NBL-2015.03.31-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission file number: 001-07964


NOBLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
73-0785597
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. employer identification number)
1001 Noble Energy Way
 
 
Houston, Texas
 
77070
(Address of principal executive offices)
 
(Zip Code)
(281) 872-3100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý    No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý
 
As of March 31, 2015, there were 387,004,520 shares of the registrant’s common stock,
par value $0.01 per share, outstanding.




Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II. Other Information  
 
 
Item 1.  Legal Proceedings 
 
 
Item 1A.  Risk Factors 
 
 
 
 
 
 
 
 
 
 
Item 6.  Exhibits 
 
 
 
 


2

Table of Contents

Part I. Financial Information
Item 1. Financial Statements
Noble Energy, Inc.
Consolidated Statements of Operations
(millions, except per share amounts)
(unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Revenues
 
 
 
Oil, Gas and NGL Sales
$
740

 
$
1,327

Income from Equity Method Investees
18

 
52

Other
1

 

Total
759

 
1,379

Costs and Expenses
 

 
 

Production Expense
245

 
229

Exploration Expense
65

 
74

Depreciation, Depletion and Amortization
454

 
425

General and Administrative
94

 
140

Asset Impairments
27

 
97

Other Operating Expense, Net
8

 
10

Total
893

 
975

Operating Income (Loss)
(134
)
 
404

Other (Income) Expense
 

 
 

(Gain) Loss on Commodity Derivative Instruments
(150
)
 
75

Interest, Net of Amount Capitalized
57

 
47

Other Non-Operating (Income) Expense, Net
1

 
5

Total
(92
)
 
127

Income (Loss) Before Income Taxes
(42
)
 
277

Income Tax (Benefit) Provision
(20
)
 
77

Net Income (Loss)
$
(22
)
 
$
200

 
 
 
 
Earnings (Loss) Per Share, Basic
$
(0.06
)
 
$
0.56

Earnings (Loss) Per Share, Diluted
$
(0.06
)
 
$
0.55

 
 
 
 
Weighted Average Number of Shares Outstanding
 
 
 
   Basic
370

 
360

   Diluted
370

 
365


The accompanying notes are an integral part of these financial statements.

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Table of Contents

Noble Energy, Inc.
Consolidated Statements of Comprehensive Income
(millions)
(unaudited)

 
 
Three Months Ended
March 31,
 
2015
 
2014
Net Income (Loss)
$
(22
)
 
$
200

Other Items of Comprehensive Income
 
 
 
Net Change in Mutual Fund Investment
(11
)
 
1

Less Tax Benefit
3

 

Net Change in Pension and Other
1

 
4

      Less Tax Benefit

 
(2
)
Other Comprehensive Income (Loss)
(7
)
 
3

Comprehensive Income (Loss)
$
(29
)
 
$
203


The accompanying notes are an integral part of these financial statements.


4

Table of Contents

Noble Energy, Inc.
Consolidated Balance Sheets
(millions)
(unaudited)

 
March 31,
2015
 
December 31,
2014
ASSETS
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
1,709

 
$
1,183

Accounts Receivable, Net
769

 
857

Commodity Derivative Assets, Current
661

 
710

Other Current Assets
259

 
325

Total Current Assets
3,398

 
3,075

Property, Plant and Equipment
 

 
 

Oil and Gas Properties (Successful Efforts Method of Accounting)
26,337

 
25,599

Property, Plant and Equipment, Other
684

 
630

Total Property, Plant and Equipment, Gross
27,021

 
26,229

Accumulated Depreciation, Depletion and Amortization
(8,559
)
 
(8,086
)
Total Property, Plant and Equipment, Net
18,462

 
18,143

Goodwill
617

 
620

Other Noncurrent Assets
784

 
715

Total Assets
$
23,261

 
$
22,553

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 

 
 

Accounts Payable - Trade
$
1,269

 
$
1,578

Other Current Liabilities
874

 
944

Total Current Liabilities
2,143

 
2,522

Long-Term Debt
6,113

 
6,103

Deferred Income Taxes, Noncurrent
2,491

 
2,516

Other Noncurrent Liabilities
1,157

 
1,087

Total Liabilities
11,904

 
12,228

Commitments and Contingencies

 


Shareholders’ Equity
 

 
 

Preferred Stock - Par Value $1.00 per share; 4 Million Shares Authorized, None Issued

 

Common Stock - Par Value $0.01 per share; 500 Million Shares Authorized; 428 Million and 402 Million Shares Issued, respectively
4

 
4

Additional Paid in Capital
4,761

 
3,624

Accumulated Other Comprehensive Loss
(97
)
 
(90
)
Treasury Stock, at Cost; 38 Million Shares
(683
)
 
(671
)
Retained Earnings
7,372

 
7,458

Total Shareholders’ Equity
11,357

 
10,325

Total Liabilities and Shareholders’ Equity
$
23,261

 
$
22,553


The accompanying notes are an integral part of these financial statements.


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Table of Contents

Noble Energy, Inc.
Consolidated Statements of Cash Flows
(millions)
(unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Cash Flows From Operating Activities
 
 
 
Net Income (Loss)
$
(22
)
 
$
200

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
 

 
 

Depreciation, Depletion and Amortization
454

 
425

Asset Impairments
27

 
97

Dry Hole Cost
20

 
2

Deferred Income Taxes
(30
)
 
17

Income from Equity Method Investees, Net of Dividends
(18
)
 
(13
)
(Gain) Loss on Commodity Derivative Instruments
(150
)
 
75

Net Cash Received (Paid) in Settlement of Commodity Derivative Instruments
210

 
(33
)
Stock Based Compensation
21

 
23

Other Adjustments for Noncash Items Included in Income
11

 
18

Changes in Operating Assets and Liabilities
 
 
 

Decrease in Accounts Receivable
107

 
28

Increase (Decrease) in Accounts Payable
(71
)
 
57

Increase in Current Income Taxes Payable
3

 
47

Decrease in Other Current Assets and Liabilities, Net
(51
)
 
(24
)
Other Operating Assets and Liabilities, Net
30

 
10

Net Cash Provided by Operating Activities
541

 
929

Cash Flows From Investing Activities
 

 
 

Additions to Property, Plant and Equipment
(1,111
)
 
(1,158
)
Additions to Equity Method Investments
(44
)
 
(12
)
Proceeds from Divestitures
119

 
92

Net Cash Used in Investing Activities
(1,036
)
 
(1,078
)
Cash Flows From Financing Activities
 

 
 

Exercise of Stock Options
4

 
10

Excess Tax Benefits from Stock-Based Awards

 
6

Dividends Paid, Common Stock
(64
)
 
(50
)
Purchase of Treasury Stock
(12
)
 
(15
)
Proceeds from Issuance of Shares of Common Stock to Public, Net of Offering Costs
1,112

 

Proceeds from Credit Facility, Net

 
450

Repayment of Capital Lease Obligation
(19
)
 
(15
)
Net Cash Provided by Financing Activities
1,021

 
386

Increase in Cash and Cash Equivalents
526

 
237

Cash and Cash Equivalents at Beginning of Period
1,183

 
1,117

Cash and Cash Equivalents at End of Period
$
1,709

 
$
1,354

 
The accompanying notes are an integral part of these financial statements.


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Table of Contents


Noble Energy, Inc.
Consolidated Statements of Shareholders' Equity
(millions)
(unaudited)

 
Common
Stock
 
Additional
Paid in
Capital
 
Accumulated Other
Comprehensive
Loss
 
Treasury
Stock at
Cost
 
Retained
Earnings
 
Total
Shareholders'
Equity
December 31, 2014
$
4

 
$
3,624

 
$
(90
)
 
$
(671
)
 
$
7,458

 
$
10,325

Net (Loss)

 

 

 

 
(22
)
 
(22
)
Stock-based Compensation

 
21

 

 

 

 
21

Exercise of Stock Options

 
4

 

 

 

 
4

Dividends (18 cents per share)

 

 

 

 
(64
)
 
(64
)
Changes in Treasury Stock, Net

 

 

 
(12
)
 

 
(12
)
Issuance of Shares of Common Stock to Public, Net of Offering Costs

 
1,112

 

 

 

 
1,112

Net Change in Pension and Other

 

 
(7
)
 

 

 
(7
)
March 31, 2015
$
4

 
$
4,761

 
$
(97
)
 
$
(683
)
 
$
7,372

 
$
11,357

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
$
4

 
$
3,463

 
$
(117
)
 
$
(659
)
 
$
6,493

 
$
9,184

Net Income

 

 

 

 
200

 
200

Stock-based Compensation

 
23

 

 

 

 
23

Exercise of Stock Options

 
10

 

 

 

 
10

Tax Benefits Related to Exercise of Stock Options

 
6

 

 

 

 
6

Dividends (14 cents per share)

 

 

 

 
(50
)
 
(50
)
Changes in Treasury Stock, Net

 

 

 
(15
)
 

 
(15
)
Net Change in Pension and Other

 

 
3

 

 

 
3

March 31, 2014
$
4

 
$
3,502

 
$
(114
)
 
$
(674
)
 
$
6,643

 
$
9,361



The accompanying notes are an integral part of these financial statements.

7

Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements


Note 1.  Organization and Nature of Operations
Noble Energy, Inc. (Noble Energy, we or us) is a leading independent energy company engaged in worldwide crude oil and natural gas exploration and production. Our core operating areas are onshore US, primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa.

Note 2.  Basis of Presentation
Presentation   The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (US GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. The accompanying consolidated financial statements at March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and shareholders’ equity for such periods. Certain prior-period amounts have been reclassified to conform to the current-period presentation. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2014.
Consolidation   Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries.  In addition, we use the equity method of accounting for investments in entities that we do not control but over which we exert significant influence. All significant intercompany balances and transactions have been eliminated upon consolidation.
Equity Offering On March 3, 2015, we closed an underwritten public offering of 21,000,000 shares of common stock, par value $0.01 per share, at a price to the public of $47.50 per share. In addition, on March 25, 2015, we completed the issuance of an additional 3,150,000 shares of common stock, par value $0.01 per share, in connection with the exercise of the option of the underwriters to purchase additional shares of common stock. The aggregate net proceeds of the offerings were approximately $1.1 billion (after deducting underwriting discounts and commissions and estimated offering expenses). We used approximately $150 million of the net proceeds to repay outstanding indebtedness under our revolving credit facility and the remainder will be used for general corporate purposes, including the funding of our capital investment program.
Increase in Authorized Shares On April 28, 2015, our stockholders approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of our common stock from 500 million to 1 billion.
Update on Core Area Israel In March 2014, we and our partners reached an agreement with the Israel Antitrust Authority on various matters (Consent Decree). The Consent Decree, which was subject to final approval by the Antitrust Tribunal, granted the rights, to us and our partners, to jointly market natural gas from the Leviathan field. Also, as a result of the Consent Decree, we agreed to divest our Tanin and Karish natural gas discoveries.
However, on December 23, 2014, we and our partners in the Leviathan field were advised by the Israel Antitrust Authority of its decision to not submit the Consent Decree to the Antitrust Tribunal for final approval. This is a matter that we believed was resolved some time ago and we had received assurances from the Antitrust Authority that approval was forthcoming. We requested an oral hearing with the Antitrust Authority, which took place on January 27, 2015, and await final disposition.
In the meantime, negotiations are ongoing with the Antitrust Authority and with an inter-ministerial working group, established by the Prime Minister's office for the purpose of agreeing to a comprehensive regulatory framework for investment. We remain prepared to implement the Consent Decree if agreed with the Antitrust Authority but in any case, expect that divestiture of Tanin and Karish will be part of a final regulatory settlement. We therefore continue to hold these assets for sale.
Recently Issued Accounting Standards In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-03 (ASU 2015-03): Simplifying the Presentation of Debt Issuance Costs, effective for annual and interim periods beginning after December 15, 2015. ASU 2015-03 requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. It is effective retrospectively for first quarter 2016 and is only expected to impact the presentation of our consolidated balance sheet. As of March 31, 2015 and December 31, 2014, we had $48 million and $50 million of capitalized, unamortized debt issuance costs, respectively.
In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU 2015-02): Consolidation - Amendments to the Consolidation Analysis, effective for annual and interim periods beginning after December 15, 2015. ASU 2015-02 changes the guidance as to whether an entity is a variable interest entity (VIE) or a voting interest entity and how related parties

8

Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

are considered in the VIE model. We are currently evaluating the provisions of ASU 2015-02 and assessing the impact, if any, it may have on our financial position and results of operations.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. In April 2015, the FASB proposed to delay the effective date for one year, for annual reporting periods beginning after December 15, 2017. The proposal will be subject to the FASB's due process requirement. We are currently evaluating the provisions of ASU 2014-09 and awaiting implementation guidance to determine the impact, if any, it may have on our financial position and results of operations.
Estimates   The preparation of consolidated financial statements in conformity with US GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.
Statements of Operations Information   Other statements of operations information is as follows: 
 
Three Months Ended
March 31,
(millions)
2015
 
2014
Production Expense
 

 
 

Lease Operating Expense
$
157

 
$
142

Production and Ad Valorem Taxes
32

 
49

Transportation and Gathering Expense
56

 
38

Total
$
245

 
$
229

Other Operating (Income) Expense, Net
 

 
 

Midstream Gathering and Processing Expense
$
4

 
$
3

Other, Net
4

 
7

Total
$
8

 
$
10

Other Non-Operating (Income) Expense, Net
 

 
 

Deferred Compensation Expense (1)
$
2

 
$
4

Other (Income) Expense, Net
(1
)
 
1

Total
$
1

 
$
5

 
(1) 
Amounts represent increases in the fair value of shares of our common stock held in a rabbi trust.


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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Balance Sheet Information   Other balance sheet information is as follows:
(millions)
March 31,
2015
 
December 31,
2014
Accounts Receivable, Net
 
 
 
Commodity Sales
$
303

 
$
405

Joint Interest Billings
343

 
297

Other
140

 
171

Allowance for Doubtful Accounts
(17
)
 
(16
)
Total
$
769

 
$
857

Other Current Assets
 

 
 

Inventories, Materials and Supplies
$
89

 
$
81

Inventories, Crude Oil
28

 
24

Assets Held for Sale (1)
106

 
180

Prepaid Expenses and Other Current Assets
36

 
40

Total
$
259

 
$
325

Other Noncurrent Assets
 

 
 

Equity Method Investments
$
384

 
$
325

Mutual Fund Investments
112

 
111

Commodity Derivative Assets
169

 
180

Other Assets
119

 
99

Total
$
784

 
$
715

Other Current Liabilities
 

 
 

Production and Ad Valorem Taxes
$
119

 
$
110

Income Taxes Payable
182

 
180

Deferred Income Taxes, Current
151

 
158

Accrued Benefit Costs, Current
109

 
125

Asset Retirement Obligations
81

 
81

Interest Payable
83

 
70

Current Portion of Capital Lease Obligations
65

 
68

Other
84

 
152

Total
$
874

 
$
944

Other Noncurrent Liabilities
 

 
 

Deferred Compensation Liabilities
$
224

 
$
218

Asset Retirement Obligations
706

 
670

Accrued Benefit Costs
23

 
24

Other
204

 
175

Total
$
1,157

 
$
1,087

(1) Assets held for sale includes $76 million related to our Tanin and Karish natural gas discoveries, offshore Israel. See Update on Core Area Israel, above.


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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 3. Divestitures
Onshore US Properties   During the first three months of 2015, we sold certain onshore US crude oil and natural gas leases. Properties sold generated net proceeds of $119 million, which were applied to the DJ Basin depletable field, with no recognition of gain or loss.
Information regarding assets sold during the first three months of 2014 is as follows:
 
Three Months Ended
March 31,
(millions)
2014
Sales Proceeds
$
92

Less
 
     Net Book Value of Assets Sold
(106
)
     Goodwill Allocated to Assets Sold
(6
)
     Asset Retirement Obligations Associated with Assets Sold
20

     Other Closing Adjustments
(1
)
Gain on Divestitures
$
(1
)
Note 4. Asset Impairments
Pre-tax (non-cash) asset impairment charges were as follows:
 
Three Months Ended
March 31,
(millions)
2015
 
2014
Deepwater Gulf of Mexico
3

 

Eastern Mediterranean
24

 

North Sea

 
92

Non-Core US Property

 
5

Total
$
27

 
$
97

Impairments for 2015 were related to facility costs at South Raton (Deepwater Gulf of Mexico) and increases in expected field abandonment costs for the Noa and Pinnacles fields (Eastern Mediterranean).
Impairments for 2014 were primarily related to an increase in expected field abandonment costs and a change in the timing of abandonment activities at the MacCulloch North Sea field.
See Note 2. Basis of Presentation, Note 7. Fair Value Measurements and Disclosures and Note 9. Asset Retirement Obligations.

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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements


Note 5.  Derivative Instruments and Hedging Activities
Objective and Strategies for Using Derivative Instruments   We are exposed to fluctuations in crude oil and natural gas prices on the majority of our production. In order to mitigate the effect of commodity price volatility and enhance the predictability of cash flows relating to the marketing of our global crude oil and domestic natural gas, we enter into crude oil and natural gas price hedging arrangements with respect to a portion of our expected production.
While these instruments mitigate the cash flow risk of future decreases in commodity prices, they may also curtail benefits from future increases in commodity prices. See Note 7. Fair Value Measurements and Disclosures for a discussion of methods and assumptions used to estimate the fair values of our derivative instruments.
Unsettled Commodity Derivative Instruments   As of March 31, 2015, we had entered into the following crude oil derivative instruments: 
 
 
 
 
Swaps
 
Collars
Settlement
Period
Type of Contract
Index
Bbls Per
Day
Weighted
Average
Fixed
Price
 
Weighted
Average
 Short Put
 Price
Weighted
Average
Floor
Price
Weighted
Average
 Ceiling
Price
Instruments Entered Into as of March 31, 2015
 
 
 
 
 
 
2015
Swaps
NYMEX WTI
27,000

$
88.80

 
$

$

$

2015
Swaps
Dated Brent
8,000

100.31

 



2015
Two-Way Collars
NYMEX WTI
5,000


 

50.00

64.94

2015
Three-Way Collars
NYMEX WTI
20,000


 
70.50

87.55

94.41

2015
Three-Way Collars
Dated Brent
13,000


 
76.92

96.00

108.49

2016
Swaps
NYMEX WTI
6,000

87.95

 



2016
Swaps
Dated Brent
9,000

97.96

 



2016
Three-Way Collars
NYMEX WTI
6,000


 
61.00

72.50

86.37

2016
Three-Way Collars
Dated Brent
8,000


 
72.50

86.25

101.79

As of March 31, 2015, we had entered into the following natural gas derivative instruments:
 
 
 
 
Swaps
 
Collars
Settlement
Period
Type of Contract
Index
MMBtu
Per Day
Weighted
Average
Fixed
Price
 
Weighted
Average
Short Put
 Price
Weighted
Average
Floor
Price
Weighted
Average
Ceiling
Price
Instruments Entered Into as of March 31, 2015
 
 
 
 
 
 
2015
Swaps
NYMEX HH
140,000
$
4.30

 
$

$

$

2015
Three-Way Collars
NYMEX HH
150,000

 
3.58

4.25

5.04

2016
Swaps (1)
NYMEX HH
40,000
3.60

 



2016
Two-Way Collars
NYMEX HH
30,000

 

3.00

3.50

2016
Three-Way Collars
NYMEX HH
60,000

 
2.88

3.50

4.03

(1) 
We have entered into natural gas derivative contracts which give counterparties the option to extend for an additional 12-month period. Options covering a notional volume of 30,000 MMBtu/d are exercisable on December 22 and 23, 2016. If the counterparties exercise all such options, the notional volume of our existing natural gas derivative contracts will increase by 30,000 MMBtu/d at an average price of $3.50 per MMBtu for each month during the period January 1, 2017 through December 31, 2017.

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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Fair Value Amounts and (Gain) Loss on Commodity Derivative Instruments   The fair values of commodity derivative instruments in our consolidated balance sheets were as follows:
Fair Value of Derivative Instruments
 
Asset Derivative Instruments
 
Liability Derivative Instruments
 
March 31,
2015
 
December 31,
2014
 
March 31,
2015
 
December 31,
2014
(millions)
Balance Sheet Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
 Value
 
Balance Sheet Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
Value
Commodity Derivative Instruments
Current Assets
 
$
661

 
Current Assets
 
$
710

 
Current Liabilities
 
$

 
Current Liabilities
 
$

 
Noncurrent Assets
 
169

 
Noncurrent Assets
 
180

 
Noncurrent Liabilities
 

 
Noncurrent Liabilities
 

Total
 
 
$
830

 
 
 
$
890

 
 
 
$

 
 
 
$


The effect of commodity derivative instruments on our consolidated statements of operations was as follows:
 
Three Months Ended
March 31,
(millions)
2015
 
2014
Cash (Received) Paid in Settlement of Commodity Derivative Instruments
 
 
 
  Crude Oil
$
(185
)
 
$
27

  Natural Gas
(25
)
 
6

Total Cash (Received) Paid in Settlement of Commodity Derivative Instruments
(210
)
 
33

Non-cash Portion of (Gain) Loss on Commodity Derivative Instruments
 
 
 
   Crude Oil
55

 
28

   Natural Gas
5

 
14

Total Non-cash Portion of (Gain) Loss on Commodity Derivative Instruments
60

 
42

(Gain) Loss on Commodity Derivative Instruments
 
 
 
   Crude Oil
(130
)
 
55

   Natural Gas
(20
)
 
20

Total (Gain) Loss on Commodity Derivative Instruments
$
(150
)
 
$
75


13

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Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 6. Debt
Debt consists of the following:
 
March 31,
2015
 
 
December 31,
2014
 
(millions, except percentages)
Debt
 
Interest Rate
 
 
Debt
 
Interest Rate
 
Credit Facility, due October 3, 2018
$

 
%
 
 
$

 
%
 
Capital Lease and Other Obligations
419

 
%
 
 
413

 
%
 
8.25% Senior Notes, due March 1, 2019
1,000

 
8.25
%
 
 
1,000

 
8.25
%
 
4.15% Senior Notes, due December 15, 2021
1,000

 
4.15
%
 
 
1,000

 
4.15
%
 
7.25% Senior Notes, due October 15, 2023
100

 
7.25
%
 
 
100

 
7.25
%
 
3.90% Senior Notes, due November 15, 2024
650

 
3.90
%
 
 
650

 
3.90
%
 
8.00% Senior Notes, due April 1, 2027
250

 
8.00
%
 
 
250

 
8.00
%
 
6.00% Senior Notes, due March 1, 2041
850

 
6.00
%
 
 
850

 
6.00
%
 
5.25% Senior Notes, due November 15, 2043
1,000

 
5.25
%
 
 
1,000

 
5.25
%
 
5.05% Senior Notes, due November 15, 2044
850

 
5.05
%
 
 
850

 
5.05
%
 
7.25% Senior Debentures, due August 1, 2097
84

 
7.25
%
 
 
84

 
7.25
%
 
Total
6,203

 
 
 
 
6,197

 
 

 
Unamortized Discount
(25
)
 
 

 
 
(26
)
 
 

 
Total Debt, Net of Discount
6,178

 
 

 
 
6,171

 
 

 
Less Amounts Due Within One Year
 

 
 

 
 
 

 
 

 
Capital Lease Obligations
(65
)
 
 

 
 
(68
)
 
 

 
Long-Term Debt Due After One Year
$
6,113

 
 

 
 
$
6,103

 
 

 
Credit Facility Our Credit Agreement provides for a $4.0 billion unsecured revolving credit facility (Credit Facility), which is available for general corporate purposes. The Credit Facility (i) provides for facility fee rates that range from 12.5 basis points to 30 basis points per year depending upon our credit rating, (ii) includes sub-facilities for short-term loans and letters of credit up to an aggregate amount of $500 million under each sub-facility and (iii) provides for interest rates that are based upon the Eurodollar rate plus a margin that ranges from 100 basis points to 145 basis points depending upon our credit rating.
See Note 7. Fair Value Measurements and Disclosures for a discussion of methods and assumptions used to estimate the fair values of debt.

Note 7.  Fair Value Measurements and Disclosures  
Assets and Liabilities Measured at Fair Value on a Recurring Basis 
Certain assets and liabilities are measured at fair value on a recurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values: 
Cash, Cash Equivalents, Accounts Receivable and Accounts Payable   The carrying amounts approximate fair value due to the short-term nature or maturity of the instruments. 
Mutual Fund Investments   Our mutual fund investments, which primarily include assets held in a rabbi trust, consist of various publicly-traded mutual funds that include investments ranging from equities to money market instruments. The fair values are based on quoted market prices for identical assets. 
Commodity Derivative Instruments   Our commodity derivative instruments may include: variable to fixed price commodity swaps, two-way collars, and/or three-way collars. We estimate the fair values of these instruments based on published forward commodity price curves as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published LIBOR rates, Eurodollar futures rates and interest swap rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and the fair values of commodity derivative instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. In addition, for collars, we estimate the option values of the put options sold and the contract floors and ceilings using an option pricing model which takes into account market volatility, market prices and contract terms. See Note 5. Derivative Instruments and Hedging Activities
Deferred Compensation Liability   The value is dependent upon the fair values of mutual fund investments and shares of our common stock held in a rabbi trust. See Mutual Fund Investments above. 

14

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Noble Energy, Inc.
Notes to Consolidated Financial Statements

Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows: 
 
Fair Value Measurements Using
 
 
 
 
 
Quoted Prices in 
Active Markets
(Level 1) (1)
 
Significant Other
Observable Inputs
(Level 2) (2)
 
Significant
Unobservable
Inputs (Level 3) (3)
 
Adjustment (4)
 
Fair Value Measurement
(millions)
 
 
 
 
 
 
 
 
 
March 31, 2015
 
 
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
 
 
Mutual Fund Investments
$
112

 
$

 
$

 
$

 
$
112

Commodity Derivative Instruments

 
832

 

 
(2
)
 
830

Financial Liabilities
 

 
 

 
 

 
 

 
 

Commodity Derivative Instruments

 
(2
)
 

 
2

 

Portion of Deferred Compensation Liability Measured at Fair Value
(137
)
 

 

 

 
(137
)
December 31, 2014
 
 
 
 
 
 
 

 
 

Financial Assets
 

 
 

 
 

 
 

 
 

Mutual Fund Investments
$
111

 
$

 
$

 
$

 
$
111

Commodity Derivative Instruments

 
890

 

 

 
890

Financial Liabilities
 

 
 

 
 

 
 

 
 

Commodity Derivative Instruments

 

 

 

 

Portion of Deferred Compensation Liability Measured at Fair Value
(134
)
 

 

 

 
(134
)
 
(1) 
Level 1 measurements are fair value measurements which use quoted market prices (unadjusted) in active markets for identical assets or liabilities. We use Level 1 inputs when available as Level 1 inputs generally provide the most reliable evidence of fair value.
(2) 
Level 2 measurements are fair value measurements which use inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.
(3) 
Level 3 measurements are fair value measurements which use unobservable inputs.
(4) 
Amount represents the impact of netting provisions within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:
Asset Impairments Information about impaired assets is as follows:
 
Fair Value Measurements Using
 
 
 
 
Description
Quoted Prices in 
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Net Book Value (1)
 
Total Pre-tax (Non-cash) Impairment Loss
millions
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
 
Impaired Oil and Gas Properties
$

 
$

 
$

 
$
27

 
$
27

Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
Impaired Oil and Gas Properties

 

 
6

 
103

 
97

(1) Amount represents net book value at the date of assessment.

15

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Noble Energy, Inc.
Notes to Consolidated Financial Statements

The fair value of impaired oil and gas properties was determined as of the date of the assessment using a discounted cash flow model based on management’s expectations of future crude oil and natural gas production prior to abandonment date, commodity prices based on NYMEX WTI, NYMEX Henry Hub, and Brent future price curves as of the date of the estimate, estimated operating and abandonment costs, and a risk-adjusted discount rate of 10%. First quarter 2015 impairments were due primarily to increases in asset carrying values associated with increases in estimated abandonment costs. See Note 4. Asset Impairments.
Additional Fair Value Disclosures
Debt   The fair value of public, fixed-rate debt is estimated based on the published market prices for the same or similar issues. As such, we consider the fair value of our public, fixed-rate debt to be a Level 1 measurement on the fair value hierarchy. 
As such, we consider the fair values of our Credit Facility to be a Level 2 measurement on the fair value hierarchy. See Note 6. Debt.
Fair value information regarding our debt is as follows:
 
March 31,
2015
 
December 31,
2014
(millions)
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Total Debt, Net of Unamortized Discount (1)
$
5,759

 
$
6,385

 
$
5,758

 
$
6,179

(1) 
Excludes capital lease and other obligations.
Note 8.  Capitalized Exploratory Well Costs
We capitalize exploratory well costs until a determination is made that the well has found proved reserves or is deemed noncommercial. If a well is deemed to be noncommercial, the well costs are charged to exploration expense as dry hole cost.
Changes in capitalized exploratory well costs are as follows and exclude amounts that were capitalized and subsequently expensed in the same period:
(millions)
Three Months Ended March 31, 2015
Capitalized Exploratory Well Costs, Beginning of Period
$
1,337

Additions to Capitalized Exploratory Well Costs Pending Determination of Proved Reserves
59

Reclassified to Proved Oil and Gas Properties Based on Determination of Proved Reserves
(6
)
Capitalized Exploratory Well Costs Charged to Expense (1)
(17
)
Capitalized Exploratory Well Costs, End of Period
$
1,373


(1) Relates to onshore US exploration activity.

The following table provides an aging of capitalized exploratory well costs based on the date that drilling commenced, and the number of projects that have been capitalized for a period greater than one year: 
(millions)
March 31,
2015
 
December 31,
2014
Exploratory Well Costs Capitalized for a Period of One Year or Less
$
272

 
$
247

Exploratory Well Costs Capitalized for a Period Greater Than One Year Since Commencement of Drilling
1,101

 
1,090

Balance at End of Period
$
1,373

 
$
1,337

Number of Projects with Exploratory Well Costs That Have Been Capitalized for a Period Greater Than One Year Since Commencement of Drilling
13

 
13

 

16

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Noble Energy, Inc.
Notes to Consolidated Financial Statements

The following table includes exploratory well costs that have been capitalized for a period greater than one year since the commencement of drilling as of March 31, 2015:
 
 
 
(millions)
Total by Project
Progress
Country/Project:
 
 
Onshore US
 
 
Northeast Nevada
$
26

Analyzing results from our first four exploratory vertical wells and evaluating potential for production tests.
Deepwater Gulf of Mexico
 
 
Troubadour
47

Evaluating development scenarios for this 2013 natural gas discovery including subsea tieback to existing infrastructure.
Offshore Equatorial Guinea (Blocks O and I)
 

 
Diega/Carmen
221

Evaluating regional development scenarios for this 2008 crude oil discovery. We drilled subsequent appraisal wells. During 2014, we conducted additional seismic activity over Blocks O and I and are engaged in processing the newly-acquired seismic data.
Carla
154

Evaluating regional development scenarios for this 2011 crude oil discovery. We drilled subsequent appraisal wells. During 2014, we conducted additional seismic activity over Blocks O and I and are engaged in processing the newly-acquired seismic data.
Felicita
39

Evaluating regional development plans for this 2008 condensate and natural gas discovery. A natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options and finalize a data exchange agreement between the two countries.
Yolanda
20

Evaluating regional development plans for this 2007 condensate and natural gas discovery. A natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options and finalize a data exchange agreement between the two countries.
Offshore Cameroon
 

 
YoYo
48

Working with the government to assess commercialization of this 2007 condensate and natural gas discovery. A natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options and finalize a data exchange agreement between the two countries.
Offshore Israel (1)
 

 
Leviathan
185

During 2014, we received the Leviathan Development and Production Leases, submitted a development plan to the government, completed substantial engineering and procurement activities and engaged in natural gas marketing activities.
Leviathan-1 Deep
79

Well did not reach the target interval; developing future drilling plans to test this deep oil concept, which is held by the Leviathan Development and Production Leases. We are working on potential well design and placement.

17

Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Dalit
28

Submitted a development plan to the government to develop this 2009 natural gas discovery as a tie-in to existing infrastructure.
Dolphin 1
25

Reviewing regional development scenarios for this 2011 natural gas discovery, including a potential tieback to Leviathan. We have applied to the Israeli government for a commerciality ruling.
Offshore Cyprus
 
 
Cyprus
203

Discussing monetization options with the Cyprus government for this 2011 natural gas discovery. In May 2014, our application for renewal of the PSC for two additional years was approved. We plan to submit a plan of development to the government in 2015.
Other
 

 
Individual Projects Less than $20 million
26

Continuing to drill and evaluate wells.
Total
$
1,101

 
(1) We are currently working to resolve antitrust and other regulatory matters with the Israeli government to enable Leviathan and other development to move forward. See Note 2. Basis of Presentation Update on Core Area Israel.

Note 9.  Asset Retirement Obligations
Asset retirement obligations (ARO) consists primarily of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our oil and gas properties. Changes in ARO are as follows:
 
Three Months Ended
March 31,
(millions)
2015
 
2014
Asset Retirement Obligations, Beginning Balance
$
751

 
$
586

Liabilities Incurred
10

 
1

Liabilities Settled
(8
)
 
(14
)
Revision of Estimate
24

 
72

Accretion Expense (1)
10

 
10

Asset Retirement Obligations, Ending Balance
$
787

 
$
655

(1) Accretion expense is included in DD&A expense in the consolidated statements of operations.
For the three months ended March 31, 2015
Liabilities incurred were due to new wells and facilities and included $4 million for onshore US and $6 million for deepwater Gulf of Mexico. Liabilities settled in 2015 relate primarily to non-core US properties classified as held for sale.
Revisions in estimate for 2015 relate to changes in cost estimates for Eastern Mediterranean.
For the three months ended March 31, 2014
Liabilities settled in 2014 include $24 million for onshore US and deepwater Gulf of Mexico abandonments and $17 million related to properties classified as held for sale, offset by $27 million as a result of reclassifying remaining North Sea assets from held for sale to held and used.
Revision in estimate for 2014 included an increase of $67 million related to the non-operated MacCulloch North Sea field due to an increase in costs and a change in timing. See Note 3. Divestitures.

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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 10.  Earnings Per Share
Basic earnings per share of common stock is computed using the weighted average number of shares of common stock outstanding during each period. The diluted earnings per share of common stock include the effect of outstanding stock options, shares of restricted stock, or shares of our common stock held in a rabbi trust (when dilutive). The following table summarizes the calculation of basic and diluted earnings per share:
 
Three Months Ended
March 31,
(millions, except per share amounts)
2015
 
2014
Net Income (Loss)
$
(22
)
 
$
200

 
 
 
 
Weighted Average Number of Shares Outstanding, Basic (1)
370

 
360

Incremental Shares from Assumed Conversion of Dilutive Stock Options, Restricted Stock, and Shares of Common Stock in Rabbi Trust (2)

 
5

Weighted Average Number of Shares Outstanding, Diluted
370

 
365

Earnings (Loss) Per Share, Basic
$
(0.06
)
 
$
0.56

Earnings (Loss) Per Share, Diluted
(0.06
)
 
0.55

Number of Antidilutive Stock Options, Shares of Restricted Stock, and Shares of Common Stock in Rabbi Trust Excluded from Calculation Above
9

 
6

(1) 
The weighted average number of shares outstanding includes the weighted average shares of common stock issued in connection with the underwritten public offering of 24,150,000 shares of common stock of the Company in first quarter 2015.
(2) 
For the three months ended March 31, 2015, all outstanding options and non-vested restricted shares have been excluded from the calculation of diluted EPS as the Company incurred a loss for the quarter. Therefore, inclusion of outstanding options and non-vested restricted shares in the calculation of diluted EPS would be anti-dilutive.


Note 11.  Income Taxes
The income tax provision relating to continuing operations consists of the following:
 
Three Months Ended
March 31,
(millions)
2015
 
2014
Current
$
10

 
$
60

Deferred
(30
)
 
17

Total Income Tax (Benefit) Provision
$
(20
)
 
$
77

Effective Tax Rate
47.6
%
 
27.6
%

Our effective tax rate (ETR) for the three months ended March 31, 2015 increased as compared with the three months ended March 31, 2014 primarily as a result of a tax benefit divided by a pre-tax loss. In the case of a pre-tax loss, our favorable permanent differences, such as income from equity method investees and increased earnings in our foreign jurisdictions with rates that vary from the US statutory rate, have the effect of increasing the tax benefit which, in turn, increases the ETR.
In our major tax jurisdictions, the earliest years remaining open to examination are as follows: US – 2011, Equatorial Guinea – 2009 and Israel – 2010.

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Table of Contents
Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 12.  Segment Information  
We have operations throughout the world and manage our operations by country. The following information is grouped into four components that are all in the business of crude oil and natural gas exploration, development, production, and acquisition: the United States; West Africa (Equatorial Guinea, Cameroon, Sierra Leone, and Gabon); Eastern Mediterranean (Israel and Cyprus); and Other International and Corporate. Other International includes the North Sea, China (through June 30, 2014), Falkland Islands, Nicaragua and new ventures. Income (loss) from continuing operations before income taxes for the United States and West Africa includes gains and losses on commodity derivative instruments.
(millions)
Consolidated
 
United
States
 
West
Africa
 
Eastern
Mediterranean
 
Other Int'l &
Corporate
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
 
 
Revenues from Third Parties
$
740

 
$
478

 
$
138

 
$
120

 
$
4

Income from Equity Method Investees
18

 
11

 
7

 

 

Gathering, Marketing and Processing
1

 
1

 

 

 

Total Revenues
759

 
490

 
145

 
120

 
4

DD&A
454

 
357

 
77

 
15

 
5

Asset Impairments
27

 
3

 

 
24

 

Gain on Commodity Derivative Instruments 
(150
)
 
(105
)
 
(45
)
 

 

Income (Loss) Before Income Taxes
(42
)
 
(1
)
 
74

 
51

 
(166
)
Three Months Ended March 31, 2014
 

 
 

 
 

 
 

 
 

Revenues from Third Parties
$
1,327

 
$
842

 
$
323

 
$
112

 
$
50

Income from Equity Method Investees
52

 

 
52

 

 

Total Revenues
1,379

 
842

 
375

 
112

 
50

DD&A
425

 
308

 
76

 
14

 
27

Asset Impairments
97

 
5

 

 

 
92

Loss on Commodity Derivative Instruments
75

 
76

 
(1
)
 

 

Income (Loss) from Before Income Taxes
277

 
183

 
261

 
77

 
(244
)
March 31, 2015
 

 
 

 
 

 
 

 
 

Total Assets
$
23,261

 
$
16,998

 
$
2,732

 
$
2,840

 
$
691

December 31, 2014
 

 
 

 
 

 
 

 
 

Total Assets
22,553

 
16,400

 
2,763

 
2,806

 
584



Note 13.  Commitments and Contingencies  
CONSOL Carried Cost Obligation In accordance with our Marcellus Shale joint venture arrangement with a subsidiary of CONSOL Energy Inc. (CONSOL), we agreed to fund one-third of CONSOL's 50% working interest share of future drilling and completion costs, capped at $400 million each year (CONSOL Carried Cost Obligation). The remaining obligation totaled approximately $1.6 billion at March 31, 2015.
The CONSOL Carried Cost Obligation is suspended if average Henry Hub natural gas prices fall and remain below $4.00 per MMBtu in any three consecutive month period and remain suspended until average Henry Hub natural gas prices equal or exceed $4.00 per MMBtu for three consecutive months. The CONSOL Carried Cost Obligation is currently suspended due to low natural gas prices. Based on the March 31, 2015 NYMEX Henry Hub natural gas price curve, we expect that the CONSOL Carried Cost Obligation will be suspended for the next 12 months.
Legal Proceedings  We are involved in various legal proceedings in the ordinary course of business.  These proceedings are subject to the uncertainties inherent in any litigation.  We are defending ourselves vigorously in all such matters and we believe that the ultimate disposition of such proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.



20

Table of Contents

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a narrative about our business from the perspective of our management. We use common industry terms, such as thousand barrels of oil equivalent per day (MBoe/d) and million cubic feet equivalent per day (MMcfe/d), to discuss production and sales volumes. Our MD&A is presented in the following major sections:

 
The preceding consolidated financial statements, including the notes thereto, contain detailed information that should be read in conjunction with our MD&A.
 
EXECUTIVE OVERVIEW
We are a worldwide explorer and producer of crude oil, natural gas and natural gas liquids. We aim to achieve sustainable growth in value and cash flow through exploration success and the development of a high-quality, diversified portfolio of assets with investment flexibility between: onshore unconventional developments and offshore organic exploration leading to major development projects; US and international development projects; and production mix among crude oil, natural gas, and NGLs. We currently focus our efforts in five core operating areas: the DJ Basin and Marcellus Shale (onshore US), deepwater Gulf of Mexico, offshore West Africa, and offshore Eastern Mediterranean, where we have strategic competitive advantage and which we believe generate attractive returns. We also seek to enter potential new core areas, and we are currently conducting exploration activities in domestic and international locations such as Northeast Nevada, the Falkland Islands, Cameroon, and Gabon.
Significant Operating Highlights Included:
record total sales volumes of 318 MBoe/d, an 11% increase over first quarter 2014;
record quarterly US onshore horizontal volumes of 96 MBoe/d;
deepwater Gulf of Mexico major projects remain on schedule and on budget;
first gas sales and purchase agreement for regional export of Eastern Mediterranean natural gas approved;
planning for upcoming exploration opportunities offshore the Falkland Islands and Cameroon; and
a decision to exit our position in Nicaragua following detailed future prospect review.
First Quarter 2015 Financial Results Included:
net loss of $22 million, as compared with net income of $200 million for first quarter 2014;
engagement in cost reduction initiatives, including both operational enhancements and new pricing arrangements with service partners, which we expect will decrease capital and operating costs through the year;
net gain on commodity derivative instruments of $150 million (including $60 million non-cash loss) as compared with a net loss on commodity derivative instruments of $75 million (including $42 million non-cash loss) for first quarter 2014;
asset impairment charges of $27 million, as compared with $97 million for first quarter 2014;
diluted loss per share of $0.06, as compared with diluted earnings per share of $0.55 for first quarter 2014;
cash flow provided by operating activities of $541 million, as compared with $929 million for first quarter 2014; and
capital expenditures (accrual based) of $919 million, as compared with $951 million for first quarter 2014.
Significant Events Impacting Liquidity Included:
net cash proceeds of $1.1 billion received from public offering of shares of common stock.
Quarter-End Key Financial Metrics Included:
ending cash balance of $1.7 billion, as compared with $1.2 billion at December 31, 2014;
total liquidity of $5.7 billion at March 31, 2015, as compared with $5.2 billion at December 31, 2014; and
ratio of debt-to-book capital of 35% at March 31, 2015, as compared with 38% at December 31, 2014
Commodity Price Changes The upstream oil and gas business is cyclical. During 2014, natural gas prices declined steadily, and, during fourth quarter 2014, a significant decline in crude oil prices occurred. During first quarter 2015, crude oil and average realized natural gas prices continued to decline. As a result, our consolidated average realized crude oil price

21

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decreased 54% and our consolidated average realized natural gas price decreased 27% for first quarter 2015 as compared with first quarter 2014.
We are unable to predict the extent to which commodity prices may recover during 2015. Prices are likely to remain volatile and could decline further. In addition, we could be entering a period of sustained, lower worldwide crude oil prices.
We plan for these cyclical downturns in our business and feel we are well positioned to withstand current and future commodity price volatility:
we have a high-quality, diversified portfolio of assets which provide investment flexibility;
we have positive operating cash flow (revenues less cash operating expenses), prior to capital expenditures, in each of our core areas;
we have designed a substantially-reduced capital investment program which will allow us to respond to conditions that occur in 2015;
we are well hedged, with approximately 60% of global crude oil and 50% of domestic natural gas production hedged for 2015, with additional quantities hedged into 2016;
we have a strong balance sheet with a ratio of debt-to-book capital of 35% at March 31, 2015; and
we have robust liquidity with total liquidity of $5.7 billion at March 31, 2015.
See Operating Outlook – 2015 Capital Investment Program below.
Major Development Project Updates
We continue to advance our major development projects, which we expect to deliver incremental production over the next several years. Updates on major development projects are as follows:
Sanctioned Ongoing Development Projects
A "sanctioned" development project is one for which a final investment decision has been made.
DJ Basin (Onshore US)   During the quarter, we drilled 57 horizontal wells and commenced production on 48 wells, including 17 extended reach lateral wells. Third-party compression, natural gas processing and transportation capacity continue to expand.
Marcellus Shale (Onshore US)  During the quarter, we drilled 15 operated wells, and commenced production on three operated wells. Our joint venture partner drilled 25 wells and 29 dry gas wells commenced production.
Gunflint (Deepwater Gulf of Mexico)  Development is on track for the Gunflint (31% operated working interest) crude oil discovery, utilizing a two-well subsea tieback to the Gulfstar 1 spar platform. The drilling rig is currently performing development work at Gunflint.  Topsides equipment fabrication is underway for installation in 2015 through early 2016, and first production is targeted for mid-2016.
Big Bend and Dantzler (Deepwater Gulf of Mexico) A co-development project is underway for the Big Bend (54% operated working interest) and Dantzler (45% operated working interest) crude oil discoveries, located in the Rio Grande area of the deepwater Gulf of Mexico, which will tie back to the Thunder Hawk semi-submersible production facility. All drilling and completion activities are complete, and development work is progressing on schedule. First production for Big Bend is targeted for fourth quarter 2015, and first production for Dantzler is targeted for end of 2015.
Tamar Compression (Onshore Israel) The Tamar compression project is near completion. The compression is targeted to increase deliverability at Tamar to approximately 1.2 Bcf/d, gross, beginning in mid-2015.
Tamar Southwest We continue to work with the Israeli government to obtain regulatory approval of our development plan for the Tamar Southwest discovery, which is intended to utilize current Tamar infrastructure. Continuing delays in securing regulatory approvals have placed the project at risk of delay. We have petitioned the Israeli courts to expedite the needed approvals. Timely development of Tamar Southwest is important to maintain well capacity and reliability for our overall Tamar project.
Unsanctioned Development Projects
Tamar Expansion Project (Offshore Israel) We have engaged in the planning phase for an expansion project which would expand Tamar field deliverability to approximately 2.0 Bcf/d. Timing of project sanction depends on satisfactory resolution of antitrust and other regulatory matters. See Update on Core Area – Israel, below.
Leviathan Project (Offshore Israel)   In 2014, we submitted the Plan of Development to the Ministry of National Infrastructures, Energy and Water Resources. The development plan is expected to serve both domestic demand and export. Timing of project sanction depends on satisfactory resolution of antitrust and other regulatory matters, as well as execution of natural gas sales and purchase agreements (GSPAs), which will be subject to, among other conditions, the receipt of regulatory

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approvals. Project financing will also be required. We are engaged with the governments of the US, Israel, Jordan and Egypt on this project. See Update on Core Area – Israel, below.
Cyprus Project (Offshore Cyprus) We are currently evaluating development scenarios for Block 12 and plan to submit a plan of development to the Cypriot government in 2015. There is also potential for a farm-out arrangement of our working interest.
See Item 1. Financial Statements – Note 8. Capitalized Exploratory Well Costs for additional information on costs incurred related to these projects.
Exploration Program Update
We have numerous exploration opportunities remaining in our core areas and are also engaged in new venture activity in both US and international locations.
We were in the process of drilling and/or evaluating significant exploratory wells at March 31, 2015 (See Item 1. Financial Statements – Note 8. Capitalized Exploratory Well Costs), and expect to conduct additional exploratory activities.
A portion of our 2015 capital investment program is dedicated to exploration and associated appraisal activities. However, we do not always encounter hydrocarbons through our drilling activities. In addition, we may find hydrocarbons but subsequently reach a decision, through additional analysis or appraisal drilling, that a development project is not economically or operationally viable.
In the event we conclude that one of our exploratory wells did not encounter hydrocarbons or that a discovery is not economically or operationally viable, the associated capitalized exploratory well costs would be recorded as dry hole expense. 
Additionally, we may not be able to conduct exploration activities prior to lease expirations. As a result, in a future period, dry hole cost and/or leasehold abandonment expense could be significant. See Operating Outlook – Potential for Future Asset Impairment, Dry Hole or Lease Abandonment Expense, below.
Updates on significant exploration activities are as follows:
Northeast Nevada We have drilled four exploratory wells to date. Further testing is required to assess commercial viability, and we are preparing to conduct production testing of the third well during second quarter 2015. Currently, no exploratory drilling is planned for the remainder of 2015.
Deepwater Gulf of Mexico We currently have an inventory of identified prospects, which are a combination of both high impact subsalt prospects and smaller, high value tie-back opportunities. These prospects are subject to an ongoing technical maturation process and may or may not emerge as drillable options. We are actively assessing exploration and appraisal drilling activity necessary to test the resource potential of our Katmai discovery from third quarter 2014 (Green Canyon Block 40, 50% operated working interest). We anticipate drilling a Katmai appraisal well in 2016. 
Offshore West Africa We are currently processing the results of recently-acquired 3D seismic data across Blocks O and I which will aid in advancing other regional exploration and development opportunities, including Diega/Carmen and Carla.
During first quarter, the Government of Cameroon approved a farmout of a portion of our working interest in the Tilapia PSC to Woodside Energy, Ltd. We remain the operator (46.67% working interest) and plan to drill the Cheetah exploration prospect in the second half of 2015. We are also reprocessing 3D seismic data over our YoYo mining concession.
Offshore Eastern Mediterranean See Update on Core Area – Israel, below.
Offshore Falkland Islands We anticipate drilling operations to begin at the Humpback prospect (35% operated working interest), located in the South Falkland Basin, in May 2015. In addition, we recently acquired a 75% interest and operatorship of the PL001 License in the North Falkland Basin. The PL001 License covers an area of nearly 285,000 gross acres. We have identified the Rhea prospect as the initial target on the PL001 License and expect to commence drilling in third quarter 2015.
Argentine officials have recently filed charges against Noble and other oil and gas companies operating offshore the Falkland Islands. We believe the charges have no merit. Our concessions are offshore the Falkland Islands and our concession contracts are with the Falkland Islands Government.

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Non-Core Divestiture Program
We have continued our non-core asset divestiture program with the sale of certain smaller onshore US property packages during the first three months of 2015. Divestitures of non-core properties allow us to allocate capital and human resources to high-value and high-growth areas. See Item 1. Financial Statements – Note 3. Divestitures and Operating Outlook - Potential for Future Asset Impairment, Dry Hole or Lease Abandonment Expense, below.
Colorado Air Matter
In August 2013, we received an information request from the EPA under Section 114 of the Clean Air Act regarding several tank batteries used in our DJ Basin operations. The information request relates to our compliance with certain regulatory requirements at those locations, including air emissions of volatile organic compounds in a marginal ozone non-attainment area. We responded to the EPA’s information requests between November 2013 and April 2014 and, in April 2015, reached a settlement with the EPA and the State of Colorado regarding potential noncompliance with the Clean Air Act, Colorado's State Implementation Plan, Colorado's Air Pollution Prevention and Control Act and its implementation regulations. See Part II. Other Information – Item 1. Legal Proceedings.
Update on Core Area – Israel
Noble Energy and its partners have been committed to providing natural gas to Israeli citizens for over a decade. We have delivered approximately 1.3 Tcf, gross, of natural gas to Israeli customers, including the government-owned Israel Electric Corporation (IEC), the largest supplier of electricity in the country.
Since obtaining our first exploration license in 1998, Noble Energy has been the first, and only, oil and natural gas company to successfully explore for significant amounts of hydrocarbons in Israel. We are also the first company to construct, operate and produce from a major development project offshore Israel. We have invested significant amounts of capital in exploration and development activities since 1998. Throughout this time, we have focused on partnering with our customers and the Israeli government to provide a reliable fuel source at reasonable prices to support affordable energy for the country’s citizens.
Since our initial discovery at Mari-B in 2000, we and our partners have continued to reinvest for long-term growth, leasing additional acreage and conducting exploration activities offshore Israel, in pursuit of additional resources to meet increasing demand from Israeli consumers and global markets. Our exploration efforts resulted in numerous natural gas discoveries over the past several years. The Tamar and Leviathan discoveries, in particular, are large scale, high quality reservoirs, of global significance, providing substantial additional resources for the government and citizens of Israel. We developed the Tamar field, with a discovery to production cycle time of approximately four years, which is exceptionally fast by historical industry standards for an offshore natural gas project of this magnitude and complexity.
The quantity of discovered resources at Tamar and Leviathan have positioned Israel to meet domestic needs for years to come and eventually become a significant natural gas exporter. Multiple regional markets are emerging and Israel’s domestic demand is predicted to continue to grow over the next decade. Eastern Mediterranean export projects would be well positioned to supply growing regional and global natural gas demand, which would provide benefits beyond satisfying domestic consumption of natural gas. In fact, we have been working with potential customers to supply natural gas through a regional pipeline system and/or LNG facilities. Government export royalties and tax revenues related to regional export sales would provide material financial benefit for Israel’s citizens.
In addition to our natural gas discoveries, the Levant Basin also has potential for large scale crude oil discoveries, which may exist at greater depths. We have conducted preliminary exploration activities and have been planning to complete our test of two deeper intervals.
We have been working with the Israeli government on plans to develop the Leviathan field and expand the currently-producing Tamar field. However, the regulatory environment in Israel has become increasingly challenging and uncertain. Laws, regulations and guidelines have been modified, sometimes with retroactive impacts, resulting in an unpredictable investment climate. Timing of approval for development plans has been delayed, and consequently our ability to make significant, long-term investment decisions has been stymied.
Since 2011, following the discovery of Leviathan, we have been engaged with the Israeli government, including the Antitrust Commissioner, to reach agreement on various antitrust matters resulting from our significant resource ownership status. During 2014, we and our partners reached an agreement with the Israeli government on the antitrust matters (Consent Decree), which included an agreement to divest two of our natural gas discoveries, Tanin and Karish.
Acting in good faith upon the Consent Decree, we engaged in discussions with potential purchasers of the Tanin and Karish discoveries. We believed that the Consent Decree matter had been resolved and had received assurances from the Antitrust Authority that approval was forthcoming.

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However, on December 23, 2014, the Israeli Antitrust Commissioner (Commissioner) reversed a decision to submit the agreed Consent Decree to the Israeli Antitrust Tribunal for approval. Subsequently, we requested an oral hearing with the Antitrust Authority. The hearing took place on January 27, 2015, and we are awaiting final disposition.
Because stable fiscal and regulatory regimes are imperative to support ongoing investment and sanction of major development projects, we determined that the resolution of the following items, and greater certainty with respect to Israeli fiscal and regulatory matters, would be required prior to sanction of a Leviathan development project, the Tamar expansion or other future development projects:
Approval of final gas sale and purchase agreements with off-takers, to support financing arrangements;
Clear, economically viable tax rulings, including export tax rulings;
Export approval with reasonable export allocations;
Approvals of Plans of Development;
Acceptable resolution of Leviathan and other pending matters with the Israeli Antitrust Authority;
Timely permitting;
Prompt decisions regarding pipeline onshore landing sites;
Other relevant regulatory terms critical to offshore crude oil and natural gas exploration and production;
Stable fiscal and contract terms that allow for financial returns that are appropriate to support long-term investment by a global exploration and production company; and
Stability clauses and protection from changes in laws and regulations.
In response to this situation, in late 2014, the Prime Minister's office established an inter-ministerial working group, led by the head of the National Economic Council, for the purpose of addressing outstanding regulatory matters and developing a comprehensive regulatory framework to support further investment in natural gas development. We have been engaged with the Israeli government inter-ministerial working group in an attempt to resolve these matters.
During March 2015, general elections were held, and a new coalition government is under formation. Under this new governing coalition, leadership changes in certain of the government ministries could occur, which could impact the timing of decisions regarding natural gas development.
Although our development plans have been delayed as a result of recent government actions, described above, we believe that, given the quality of the natural gas resources and significant associated economic benefit to the citizens of Israel, which could total in the billions of dollars over the life of the fields, it is in the best interest of the Israeli government to ultimately support development, and, we continue to expect that our discoveries will be developed, upon satisfactory resolution of the above matters. Therefore, we believe the risk of loss of our investment is remote as the value of these assets could be realized through ultimate development and/or sale to third parties. In addition, we would pursue any and all remedies for any damages incurred.
As of March 31, 2015, our $2.1 billion investment in Israel includes: approximately $1.3 billion related to the currently-producing Tamar field; approximately $400 million related to the Leviathan natural gas discovery and suspended deep oil test; approximately $300 million related to the Tamar expansion project and previous discoveries which are awaiting sanction of development plans; and $76 million related to the Karish and Tanin discoveries, which are included in assets held for sale. We expect further capital expenditure to be minimized, pending resolution of regulatory matters.
Update on Regulations
DOI Hydraulic Fracturing Rules
Although hydraulic fracturing is regulated primarily at the state level, governments and agencies at all levels from federal to municipal are conducting studies and considering regulations, and some have proposed rules.
On March 26, 2015, the US Interior Department's Bureau of Land Management (BLM) published a final rule regulating hydraulic fracturing on public and Indian lands. The new rules include requirements related to well-bore integrity, wastewater disposal and public disclosure of chemicals. Key components of the rule, which will take effect on June 24, 2015, include:
• provisions for ensuring the protection of groundwater supplies by requiring a validation of well integrity and strong cement barriers between the wellbore and water zones through which the wellbore passes;
• increased transparency by requiring companies to publicly disclose chemicals used in hydraulic fracturing to the Bureau of Land Management through the website FracFocus, within 30 days of completing fracturing operations;
• higher standards for interim storage of recovered waste fluids from hydraulic fracturing to mitigate risks to air, water and wildlife; and
• measures to lower the risk of cross-well contamination with chemicals and fluids used in the fracturing operation, by requiring companies to submit more detailed information on the geology, depth, and location of preexisting wells to afford the BLM an opportunity to better evaluate and manage unique site characteristics.

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We are currently reviewing the final rules to determine the impacts, including additional costs and reporting burdens and increased cycle time for permit approval, they may have on our operations on federal land, including our federal units in Nevada.
Nevada Regulations
In September 2014, Nevada state regulators finalized regulations for the use of hydraulic fracturing in crude oil and natural gas development. The regulatory program includes requirements for groundwater baseline sampling and monitoring, water resource and wastewater disposal requirements, chemical disclosure requirements and mandates for extra casing for unconventional wells. We actively participated in its development and do not believe it will have a material impact on our activities.
DOI Proposed Offshore Drilling Regulations
On April 13, 2015, the DOI announced proposed regulations which include more stringent design requirements and operational procedures for critical well control equipment used in offshore oil and gas operations.
The proposed rule, which will be open for public comment, addresses the range of systems and equipment related to well control operations. The measures are designed to improve equipment reliability, building upon enhanced industry standards for blowout preventers and blowout prevention technologies. The rule also includes reforms in well design, well control, casing, cementing, real-time well monitoring and subsea containment. We will continue to monitor the development of these new regulations to determine the impacts, including additional costs and reporting burdens, they may have on our deepwater Gulf of Mexico operations.
Endangered Species Act
The US Fish and Wildlife Service (the Agency), under the Endangered Species Act (ESA), has regulatory authority over our exploration for, and production and sale of, crude oil, natural gas and NGLs and activities that may result in the take of any endangered or threatened species or its habitat. The Agency recently listed the northern long-eared bat as threatened under the ESA, which could have an impact on the timing of certain of our operations in the Marcellus Shale.
Colorado Task Force
In 2014, by executive order, Colorado Governor Hickenlooper created the Task Force on State and Local Regulation of Oil and Gas Operations (Task Force) for the purpose of recommending policies and legislation.
The 21-member Task Force, which included a Noble Energy representative, concluded its activities on February 27, 2015.  The Task Force sent nine recommendations to the governor.  The recommendations seek to balance land use issues among communities and oil and gas operators and allow reasonable access to private mineral rights.  Three recommendations are presently being considered by the legislature and the governor is reviewing the remaining recommendations, but has not yet indicated how he plans to proceed.  
In addition to the above, we will continue to monitor proposed and new regulations and legislation in all operating jurisdictions to assess the potential impact on our company. Concurrently, we are engaged in extensive public education and outreach efforts with the goal of engaging and educating the general public and communities about the energy, economic and environmental benefits of safe and responsible crude oil and natural gas development.
Sales Volumes
On a BOE basis, total sales volumes were 11% higher for first quarter 2015 as compared with first quarter 2014, and our mix of sales volumes was 43% global liquids, 25% international natural gas, and 32% US natural gas. See Results of Operations – Revenues, below.
Recently Issued Accounting Standards
See Item 1. Financial Statements – Note 2. Basis of Presentation.
OPERATING OUTLOOK
2015 Production   Our expected crude oil, natural gas and NGL production for 2015 may be impacted by several factors including:
overall level and timing of capital expenditures which, as discussed below and dependent upon our drilling success, will impact near-term production volumes;
the level of horizontal drilling activity in the DJ Basin and the Marcellus Shale;
decline in our DJ Basin legacy vertical well production and capacity constraints of midstream facilities serving those wells;
timing of start up of DCP Midstream's Lucerne 2 cryogenic plant and occurrence of other events which impact capacity constraints of midstream facilities serving our DJ Basin horizontal wells;

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timing of start-up of the Big Bend project (deepwater Gulf of Mexico);
Israeli demand for electricity, which affects demand for natural gas as fuel for power generation and industrial market growth, and which is impacted by unseasonable weather;
variations in West Africa crude oil and condensate sales volumes due to potential Aseng FPSO downtime and timing of liftings, and variations in natural gas sales volumes related to potential downtime at the methanol, LPG and/or LNG plants;
natural field decline in the deepwater Gulf of Mexico and offshore Equatorial Guinea;
potential weather-related volume curtailments due to hurricanes in the deepwater Gulf of Mexico, or winter storms and flooding in the DJ Basin and/or Marcellus Shale;
reliability of support equipment and facilities and/or potential pipeline and processing facility capacity constraints which may cause restrictions or interruptions in production and/or mid-stream processing;
pending Alba and Alen field unitizations in West Africa;
potential shut-in of US producing properties if storage capacity becomes unavailable;
potential drilling and/or completion permit delays due to future regulatory changes; and
potential purchases of producing properties or divestments of non-core operating assets.
2015 Capital Investment Program Given the current commodity price environment with low prices and an industry cost structure that has yet to fully reset to lower revenue levels, we have designed a substantially-reduced capital investment program that is appropriate for the environment and will be responsive to conditions that develop during 2015. Our preliminary capital program for 2015 will accommodate an investment level of approximately $2.9 billion which represents an approximate 40% reduction from 2014. The program allocates more than 60% of total investment to core onshore US assets and 35% for global offshore development activities including the deepwater Gulf of Mexico, and approximately 5% for global offshore exploration.
The 2015 investment program allocates approximately $1.8 billion to onshore US development split between DJ Basin and Marcellus Shale drilling programs and continued infrastructure investments. We and our Marcellus Shale joint venture partner continue to work together to determine the optimal investment plan for 2015 and 2016.
Approximately $600 million will be invested in the continued development of our sanctioned Gulf of Mexico projects, and additional amounts have been allocated to the Alba and Tamar compression projects.
The 2015 capital investment program is anticipated to exceed operating cash flows during the first half of 2015 and may be funded from cash flows from operations, cash on hand, proceeds from divestments of non-core assets, borrowings under our Credit Facility and/or other financings. We are targeting a cash neutral position, whereby the capital investment program is at, or below, operating cash flows, by the second half of 2015. See Liquidity and Capital Resources – Financing Activities.
Potential for Future Asset Impairment, Dry Hole or Lease Abandonment Expense
Exploration Activities We have an active exploratory drilling program. In the event we conclude that an exploratory well did not encounter hydrocarbons or that a discovery is not economically or operationally viable, the associated capitalized exploratory well costs would be charged to expense. For example, during first quarter 2015, we recorded dry hole expense of $20 million. See also Item 1. Financial Statements - Note 8. Capitalized Exploratory Well Costs.
Additionally, we may not conduct exploration activities prior to lease expirations. For example, in the deepwater Gulf of Mexico, while we continue to mature our prospect portfolio, regulations have become more stringent due to the Deepwater Horizon incident in 2010. In some instances, specifically engineered blowout preventers, rigs, and completion equipment may be required for high pressure environments. Regulatory requirements or lack of readily available equipment could prevent us from engaging in future exploration activities during our current lease terms. We currently have capitalized undeveloped leasehold cost of approximately $308 million related to deepwater Gulf of Mexico prospects that have not yet been drilled. These leases will expire over the years 2015 - 2024.
Producing Properties Commodity prices remain volatile. A decline in future crude oil or natural gas prices could result in impairment charges. The cash flow model that we use to assess proved properties for impairment includes numerous assumptions, such as management’s estimates of future oil and gas production along with operating and development costs, market outlook on forward commodity prices, and interest rates. All inputs to the cash flow model must be evaluated at each date of estimate. However, a decrease in forward crude oil or natural gas prices alone could result in an impairment.
In addition, well decommissioning programs, especially in deepwater or remote locations, are often complex and expensive. It may be difficult to estimate timing of actual abandonment activities, which are subject to regulatory approval and the availability of rigs and services. It may be difficult to estimate costs as rigs and services become more expensive in periods of higher demand. Therefore, our ARO estimates may change, sometimes significantly, and could result in asset impairment.
Divestments We are currently marketing certain non-core onshore US properties. If properties are reclassified as assets held for sale in the future, they will be valued at the lower of net book value or anticipated sales proceeds less costs to sell.

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Impairment expense would be recorded for any excess of net book value over anticipated sales proceeds less costs to sell. In addition, we would allocate a portion of goodwill to any non-core onshore US property held for sale that constitutes a business, which could potentially decrease any gain or increase any loss recorded on the sale.
In addition, certain assets offshore Israel were classified as held for sale at March 31, 2015. No impairments are indicated at this time. However, failure to achieve acceptable sale terms or delays in closing sales of these properties could result in impairment and/or loss on sale.

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RESULTS OF OPERATIONS
Revenues
Revenues were as follows:
 
 
 
 
 
Increase/(Decrease)
from Prior Year
(millions)
2015
 
2014
 
Three Months Ended March 31,
 
 
 
 
 
Oil, Gas and NGL Sales
$
740

 
$
1,327

 
(44
)%
Income from Equity Method Investees
18

 
52

 
(65
)%
Other
1

 

 
N/M

Total
$
759

 
$
1,379

 
(45
)%
Changes in revenues are discussed below.
Oil, Gas and NGL Sales 
We generally sell crude oil, natural gas, and NGLs under two types of agreements, which are common in our industry. Both types of agreements may include transportation charges. One type of agreement is a netback agreement, under which we sell crude oil and natural gas at the wellhead and receive a price, net of transportation expense incurred by the purchaser. In this case, we record crude oil and natural gas revenue at the net price we received from the purchaser. In the case of NGLs, we may receive a price from the purchaser, which is net of processing costs. In this case, we record NGL revenue at the net price we receive from the purchaser. The second type of agreement is one whereby we pay transportation expense directly. In that case, transportation expense is included within production expense in our consolidated statements of operations.
In addition, commodity prices we receive may be reduced by location basis differentials, which can be significant. As a result of both netback agreements and location basis differentials, our reported sales prices may differ significantly from published commodity price benchmarks for the same period.
Average daily sales volumes and average realized sales prices were as follows:
 
Sales Volumes
 
Average Realized Sales Prices
 
Crude Oil & Condensate
(MBbl/d)
 
Natural
Gas
(MMcf/d)
 
NGLs
(MBbl/d)
 
Total
(MBoe/d) (1)
 
Crude Oil & Condensate
(Per Bbl)
 
Natural
Gas
(Per Mcf)
 
NGLs
(Per Bbl)
Three Months Ended March 31, 2015
United States
73

 
619

 
25

 
201

 
$
44.39

 
$
2.72

 
$
14.65

Equatorial Guinea (2)
30

 
231

 

 
68

 
49.65

 
0.27

 

Israel

 
242

 

 
40

 

 
5.45

 

Other International (3)
1

 

 

 
1

 
52.89

 

 

Total Consolidated Operations
104

 
1,092

 
25

 
310

 
45.96

 
2.81

 
14.65

Equity Investees (4)
2

 

 
6

 
8

 
48.63

 

 
30.17

Total
106

 
1,092

 
31

 
318

 
$
46.01

 
$
2.81

 
$
17.64

Three Months Ended March 31, 2014
United States
64

 
483

 
18

 
163

 
$
97.02

 
$
4.81

 
$
44.50

Equatorial Guinea (2)
34

 
242

 

 
74

 
105.73

 
0.27

 

Israel

 
218

 

 
37

 

 
5.60

 

Other International (3)
5

 

 

 
5

 
104.28

 

 

Total Consolidated Operations
103