                                        2010        2009   2010        2009
                                        ----        ----   ----        ----

    Net Income (Loss)                   $232        $107   $673       $(139)
      Unrealized (gains) losses on
       commodity
          derivative instruments          (5)        149   (215)        508
      Gain on asset sale (1)            (114)          -   (114)        (24)
      Asset impairments (2)              100           -    100         437
      Rig contract termination expense
       (3)                                 -           -     27           -
      Other adjustments                    2          12      2          12
                                         ---         ---    ---         ---
      Total Adjustments before tax       (17)        161   (200)        933

      Income Tax Effect of Adjustments
        (4)                               10         (75)    88        (382)
                                         ---         ---    ---        ----

    Adjusted Earnings (5)               $225        $193   $561        $412
                                        ----        ----   ----        ----

    Adjusted Earnings Per Share
      Basic                            $1.29       $1.11  $3.21       $2.38
      Diluted (6)                       1.27        1.10   3.17        2.35

    Weighted average number of
     shares outstanding
        Basic                            175         173    175         173
        Diluted                          177         175    178         175



    (1) Gain on asset sale relates to the sale of non-core US onshore
    assets in 2010 and the recognition of the gain on the sale of
    Argentina assets in 2009.
    (2) Impairments for 2010 related to our Iron Horse development, an
    onshore US area, our non-core New Albany Shale assets classified as
    held-for-sale and certain other Gulf of Mexico assets. Impairments
    for 2009 related to Granite Wash, an onshore US area, and our Main
    Pass asset located in the Gulf of Mexico shelf.
    (3) Amount represents costs to terminate a deepwater Gulf of Mexico
    drilling rig contract due to the Federal Deepwater Moratorium.
    (4) 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.
    (5) 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.
    (6) The diluted earnings per share calculations for the nine months
    ended September 30, 2010 includes an increase to net income of $3
    million, net of tax, related to deferred compensation loss 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          Nine Months
                                             Ended                Ended
                                        September 30,        September 30,
                                        -------------        -------------
                                       2010        2009   2010         2009
                                       ----        ----   ----         ----
    Revenues
      Crude oil and condensate         $446        $377 $1,313         $876
      Natural gas                       214         172    646          498
      NGLs                               44          24    143           66
      Income from equity method
       investees                         34          25     85           52
      Other revenues                     17          23     52           61
        Total revenues                  755         621  2,239        1,553
                                        ---         ---  -----        -----
    Operating Expenses
      Lease operating expense            95          88    283          281
      Production and ad valorem taxes    29          25     96           66
      Transportation expense             17          18     51           43
      Exploration expense                35          27    167          102
      Depreciation, depletion and
       amortization                     231         205    662          601
      General and administrative         65          53    194          173
      Gain on asset sale               (114)          -   (114)         (24)
      Asset impairments                 100           -    100          437
      Other operating (income)
       expense, net                       4          34     59           46
                                        ---         ---    ---
        Total operating expenses        462         450  1,498        1,725
                                        ---         ---  -----        -----
    Operating Income (Loss)             293         171    741         (172)
    Other (Income) Expense
      (Gain) loss on commodity
       derivative instruments           (38)         28   (280)          95
      Interest, net of amount
       capitalized                       21          23     60           64
      Other (income) expense, net        12           5     (1)          18
                                        ---         ---
        Total other (income) expense     (5)         56   (221)         177
                                        ---         ---   ----          ---
    Income (Loss) Before Taxes          298         115    962         (349)
    Income Tax Provision (Benefit)       66           8    289         (210)
    Net Income (Loss)                  $232        $107   $673        $(139)
                                       ----        ----   ----        -----

    Earnings (Loss) Per Share
      Basic                           $1.33       $0.62  $3.86       $(0.80)
      Diluted (1)                      1.31        0.61   3.80        (0.80)

    Weighted average number of
     shares outstanding
        Basic                           175         173    175          173
        Diluted                         177         175    178          173



    (1) The diluted earnings per share calculations for the nine months
    ended September 30, 2010 includes an increase to net income of $3
    million, net of tax, related to deferred compensation loss from NBL
    shares held in a rabbi trust. Consistent with US 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         Nine Months
                                                Ended                Ended
                                            September 30,        September 30,
                                            -------------        -------------
                                          2010        2009   2010        2009
                                          ----        ----   ----        ----
    Crude Oil and
     Condensate Sales
     Volumes (MBpd)
      United States                         41          39     40          37
      Equatorial Guinea                      8          14     11          14
      North Sea                             13           8     10           7
      Other International                    4           4      4           4
                                           ---         ---    ---         ---
        Total consolidated
         operations                         66          65     65          62
      Equity method investee                 2           2      2           2
                                           ---                ---         ---
        Total sales volumes                 68          67     67          64
                                           ---         ---    ---         ---
    Crude Oil and
     Condensate Realized
     Prices ($/Bbl)
      United States                     $71.28      $62.30 $73.31      $50.45
      Equatorial Guinea                  76.28       63.10  75.44       51.94
      North Sea                          78.89       69.56  77.33       57.61
      Other International                71.37       62.75  73.27       49.76
                                                            -----       -----
        Consolidated average
         realized prices                $73.41      $63.36 $74.30      $51.55
                                        ------      ------ ------      ------

    Natural Gas Sales
     Volumes (MMcfpd)
      United States                        399         397    399         401
      Equatorial Guinea                    243         228    221         238
      Israel                               178         144    129         117
      North Sea                              6           5      7           5
      Other International                   28          28     28          24
                                                                          ---
        Total sales volumes                854         802    784         785
                                           ---         ---    ---         ---
    Natural Gas Realized
     Prices ($/Mcf)
      United States                      $3.87       $3.05  $4.38       $3.36
      Equatorial Guinea                   0.27        0.27   0.27        0.27
      Israel                              3.85        3.95   4.08        3.27
      North Sea                           5.82        4.63   5.25        5.94
                                                             ----        ----
        Consolidated average
         realized prices                 $2.82       $2.41  $3.13       $2.40
                                         -----       -----  -----       -----

    Natural Gas Liquids
     (NGL) Sales Volumes
     (MBpd)
      United States                         13          10     13          10
      Equity method investee                 6           6      5           6
                                           ---         ---                ---
        Total sales volumes                 19          16     18          16
                                           ---         ---    ---         ---
    Natural Gas Liquids
     Realized Prices
     ($/Bbl)
      United States                     $36.30      $25.39 $40.17      $24.70

    Barrels of Oil
     Equivalent Volumes
     (MBoepd)
      United States                        120         115    119         113
      Equatorial Guinea                     49          52     48          54
      Israel                                30          24     22          20
      North Sea                             14           9     11           8
      Other International                    9           9      8           8
                                           ---         ---    ---         ---
        Total consolidated
         operations                        222         209    208         203
      Equity method investee                 8           8      7           8
                                                                          ---
        Total barrels of oil
         equivalent (MBoepd)               230         217    215         211
                                           ---         ---    ---         ---
        Barrels of oil
         equivalent volumes
         (MMBoe)                            21          20     59          58
                                           ---         ---    ---         ---



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


                                                   (unaudited)
                                                    September        December
                                                       30,           31,
                                                   ----------       ---------
                                                          2010            2009
                                                          ----            ----
            Assets
              Current Assets
                Cash and cash equivalents               $1,149          $1,014
                Accounts receivable, net                   532             465
                Other current assets                       322             199
                                                           ---             ---
                    Total current assets                 2,003           1,678
              Net property, plant and
               equipment                                 9,911           8,916
              Goodwill                                     696             758
              Other noncurrent assets                      479             455
                 Total Assets                          $13,089         $11,807
                                                       -------         -------

             Liabilities and Shareholders'
             Equity
              Current Liabilities
                Accounts payable - trade                  $924            $548
                Other current liabilities                  493             442
                                                           ---             ---
                    Total current liabilities            1,417             990
              Long-term debt                             2,194           2,037
              Deferred income taxes                      2,187           2,076
              Other noncurrent liabilities                 554             547
                                                           ---             ---
                 Total Liabilities                       6,352           5,650

                Total Shareholders' Equity               6,737           6,157
                 Total Liabilities and
                  Shareholders' Equity                 $13,089         $11,807
                                                       -------         -------


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

                                          Three Months
                                             Ended           Nine Months Ended
                                         September 30,         September 30,
                                         -------------         -------------
                                       2010       2009    2010          2009
                                       ----       ----    ----          ----

    Adjusted Earnings (1)              $225       $193    $561          $412
    Adjustments to reconcile
     adjusted earnings to
     discretionary cash flow:
      Depreciation, depletion and
       amortization                     231        205     662           601
      Exploration expense                35         27     167           102
      Capitalized interest              (15)       (12)    (45)          (30)
      (Income)/distributions from
       equity method investments, net     8          7       6           (15)
      Deferred compensation adjustment   15          7       4            18
      Deferred income taxes             (11)        51      14            96
      Stock-based compensation
       expense                           13         13      40            37
      Other                             (16)         8     (11)           (8)

    Discretionary Cash Flow (2)        $485       $499  $1,398        $1,213
                                       ----       ----  ------        ------

    Reconciliation to Operating Cash
     Flows
      Net changes in working capital    113         62     134            11
      Cash exploration costs            (33)       (25)   (110)          (91)
      Capitalized interest               15         12      45            30
      Current tax expense of earnings
       adjustments                       25        (60)      8          (157)
      Rig contract termination expense    -          -     (27)            -
      Other adjustments                   3          -       4           (20)
                                        ---
    Net Cash Provided by Operating
     Activities                        $608       $488  $1,452          $986
                                       ----       ----  ------          ----

    Capital expenditures (accrual
     based)                            $619       $224  $1,547          $933
    DJ Basin asset acquisition          (11)         -     498             -
    Increase in obligation under
     FPSO lease                          80          -     188             -
                                                   ---
    Total Capital Expenditures
     (Accrual Based)                   $688       $224  $2,233          $933
                                       ----       ----  ------          ----


    Proceeds from Asset Sales          $552         $-    $552            $-



    (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        Nine Months
                                                Ended               Ended
                                      September 30,       September 30,
                                      -------------       -------------
                                    2010       2009   2010       2009
                                    ----       ----   ----       ----
    Reclassification from
     Accumulated Other
       Comprehensive Loss (AOCL) to
        Revenue (1)
      Crude Oil                      $(5)      $(14)  $(14)      $(45)
      Natural Gas                      -          -     (1)         -
    Total Revenue Decrease           $(5)      $(14)  $(15)      $(45)
                                     ---       ----   ----       ----

    Gain (Loss) on Commodity
     Derivative Instruments
      Crude oil
         Realized                     $1        $50    $(4)      $212
         Unrealized                  (50)       (34)    59      (305)
           Total crude oil          $(49)       $16    $55       $(93)
                                    ----        ---    ---       ----
      Natural gas
         Realized                     32         71     69        201
         Unrealized                   55      (115)    156      (203)
           Total natural gas          87        (44)   225         (2)
                                     ---        ---    ---        ---
    Total Gain (Loss) on Commodity
     Derivative Instruments          $38       $(28)  $280       $(95)
                                     ---       ----   ----       ----

    Summary of Cash Settlements
    Realized gain on commodity
     derivative instruments          $33       $121    $65       $413
    Amounts reclassified from AOCL    (5)       (14)   (15)       (45)
                                     ---        ---    ---        ---
    Cash settlements received        $28       $107    $50       $368
                                     ---       ----    ---       ----



    (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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