Noble Energy Announces 2012 Capital Program and Guidance
HOUSTON, Feb. 9, 2012 /PRNewswire/ — Noble Energy, Inc. (NYSE: NBL) today announced its 2012 capital program and provided guidance for the year. Total capital expenditures are estimated at $3.5 billion for the year. The capital program allocates 51 percent to onshore U.S., seven percent to the deepwater Gulf of Mexico, 22 percent to the Eastern Mediterranean and 14 percent to West Africa. Global exploration and appraisal activity is expected to receive 16 percent of total capital.
Charles D. Davidson, Noble Energy’s Chairman and CEO, stated, “Noble Energy is now positioned to accelerate our growth in production and cash flow with contributions from each of our five core areas. We have demonstrated our major project development capabilities by bringing Aseng to production late last year, months ahead of schedule and under budget. Galapagos will follow this year with Tamar and Alen on schedule for first production in 2013. The developments in the Niobrara and Marcellus continue to gain momentum and are expected to deliver consistent growth for many years. Exploration remains a key component of the 2012 program as we plan to test a number of prospects throughout our focus areas. The 2012 program remains consistent with our strategy of delivering value-adding growth through the exploration and development of a diversified portfolio of opportunities.”
Within the U.S., the Company expects to invest $1.25 billion in the DJ Basin to expand horizontal Niobrara drilling to include 173 horizontal wells and to maintain an active vertical well program in Wattenberg in 2012. In the Marcellus Shale, $500 million is planned to support the drilling of 99 joint venture wells, targeting 39 operated wells in the liquids-rich area of the play. In the deepwater Gulf of Mexico, the Company expects to spend $250 million where a one-rig program is planned to conduct appraisal drilling at Gunflint and execute a multi-well exploration program.
Noble Energy’s core international programs in West Africa and the Eastern Mediterranean represent $500 million and $750 million, respectively. In West Africa, plans are to advance the Alen liquid development project and to continue oil exploration drilling offshore Cameroon. In the Eastern Mediterranean, development activity is focused on the Tamar and Noa natural gas fields, while exploration plans include appraisal work and a deep oil test at Leviathan as well as additional testing of natural gas prospects offshore Israel.
Capital has also been allocated to China, the North Sea and several New Venture opportunities. Excluded from the total capital amount is a $328 million installment payment associated with the Marcellus acquisition, which was accrued in costs incurred during 2011.
The capital program is anticipated to be funded by operating cash flow and available balance sheet liquidity. Funding may also be supported by the proceeds from the expected divestment of non-core onshore U.S. assets throughout the year. The Company plans to maintain its investment grade credit rating.
Sales volumes for 2012 are projected to range from 244 to 256 thousand barrels of oil equivalent per day (MBoe/d), with the midpoint of the range up about 13 percent compared to 2011. Nearly all of the projected production increase is crude oil and condensate, which is expected to grow over 40 percent year-over-year. The expected growth in crude oil and condensate production is balanced between onshore U.S., deepwater Gulf of Mexico and offshore Equatorial Guinea.
Overall liquid volumes are predicted to represent 46 percent of total volume in 2012, up from 39 percent in 2011. The remaining product split is estimated to be 31 percent domestic natural gas, a slight increase from 2011, and 23 percent international natural gas, a decrease from 32 percent in 2011. The anticipated drop in international natural gas production results from lower volumes from the Mari-B field offshore Israel where production is being carefully managed to bridge supplies to 2013 when Tamar is scheduled to begin production and from maintenance downtime at Alba which is expected to reduce the low-priced natural gas sales to the LNG plant. No adjustments have been made for the expected divestiture of non-core onshore U.S. assets.
U.S. volumes are anticipated to be up about 22 percent from 2011. The Company’s onshore development programs in the central DJ Basin and Marcellus Shale, as well as new field additions in the deepwater Gulf of Mexico are expected to drive this growth. Production from non-core assets is anticipated to decline due to limited investments. The international portfolio is expected to grow approximately three percent from last year, largely due to higher liquids volumes from a full year of Aseng production in Equatorial Guinea. This increase is partially offset by lower natural gas sales in Israel and by the planned downtime at the Alba facilities in Equatorial Guinea as mentioned above.
For the first quarter 2012, the Company expects sales volume to average 228 to 236 MBoe/d, broadly flat with the fourth quarter 2011. Crude oil and condensate should be up 17 percent from the fourth quarter of 2011 with a full quarter of production from Aseng and continued development activity in the DJ Basin. Natural gas, however, should be down nearly eight percent due to lower Mari-B deliveries and maintenance downtime at Alba.
Additional detailed operational and financial information representing the 2012 Guidance is included on the following pages.
WEBCAST AND CONFERENCE CALL INFORMATION
Noble Energy, Inc. will host a webcast and conference call at 9:00 a.m. Central time today. The webcast is accessible on the ‘Investors’ page at www.nobleenergyinc.com. Conference call numbers for participation are 888-471-3840 and 719-325-2392. A replay will be available on the website.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Further information is available at www.nobleenergyinc.com.
This news release contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Noble Energy’ s current views about future events. They include estimates of oil and natural gas reserves and resources, estimates of future production, assumptions regarding future oil and natural gas pricing, planned drilling activity, future results of operations, projected cash flow and liquidity, business strategy and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this news release will occur as projected, and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other actions, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy’s business that are discussed in its most recent annual report on Form 10-K and in other reports on file with the Securities and Exchange Commission. These reports are also available from Noble Energy’s offices or website, http://www.nobleenergyinc.com. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Noble Energy does not assume any obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.
The Securities and Exchange Commission requires oil and gas companies, in their filings with the SEC, to disclose proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The SEC permits the optional disclosure of probable and possible reserves, however, we have not disclosed the Company’s probable and possible reserves in our filings with the SEC. We use certain terms in this news release, such as “net risked resources”, “estimated ultimate recovery” or “EUR”, “gross resources” and “gross mean resources.” These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our most recent annual report on Form 10-K and in other reports on file with the SEC, available from Noble Energy’s offices or website, http://www.nobleenergyinc.com.
2012 Operational and Financial Guidance
Volumes and Prices
Total volumes are estimated to average between 244 to 256 MBoe/d, which includes equity method investment volumes. The breakdown of our estimated annual average daily volumes by product and area is:
Crude Oil and Condensate (MBbl/d)
United States 45 - 53 Equatorial Guinea 26 - 37 Equatorial Guinea - equity method investment 1 - 2 North Sea 6 - 8 China 3 - 5
The price of our crude oil in the U.S. is expected to be at a discount to WTI of $1.00 to $2.00 per barrel. Crude oil in Equatorial Guinea and the North Sea is based off dated Brent. Prices of Equatorial Guinea barrels are expected to be at a discount from $1.00 to $2.00 per barrel and prices for North Sea production are expected to be at a premium of up to $1.00 per barrel. In China, the crude oil price is expected to be at parity with WTI. All price estimates exclude the impact of hedge results.
Natural Gas (MMcf/d)
United States 445 - 485 Equatorial Guinea 220 - 240 Israel 100 - 130 North Sea 4 - 6
The natural gas price for the U.S. is expected to range from $0.05 to $0.25 per thousand cubic feet (Mcf) below NYMEX Henry Hub. Price realizations for West Africa are estimated to be $0.27 per Mcf. Israel natural gas prices are anticipated to range from $4.25 to $4.75 per Mcf. All price estimates exclude the impact of hedge results.
Natural Gas Liquids (MBbl/d)
United States 15 - 17 Equatorial Guinea - equity method investment 5 - 6
The natural gas liquid (NGL) price realizations for the U.S. should average 40 to 50 percent of WTI.
Equity method investments include income generated from the methanol operations, and the condensate and NGLs recovered at the LPG plant in Equatorial Guinea, both which vary with production levels and liquid prices. The income for 2012 is estimated at $185 to $215 million.
Costs and Expenses
Lease operating $ 5.40 - $ 5.95 per Boe Transportation and gathering $ 1.00 - $ 1.20 per Boe Depreciation, depletion and amortization $14.40 - $14.90 per Boe Production and ad valorem taxes 3.3 -3.7% of oil, gas and ngl revenues Exploration $400 - $500 million General and administrative $350 - $380 million Interest (net) $130 - $150 million
Included in costs and expenses is approximately $70 million of stock-based compensation. Capitalized interest is estimated to be $125 to $145 million.
Effective tax rate 31 - 35% Deferred tax ratio 20 - 30% Outstanding shares - diluted 178 - 180 million
Tax guidance is applicable to earnings before unrealized mark-to-market gain / loss on commodity derivatives and other items typically not factored in by analysts.
Commodity Hedges – 2012
The Company has hedged 42 percent of its global oil production and 39 percent of its U.S. natural gas volumes.
Noble Energy has entered into the following crude oil and natural gas derivative instruments for 2012.
Crude Oil Hedges ---------------- Swaps Collars ----- ------- Average Average Average Average Volume Price Put Price Floor Price Ceiling Price Type of Contract Index (Bbl/d) ($/Bbl) ($/Bbl) ($/Bbl) ($/Bbl) ---------------- ----- ------- ------- ------- ------- ------- Fixed Price Swaps WTI 5,000 $91.84 Fixed Price Swaps Brent 8,000 $89.06 Three-Way Collars WTI 23,000 $61.09 $83.04 $101.66 Three-Way Collars Brent 3,000 $70.00 $95.83 $105.00 Natural Gas Hedges ------------------ Swaps Collars ----- ------- Average Average Average Average Volume Price Put Price Floor Price Ceiling Price Type of Contract Index (MMBtu/d) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) ---------------- ----- --------- --------- --------- --------- --------- Fixed Price Swaps NYMEX 30,000 $5.10 Two-Way Collars NYMEX 40,000 $3.25 $5.14 Three-Way Collars NYMEX 110,000 $4.44 $5.25 $6.66 Natural Gas Differential Hedges ------------------------------- Average Volume Price Type of Contract Index (MMBtu/d) ($/MMBtu) ---------------- ----- --------- --------- Fixed Price Swaps CIG 150,000 ($0.52)
SOURCE Noble Energy, Inc.