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Noble Energy Announces First Quarter 2012 Results

April 26, 2012

HOUSTON, April 26, 2012 /PRNewswire/ — Noble Energy, Inc. (NYSE: NBL) reported today first quarter 2012 net income of $263 million, or $1.47 per share diluted, on revenues of $1,165 million. Excluding the impact of unrealized commodity derivative losses, first quarter 2012 adjusted net income(1) was $314 million, or $1.75 per share diluted. Net income for the first quarter 2011 was $14 million, or $0.08 per share diluted, on revenues of $899 million. Adjusted net income(1) for the first quarter of 2011 was $240 million, or $1.35 per share diluted.

Discretionary cash flow(1) for the first quarter 2012 was a record $716 million, compared to $576 million for the same quarter in 2011. Net cash provided by operating activities was $741 million, and capital expenditures were $963 million.

Key highlights for the first quarter 2012 include:

  • Record sales volume of 243 thousand barrels of oil equivalent per day (MBoe/d), up 10 MBoe/d over the previous record reported in the fourth quarter of 2011
  • Liquids represent 47 percent of sales volumes, up from 40 percent last quarter
  • Horizontal production from the DJ Basin averaged 18 MBoe/d net, which was 25 percent of the total DJ Basin volumes
  • Expanded the Northern Colorado acreage position by 48,000 net acres to 230,000 net acres, where recent Company horizontal Niobrara results indicate recoveries comparable to Wattenberg
  • Assumed operatorship in the liquids-rich gas portion of the Marcellus joint venture acreage
  • Gross daily crude oil production from the Aseng field, offshore Equatorial Guinea, achieved 60 thousand barrels per day (MBbl/d)
  • Signed a natural gas sales contract with Israel Electric Corporation for 2.7 trillion cubic feet (Tcf) with expected gross revenues of $18 billion
  • Announced the Tanin discovery offshore Israel with estimated gross mean resources of 1.2 Tcf

Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “The first quarter confirmed the strong growth we have been projecting for this year. The real value driver for the outstanding results this quarter was the impressive increase in crude oil volumes and related revenues which reflect the exceptional operational performance at the Aseng field and drilling results in the DJ Basin. The impact of our crude oil and liquids sales is evident as it accounted for over 80 percent of our revenue for the quarter. We are looking forward to the additional oil and liquids production that will be coming online in the second quarter with the startup of Galapagos in the Gulf of Mexico and the expansion of horizontal activity into Northern Colorado where we are realizing the highest crude oil content in the Niobrara play.”

First quarter 2012 total sales volumes averaged 243 MBoe/d, up 13 percent from the first quarter 2011. Essentially all of the 28 MBoe/d increase was from crude oil and other liquids products, raising the Company’s liquid volume composition to 47 percent. International and U.S. natural gas comprised the remaining 23 and 30 percent, respectively. Production volumes for the quarter were 238 MBoe/d, with the difference attributable to timing of crude oil and condensate liftings in Equatorial Guinea.

U.S. sales volumes were up 15 percent from the first quarter last year to a total of 131 MBoe/d. In the DJ Basin, first quarter 2012 volumes averaged a record 73 MBoed/d with liquids increasing to 56 percent of total volumes. The 30 percent increase was largely attributable to the acceleration of the Company’s horizontal drilling program within Wattenberg. The addition of the Marcellus Shale and subsequent development activities provided an average of 68 million cubic feet per day to the quarter. Natural production declines were experienced in both non-core onshore properties and the deepwater Gulf of Mexico.

International sales volumes totaled 112 MBoe/d for the quarter, up 11 percent from the same period last year. Strong operational performance resulted in Aseng crude oil sales volumes of 18 MBbl/d for the first quarter 2012. Israel natural gas sales were lower reflecting the planned ramp down of production rates at Mari-B to manage the reservoir. In the North Sea, maintenance at Dumbarton and normal declines reduced volumes.

The average realized price for crude oil and condensate was $110.80 per barrel for the first quarter, up 14 percent from the prior year period. Natural gas realizations in the U.S. averaged $2.62 per thousand cubic feet (Mcf) and $4.51 per Mcf in Israel. Natural gas liquids pricing in the U.S. averaged $41.62 per barrel, which equates to 41 percent of the Company’s average realized price for U.S. crude oil.

Total production costs per barrel of oil equivalent (Boe), including lease operating expense (LOE), production and ad valorem taxes, and transportation and gathering expenses were $8.09 per Boe, up 10 percent from the first quarter of 2011. LOE was $5.34 per Boe and depreciation, depletion, and amortization (DD&A) was $14.11 per Boe. The unit rates were impacted by the increased cost of high value crude oil production from Aseng, the deepwater Gulf of Mexico and the DJ Basin. General and administrative expenses were up due to staffing increases supporting major development projects and increased exploration activities. The Company’s adjusted effective tax rate for the first quarter 2012 was 30 percent, with 29 percent deferred.

UPDATED GUIDANCE

Noble Energy’s original full year volume guidance range for 2012 remains unchanged at 244 to 256 MBoe/d, while second quarter sales volumes are expected to average 224 to 232 MBoe/d. The volume forecast for the second quarter includes planned maintenance at the non-operated Alba facilities in Equatorial Guinea, which was mostly deferred from the first quarter. This maintenance will affect both natural gas and liquids production, as well as equity investment income. Natural gas sales in Israel are expected to be lower as production rates at Mari-B are reduced to manage the reservoir. The Galapagos project is anticipated to come online and the horizontal drilling programs in DJ Basin and Marcellus Shale continue to build momentum during the second quarter. As a result of these volume adjustments, the Company expects second quarter unit rates for LOE and DD&A to be at the high end of the annual ranges. For the full year, both these cost items are forecast to remain within the original guidance ranges.

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

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 800-967-7134 and 719-325-2490, passcode 5684462. 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 non-GAAP measures of financial performance that management believes are good tools for internal use and the investment community in evaluating the company’s overall financial performance. These non-GAAP measures help facilitate comparison of company operating performance across periods and with peer companies.

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 “estimated gross mean resources” which 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.

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

                      Three Months Ended
                          March 31,
                          ---------
                                    2012       Per Diluted                       2011  Per Diluted
                                                  Share                                   Share
                                                  -----                                   -----

    Net Income                      $263                 $1.47                    $14            $0.08
    Unrealized losses
     on commodity
    derivative
     instruments                      73                  0.40                    303             1.71
    Drilling rig
     expense (1)                       -                     -                     18             0.10
    Other adjustments                  -                     -                      8             0.04
                                     ---                   ---                    ---             ----
    Total adjustments
     before tax                       73                  0.40                    329             1.85

    Income Tax Effect
     of Adjustments
     (2)                             (22)                (0.12)                  (103)           (0.58)
                                     ---                 -----                   ----            -----

    Adjusted Earnings
     (3)                            $314                 $1.75                   $240            $1.35
                                    ----                 -----                   ----            -----

    Weighted average
     number of shares
     outstanding
      Diluted                        180                                          178
    (1) Amount for 2011 represents stand-by rig expense
     incurred prior to receiving permits to resume drilling
     activities in the deepwater Gulf of Mexico.

    (2) The net tax effects are determined by calculating the
     tax provision for GAAP Net Income, which includes the
     adjusting items, and comparing the results to the tax
     provision for Adjusted Earnings, which excludes the
     adjusting items. The difference in the tax provision
     calculations represents the tax impact of the adjusting
     items listed here. The calculation is performed at the end
     of each quarter and, as a result, the tax rates for each
     discrete period may be different.

    (3) Adjusted earnings should not be considered a substitute
     for net income as reported in accordance with GAAP.
     Adjusted earnings is provided for comparison to earnings
     forecasts prepared by analysts and other third parties. Our
     management believes, and certain investors may find, that
     adjusted earnings is beneficial in evaluating our financial
     performance as it excludes the impact of significant non-
     cash items. We believe such measures can facilitate
     comparisons of operating performance between periods and
     with our peers.

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

                                                    Three Months Ended
                                                         March 31,
                                                                   2012         2011
                                                                   ----         ----
    Revenues
    Crude oil and condensate                                       $890         $569
    Natural gas                                                     157          203
    NGLs                                                             65           58
    Income from equity method
     investees                                                       53           48
    Other revenues                                                    -           21
    Total revenues                                                1,165          899
                                                                  -----          ---
    Operating Expenses
    Lease operating expense                                         118           92
    Production and ad valorem
     taxes                                                           38           32
    Transportation and
     gathering expense                                               23           18
    Exploration expense                                              63           70
    Depreciation, depletion
     and amortization                                               312          221
    General and administrative                                       98           83
    Other operating (income)
     expense, net                                                    12           36
                                                                                 ---
    Total operating expenses                                        664          552
                                                                    ---          ---
    Operating Income                                                501          347
    Other (Income) Expense
    Loss on commodity
     derivative instruments                                          96          286
    Interest, net of amount
     capitalized                                                     32           16
    Other (income) expense,
     net                                                             (1)           8
                                                                                 ---
    Total other (income)
     expense                                                        127          310
                                                                    ---          ---
    Income Before Taxes                                             374           37
    Income Tax Provision                                            111           23
    Net Income                                                     $263          $14
                                                                   ----          ---

    Earnings Per Share
    Basic                                                         $1.48        $0.08
    Diluted                                                        1.47         0.08

    Weighted average number of
     shares outstanding
      Basic                                                         177          176
      Diluted                                                       180          178

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

                                               Three Months Ended
                                                    March 31,
                                                              2012   2011
                                                              ----   ----
    Crude Oil and Condensate Sales
     Volumes (MBbl/d)
    United States                                               42     37
    Equatorial Guinea                                           35     13
    North Sea                                                    6     11
    China                                                        5      4
                                                               ---    ---
    Total consolidated operations                               88     65
    Equity method investee                                       2      2
                                                               ---
    Total sales volumes                                         90     67
                                                               ---    ---
    Crude Oil and Condensate Realized
     Prices ($/Bbl)
    United States                                          $101.21 $92.25
    Equatorial Guinea                                       118.04 103.49
    North Sea                                               122.44 106.26
    China                                                   126.10  95.28
    Consolidated average realized
     prices                                                $110.80 $97.15
                                                           ------- ------

    Natural Gas Sales Volumes (MMcf/
     d)
    United States                                              433    382
    Equatorial Guinea                                          230    248
    Israel                                                     108    140
    North Sea                                                    5      8
    Total sales volumes                                        776    778
                                                               ---    ---
    Natural Gas Realized Prices
     ($/Mcf)
    United States                                            $2.62  $4.07
    Equatorial Guinea                                         0.27   0.27
    Israel                                                    4.51   4.19
    North Sea                                                 7.88   7.30
    Consolidated average realized
     prices                                                  $2.22  $2.91
                                                             -----  -----

    Natural Gas Liquids (NGL) Sales
     Volumes (MBbl/d)
    United States                                               17     14
    Equity method investee                                       7      5
                                                               ---    ---
    Total sales volumes                                         24     19
                                                               ---    ---
    Natural Gas Liquids Realized
     Prices ($/Bbl)
    United States                                           $41.62 $47.80

    Barrels of Oil Equivalent Volumes
     (MBoe/d)
    United States                                              131    114
    Equatorial Guinea                                           73     55
    Israel                                                      18     23
    North Sea                                                    7     12
    Other International                                          5      4
                                                               ---    ---
    Total consolidated operations                              234    208
    Equity method investee                                       9      7
    Total barrels of oil equivalent
     (MBoe/d)                                                  243    215
                                                               ---    ---
    Barrels of oil equivalent volumes
     (MMBoe)                                                    22     19
                                                               ---    ---

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

                                                 March 31,      December 31,
                                                 ---------      ------------
                                                           2012                2011
                                                           ----                ----
    Assets
    Current Assets
    Cash and cash equivalents                            $1,143              $1,455
    Accounts receivable, net                                919                 783
    Other current assets                                    330                 180
                                                            ---                 ---
        Total current assets                              2,392               2,418
    Net property, plant and
     equipment                                           13,384              12,782
    Goodwill                                                696                 696
    Other noncurrent assets                                 592                 548
    Total Assets                                        $17,064             $16,444
                                                        -------             -------

    Liabilities and Shareholders'
     Equity
    Current Liabilities
    Accounts payable - trade                             $1,457              $1,343
    Other current liabilities                               951                 925
                                                            ---                 ---
        Total current liabilities                         2,408               2,268
    Long-term debt                                        4,088               4,100
    Deferred income taxes                                 2,216               2,059
    Other noncurrent liabilities                            819                 752
                                                            ---                 ---
    Total Liabilities                                     9,531               9,179

    Total Shareholders' Equity                            7,533               7,265
    Total Liabilities and
     Shareholders' Equity                               $17,064             $16,444
                                                        -------             -------

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

                                                             Three Months
                                                                 Ended
                                                              March 31,
                                                                       2012                2011
                                                                       ----                ----

    Adjusted Earnings
     (1)                                                               $314                $240
    Adjustments to
     reconcile adjusted
     earnings to
     discretionary cash
     flow:
    Depreciation,
     depletion and
     amortization                                                       312                 221
    Exploration expense                                                  63                  70
    (Income)/Dividends
     from equity method
     investments, net                                                   (29)                (23)
    Deferred
     compensation
     (income) expense                                                     3                  10
    Deferred income
     taxes                                                               38                  43
    Stock-based
     compensation
     expense                                                             16                  14
    Other                                                                (1)                  1
    Discretionary Cash
     Flow (2)                                                          $716                $576
                                                                       ----                ----

    Reconciliation to
     Operating Cash
     Flows
    Net changes in
     working capital                                                     59                (100)
    Cash exploration
     costs                                                              (62)                (48)
    Current tax expense
     of earnings
     adjustments                                                         15                  70
    Drilling rig expense
     (3)                                                                  -                 (18)
    Other adjustments                                                    13                   4
                                                                        ---                 ---
    Net Cash Provided by
     Operating
     Activities                                                        $741                $484
                                                                       ----                ----

    Capital expenditures
     (accrual based)                                                   $963                $545
    Increase in FPSO
     lease obligation                                                     -                  34
    Total Capital
     Expenditures
     (Accrual Based)                                                   $963                $579
                                                                       ----                ----
    (1) See Schedule 1, Reconciliation
     of Net Income to Adjusted
     Earnings.

    (2) The table above reconciles
     discretionary cash flow to net
     cash provided by operating
     activities. While discretionary
     cash flow is not a GAAP measure
     of financial performance, our
     management believes it is a
     useful tool for evaluating our
     overall financial performance.
     Among our management, research
     analysts, portfolio managers and
     investors, discretionary cash
     flow is broadly used as an
     indicator of a company's ability
     to fund exploration and
     production activities and meet
     financial obligations.
     Discretionary cash flow is also
     commonly used as a basis to value
     and compare companies in the oil
     and gas industry.

    (3) Amount for 2011 represents
     stand-by rig expense incurred
     prior to receiving permits to
     resume drilling activities in the
     deepwater Gulf of Mexico.

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

                                                  Three Months
                                                      Ended
                                                   March 31,
                                                            2012        2011
                                                            ----        ----

    (Gain) Loss on Commodity
     Derivative Instruments
    Crude Oil
    Realized                                                 $34          $9
    Unrealized                                                92         273
    Total Crude Oil                                         $126        $282
                                                            ----        ----
    Natural Gas
    Realized                                                $(11)       $(26)
    Unrealized                                               (19)         30
    Total Natural Gas                                        (30)          4
                                                             ---         ---
    Total Loss on Commodity
     Derivative Instruments                                  $96        $286
                                                             ---        ----

SOURCE Noble Energy


Source: PR Newswire