Noble Energy Announces Third Quarter 2007 Results
HOUSTON, Oct. 31 /PRNewswire-FirstCall/ — Noble Energy, Inc. today reported third quarter 2007 net income of $222.7 million, or $1.30 per basic share ($1.28 per share diluted). This compares to adjusted third quarter 2006 net income (non-GAAP measure, see Note 1 below) of $230.0 million or $1.31 per basic share ($1.27 per share diluted) after adjusting for the gain on our Gulf of Mexico Shelf Asset Sale. Reported third quarter 2006 net income was $318.1 million or $1.80 per basic share ($1.75 per share diluted). Discretionary cash flow (non-GAAP measure, see Schedule 3 – Discretionary Cash Flow and Reconciliation to Operating Cash Flow) for the third quarter 2007 was $556.1 million, as compared to $533.5 million for the third quarter 2006. Net cash provided by operating activities during the third quarter 2007 was $547.7 million.
Key accomplishments for the third quarter include: — Daily equivalent production volume increase of 14 percent versus third quarter 2006 — Successful appraisal well of the Belinda prospect in Block O, offshore Equatorial Guinea — Oil discovery in the Benita appraisal well in Block I, offshore Equatorial Guinea — Exploration success at the YoYo prospect in the PH-77 license, offshore Cameroon — Net sales of 155 million cubic feet per day (MMcfpd) of natural gas to the liquefied natural gas (LNG) plant in Equatorial Guinea — Continued ramp-up of the Dumbarton field in the North Sea with net production for the quarter averaging approximately 13,400 barrels of oil per day (Bopd) — Record quarterly net natural gas production in Israel of 131 MMcfpd
Third quarter 2007 results included deferred compensation expense of $8.4 million pretax ($5.3 million after tax). Excluding the effects of deferred compensation, third quarter adjusted net income (a non-GAAP measure, see Note 1 below) would have been $228.0 million, or $1.33 per basic share.
Third quarter 2007 production was 214,486 barrels of oil equivalent per day (Boepd) compared to 187,664 Boepd for the same period last year. Sales volumes during the third quarter 2007 were 213,309 Boepd. Capital expenditures for the quarter totaled $449.1 million.
Charles D. Davidson, the company’s Chairman, President and CEO, said, “Noble Energy has continued to execute its development and exploration programs resulting in another strong quarter both financially and operationally. Our exploration program experienced significant success during the quarter with announcements on the positive appraisal at Belinda and the exciting discovery of an oil column at Benita, both of which are in Equatorial Guinea. In addition, we announced a new gas condensate discovery in Cameroon. We are continuing with our West Africa exploration program now knowing that the three discoveries to-date provide a sound foundation for future growth in the region. In the U.S., we were pleased to be the apparent high bidder on several deepwater blocks at the latest Gulf of Mexico lease sale. Also in the Gulf of Mexico, our deepwater development projects made good progress and remain on schedule for delivering important new production in 2008.”
NORTH AMERICA
North America operations reported pre-tax operating income for the third quarter 2007 of $181.3 million compared to $435.4 million for the third quarter 2006, which included a pretax gain on sale of the Gulf of Mexico Shelf assets of approximately $203.5 million.
North American production volumes were 107,365 Boepd in the third quarter 2007 compared to 119,872 Boepd for the same quarter last year. Liquids and natural gas production volumes were 39,992 Bopd and 404.2 MMcfpd, respectively, for the current quarter compared to 48,193 Bopd and 430.1 MMcfpd for the third quarter of 2006. As compared to the third quarter 2006, a decrease of approximately 4,000 Boepd was due to the sale of our Gulf of Mexico Shelf properties in the third quarter 2006, and a decrease of approximately 8,600 Boepd in the deepwater Gulf of Mexico resulted from a combination of well performance, workovers, storm impacts, and third-party facility restrictions. Decreases of approximately 2,500 Boepd related to natural decline in onshore Gulf Coast properties and 1,350 Boepd from our Main Pass properties were fully offset by an increase of approximately 4,050 Boepd in our remaining North America properties. Third quarter 2007 production was impacted 1,000 Boepd due to third-party processing downtime in the Rocky Mountains.
North America operations benefited from higher realized natural gas prices during the quarter. The average realized natural gas price was $6.77 per thousand cubic feet (Mcf) for the third quarter 2007 compared to $6.41 per Mcf last year. Realized liquids prices decreased slightly to $55.85 per barrel (Bbl) compared to $56.84 per Bbl during the third quarter of 2006. The following table provides a detailed breakdown of the major components impacting our realized natural gas and crude oil prices for the quarter.
$ Per Mcf $ Per Bbl Natural Gas Market Price 3.93 Crude Oil Market Price 71.49 Cash Flow Hedges Settled 0.15 Cash Flow Hedges Settled (15.64) Gulf of Mexico OCL Addback* 1.14 – NGL Processing Uplift 1.55 – Realized Natural Gas Price $6.77 Realized Crude Oil Price $55.85 * Natural gas prices included a third quarter benefit that was attributable to previously recognized losses for hedge contracts that were re-designated concurrent with the 2006 Gulf of Mexico Shelf Asset Sale (see Schedule 8 – Impact of Loss Associated with Gulf of Mexico Shelf Asset Sale). INTERNATIONAL OPERATIONS
International operations reported operating income for the third quarter 2007 of $231.3 million compared to $158.9 million in the third quarter last year. Total third quarter 2007 production volumes were 107,121 Boepd compared to 67,792 Boepd for the same quarter last year, an increase of 58 percent. Liquids production volumes were 45,628 barrels per day (Bpd) compared to 36,776 Bpd for the third quarter of 2006. Natural gas production was 369.0 MMcfpd compared to 186.1 MMcfpd in the same quarter last year. Third quarter 2007 international sales were 105,944 Boepd, compared to 63,714 Boepd for the third quarter of 2006.
West Africa
Operating income for the third quarter increased to $112.3 million this year compared to $107.2 million last year. Total sales volumes in Equatorial Guinea (exclusive of methanol operations) were 55,813 Boepd, an increase of 90 percent compared to 29,331 Boepd during the third quarter of 2006. Higher sales volumes resulted primarily from increased natural gas sales to the LNG plant of approximately 155 MMcfpd in the quarter.
Alba field condensate and natural gas sales (exclusive of Alba Plant and methanol operations) accounted for $66.9 million, or 60 percent, of the operating income from West Africa. Third quarter 2007 condensate and natural gas sales volumes averaged 48,341 Boepd compared to 20,399 Boepd last year. The average realized price for condensate during the third quarter was $73.25 per Bbl compared to $66.93 per Bbl for the same period last year.
Alba Plant reported $30.7 million of income, net to Noble Energy’s interest, compared to $30.5 million during the third quarter 2006. Net Alba Plant LPG and condensate sales volumes totaled 7,472 Bpd compared to 8,932 Bpd for the same period last year. The average Alba Plant realized price during the third quarter was $57.24 per Bbl compared to $48.88 per Bbl for the same period last year.
Income from methanol operations increased to $14.6 million, net to Noble Energy’s interest, compared to $3.3 million during the third quarter 2006. The Company’s share of methanol sales volumes was 43.5 million gallons (Gal) compared to last year’s 18.8 million Gal, which was impacted by compressor repairs following a turnaround and expansion project. Third quarter realized methanol prices were 80 cents per Gal compared to 83 cents per Gal for the third quarter 2006.
North Sea
In the North Sea, operating income for the third quarter 2007 was $77.5 million compared to $15.7 million for the same period last year. The increase was primarily due to increased crude sales from the Dumbarton field in the UK, which commenced production in late January 2007. In the third quarter 2007, Dumbarton production averaged approximately 13,400 Bopd.
Israel
Third quarter 2007 operating income was $28.0 million compared to $24.8 million for the same period in 2006. Natural gas production averaged a record 131.1 MMcfpd for the third quarter 2007 compared to 116.7 MMcfpd the previous year. Increased seasonal demand for natural gas contributed to the production growth. Sales prices averaged $2.95 per Mcf for the third quarter 2007 as compared to $2.84 per Mcf for the prior year period.
Other International
Argentina, China, Ecuador and Suriname combined recorded third quarter 2007 operating income of $13.6 million compared to $11.2 million for third quarter last year. In China, third quarter operating income was $12.1 million. Net oil production in China averaged 3,780 Bopd for the third quarter. In Argentina, operating income was $2.9 million, and net production averaged 2,850 Bopd. The Machala power plant reported operating income of $2.9 million. For the quarter, 223,663 megawatt-hours were sold at an average price of 7.4 cents per kilowatt-hour.
Note 1 – Adjusted net income should not be considered a substitute for net income as reported in accordance with GAAP and is provided for comparison purposes to prior periods and to earnings forecasts prepared by analysts and other third parties. Management believes and certain investors may find that adjusted net income is beneficial in evaluating the Company’s financial performance.
OUTLOOK
Fourth quarter production is expected to range from 193,000 to 197,000 Boepd, which represents an increase of six to eight percent above fourth quarter 2006. The above guidance assumes net natural gas sales to the LNG plant of 50 MMcfpd in the fourth quarter 2007 versus actual sales of 155 MMcfpd in the third quarter, with the decrease a result of fourth quarter downtime for third-party plant repairs. Compared to the third quarter 2007, other international production is expected to be down 2,000 to 5,000 Boepd mostly due to the seasonal decline in natural gas demand in Israel. Production in North America is expected to increase 1,000 to 2,000 Boepd from the third quarter.
For the fourth quarter 2007, costs and expenses are expected to range as follows:
— Exploration expense is expected to range from $45 million to $60 million, — General and administrative expenses is expected to range from $52 million to $56 million, — Oil and gas operations expense is expected to range from $78 million to $82 million, — Depreciation, depletion and amortization is expected to range from $185 million to $190 million.
For the year 2007, an effective tax rate is expected on the low end of the original estimated range of 30 to 36 percent. Of the total book taxes planned for 2007, deferred taxes are expected to be between 60 and 65 percent as compared to the previous estimate of 55 to 60 percent.
Capital expenditures for the year are expected to total approximately $1.7 billion.
Noble Energy is one of the nation’s leading independent energy companies and operates throughout major basins in the United States including Colorado’s Wattenberg Field, the Mid-continent region of western Oklahoma and the Texas Panhandle, the San Juan Basin in New Mexico, the Gulf Coast and the deepwater Gulf of Mexico. In addition, Noble Energy operates internationally in Argentina, China, Ecuador, the Mediterranean Sea (Israel), the North Sea (UK, the Netherlands, and Norway), West Africa (Equatorial Guinea and Cameroon) and Suriname. Noble Energy markets natural gas and crude oil through its subsidiary, Noble Energy Marketing, Inc. Visit Noble Energy online at http://www.nobleenergyinc.com/.
This news release may include projections and other “forward-looking statements” within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy’s current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Important factors that could cause the actual results to differ materially from those projected include, without limitation, the volatility in commodity prices for oil and gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy’s business that are detailed in its Securities and Exchange Commission filings. The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We may use certain terms in this press release, such as “resources,”"estimated resource range,”"resource potential” and “potential resources,” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-07964, available from Noble Energy’s offices or website, http://www.nobleenergyinc.com/. These forms can also be obtained from the SEC by calling 1-800-SEC-0330.
Schedule 1 Noble Energy, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Revenues Oil and gas sales $746,258 $683,544 $2,140,218 $2,044,656 Income from equity method investees 45,371 33,810 139,904 108,901 Other revenues 22,182 23,965 70,447 72,339 Total Revenues 813,811 741,319 2,350,569 2,225,896 Costs and Expenses Lease operating costs 81,767 76,928 243,205 238,307 Production and ad valorem taxes 26,752 30,697 80,667 83,663 Transportation costs 13,260 4,531 40,346 18,463 Exploration costs 45,794 30,904 144,796 92,327 Depreciation, depletion and amortization 195,266 165,765 540,453 458,878 General and administrative 49,518 40,657 142,368 113,716 Accretion of discount on asset retirement obligations 1,909 2,426 6,337 8,405 Interest, net of amount capitalized 29,247 28,556 87,105 95,642 Loss (gain) on derivative instruments 1,514 (6,315) (557) 389,723 Loss (gain) on sale of assets 1,684 (200,676) (4,381) (211,691) Loss on involuntary conversion – – 51,406 – Other expense, net 23,823 22,880 78,594 89,008 Total Costs and Expenses 470,534 196,353 1,410,339 1,376,441 Income Before Taxes 343,277 544,966 940,230 849,455 Income Tax Provision 120,602 226,902 296,638 336,009 Net Income $222,675 $318,064 $643,592 $513,446 Earnings Per Share Basic $1.30 $1.80 $3.76 $2.91 Diluted $1.28 $1.75 $3.72 $2.85 Weighted average number of shares outstanding Basic 171,123 176,218 170,953 176,505 Diluted 173,350 181,077 173,156 180,158 Schedule 2 Noble Energy, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited) September 30, December 31, 2007 2006 ASSETS Current Assets Cash and cash equivalents $450,773 $153,408 Accounts receivable – trade, net 555,850 586,882 Deferred income taxes 64,337 99,835 Probable insurance claims 12,193 101,233 Other current assets 114,857 127,188 Total current assets 1,198,010 1,068,546 Property, plant and equipment Oil and gas properties (successful efforts method of accounting) 9,924,532 8,867,639 Other property, plant and equipment 93,475 79,646 10,018,007 8,947,285 Accumulated depreciation, depletion and amortization (2,292,108) (1,776,528) Total property, plant and equipment, net 7,725,899 7,170,757 Other noncurrent assets 561,270 568,032 Goodwill 766,249 781,290 Total Assets $10,251,428 $9,588,625 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable – trade $588,453 $518,609 Derivative instruments 372,027 254,625 Income taxes 54,055 107,136 Short-term borrowings 25,000 — Asset retirement obligations 15,081 68,500 Other current liabilities 176,579 235,392 Total current liabilities 1,231,195 1,184,262 Deferred income taxes 1,882,518 1,758,452 Asset retirement obligations 108,589 127,689 Derivative instruments 127,944 328,875 Other noncurrent liabilities 341,873 274,720 Long-term debt 1,941,018 1,800,810 Total Liabilities 5,633,137 5,474,808 Commitments and Contingencies Shareholders’ Equity Preferred stock – par value $1.00; 4,000,000 shares authorized, none issued – – Common stock – par value $3.33 1/3; 250,000,000 shares authorized; 190,462,250 and 188,808,087 shares issued, respectively 634,860 629,360 Capital in excess of par value 2,088,891 2,041,048 Accumulated other comprehensive loss (177,023) (140,509) Treasury stock, at cost: 18,580,865 and 16,574,384 shares, respectively (612,976) (511,443) Retained earnings 2,684,539 2,095,361 Total Shareholders’ Equity 4,618,291 4,113,817 Total Liabilities and Shareholders’ Equity $10,251,428 $9,588,625 Schedule 3 Noble Energy, Inc. and Subsidiaries Discretionary Cash Flow and Reconciliation to Operating Cash Flow (In Thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Net income $222,675 $318,064 $643,592 $513,446 Adjustments to reconcile net income to discretionary cash flow: Depreciation, depletion and amortization – oil and gas production 195,266 165,765 540,453 458,878 Depreciation, depletion and amortization – electricity generation 3,645 3,775 10,558 11,842 Impairment of operating assets 3,661 – 3,661 6,359 Exploration costs 45,794 30,904 144,796 92,327 Interest capitalized (3,918) (1,174) (10,219) (3,430) Income from equity method investments (45,371) (33,810) (139,904) (108,901) Distributions and dividends from equity method investees 58,487 39,001 155,431 134,521 Deferred compensation adjustment 8,423 933 23,089 15,673 Deferred income taxes 88,621 99,650 192,137 146,709 Accretion of discount on asset retirement obligations 1,909 2,426 6,337 8,405 Allowance for doubtful accounts 3,297 6,949 10,780 10,564 Stock-based compensation expense 7,962 2,997 20,040 9,320 (Gain) loss on derivative instruments [1] (40,890) (17,461) (133,580) 430,328 Gain on sale of Gulf of Mexico shelf assets – (88,148) – (88,148) Other, net 6,546 3,600 10,465 5,079 Discretionary Cash Flow [2] 556,107 533,471 1,477,636 1,642,972 Reconciliation to Operating Cash Flows: Net changes in working capital 17,102 66,204 (65,661) 10,194 Cash exploration costs (28,888) (16,665) (97,027) (52,983) Capitalized interest 3,918 1,174 10,219 3,430 Distributions from equity method investees (2,100) (39,001) (2,100) (116,521) (Gain) Loss on disposal of assets 1,684 (112,528) (4,381) (123,543) Other adjustments to reconcile discretionary cash flow to operating cash flows (83) (26,082) 1,925 (22,736) Net Cash Provided by Operating Activities $547,740 $406,573 $1,320,611 $1,340,813 [1] Includes $42,404 and $133,022 related to hedge contracts that were re-designated at the time of the Gulf of Mexico Shelf Asset Sale and settled during the three and nine months ended September 30, 2007. $10,129 is included in the three and nine months ended September 30, 2006. See Schedule 8 — PreTax Cash Flow Hedges Earnings Impact. [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, management believes it is a good tool for internal use and the investment community in evaluating the Company’s overall financial performance. Among management, professional research analysts, portfolio managers and investors following the oil and gas industry, discretionary cash flow is broadly used as an indicator of a company’s ability to fund exploration and production activities and meet financial obligations. Discretionary cash flow is also commonly used as a basis to value and compare companies in the oil and gas industry. Schedule 4 Noble Energy, Inc. Income Before Income Taxes (Dollars in thousands, except realized prices) (Unaudited) Three Months Ended 9/30/07 Consoli- North West North dated America Africa Sea Revenues Oil sales $449,898 $205,477 $92,704 $118,101 Gas sales 296,360 251,872 5,189 [3] 3,673 Equity investee liquids sales – – 39,349 – Equity investee methanol sales – – 34,744 – Gathering, marketing and processing 5,566 – – – Electricity sales 16,616 – – – Income from equity method investments 45,371 – – – Total Revenues 813,811 457,349 171,986 121,774 Costs and expenses Oil and gas operating costs 77,283 50,007 7,483 10,697 Workover and repair expense 4,484 4,460 [8] – – Production and ad valorem taxes 26,752 21,389 – – Transportation 13,260 10,111 – 2,859 Oil and gas exploration 45,794 21,274 17,903 2,087 Gathering, marketing and processing 4,100 – – – Equity investee liquids expense – – 8,627 – Equity investee methanol expense – – 20,095 – Electricity generation 13,679 – – – DD&A 195,266 143,574 8,716 29,741 Impairment of operating assets 3,661 3,661 – – General and administrative 49,518 17,138 906 1,125 Accretion expense 1,909 1,373 25 336 Interest expense, net 29,247 – – – Deferred compensation 8,423 – – – Loss on derivative instruments 1,514 1,514 – – Loss on involuntary conversion – – – – (Gain) loss on sale of assets 1,684 1,945 – (225) Other expense (income), net (6,040) (388) (4,042) (2,382) Total Costs and Expenses 470,534 276,058 59,713 44,238 Operating Income (Loss) $343,277 $181,291 $112,273 $77,536 Key Statistics Sales Volumes Liquids (Bopd) 76,971 39,992 13,757 16,644 Natural Gas (Mcfpd) 773,194 404,238 207,501 [3][4] 5,496 Equity Investee Liquids (Bpd) 7,472 – 7,472 [5] – Equity Investee Methanol (Kgal) 43,541 – 43,541 – Production Volumes Liquids (Bopd) 77,671 39,992 15,327 15,722 Natural Gas (Mcfpd) 773,194 404,238 207,501 5,496 Equity Investee Liquids (Bpd) 7,949 – 7,949 [6] – Total Production Boepd [9] 214,486 107,365 57,860 16,638 Average Realized Price Liquids $63.53 $55.85 $73.25 $77.13 Natural Gas 4.30 6.77 0.27 7.26 Equity Investee Liquids 57.24 – 57.24 – Equity Investee Methanol 0.80 – 0.80 – Three Months Ended 9/30/07 Other Corporate Israel Int’l [1] & Other [2] Revenues Oil sales $ – $33,616 $- Gas sales 35,626 – – Equity investee liquids sales – – (39,349) Equity investee methanol sales – – (34,744) Gathering, marketing and processing – – 5,566 Electricity sales – 16,616 – Income from equity method investments – – 45,371 Total Revenues 35,626 50,232 (23,156) Costs and expenses Oil and gas operating costs 2,615 6,300 181 Workover and repair expense – 24 – Production and ad valorem taxes – 5,240 123 Transportation – 290 – Oil and gas exploration 689 1,256 2,585 Gathering, marketing and processing – – 4,100 Equity investee liquids expense – – (8,627) Equity investee methanol expense – – (20,095) Electricity generation – 13,679 – DD&A 5,178 5,845 2,212 Impairment of operating assets – – – General and administrative 6 2,481 27,862 Accretion expense 112 63 – Interest expense, net – – 29,247 Deferred compensation – – 8,423 Loss on derivative instruments – – – Loss on involuntary conversion – – – (Gain) loss on sale of assets (39) – 3 Other expense (income), net (892) 1,497 167 Total Costs and Expenses 7,669 36,675 46,181 Operating Income (Loss) $27,957 $13,557 $(69,337) Key Statistics Sales Volumes Liquids (Bopd) – 6,578 – Natural Gas (Mcfpd) 131,115 24,844 [7] – Equity Investee Liquids (Bpd) – – – Equity Investee Methanol (Kgal) – – – Production Volumes Liquids (Bopd) – 6,630 – Natural Gas (Mcfpd) 131,115 24,844 – Equity Investee Liquids (Bpd) – – – Total Production Boepd [9] 21,853 10,771 – Average Realized Price Liquids $- $55.55 $- Natural Gas 2.95 – Equity Investee Liquids – – – Equity Investee Methanol – – – [1] Other international includes operations in Argentina, China, Ecuador and Suriname. [2] Corporate and Other includes corporate overhead, intercompany eliminations and marketing. [3] Natural gas in Equatorial Guinea is under contract for $0.25 per MMBtu through 2026 to a methanol plant, an LPG plant and an LNG plant. The price on an Mcf basis has been adjusted to reflect Btu content. The methanol and LPG plants are owned by affiliated entities accounted for under the equity method of accounting. [4] Equatorial Guinea natural gas volumes include 154,637 Mcfpd sold to an LNG plant. [5] Equity Investee LPG volumes include condensate and natural gas liquids of 1,942 Bpd and 5,530 Bpd, respectively. These volumes are included in West Africa production and LPG sales revenue. [6] Equity Investee LPG volumes include condensate and natural gas liquids of 1,815 Bpd and 6,134 Bpd, respectively. [7] Ecuador natural gas volumes are included in Other International and Consolidated production, but are not included in natural gas sales revenue for either. Because the gas-to-power project in Ecuador is 100 percent owned by Noble Energy, intercompany natural gas sales are eliminated for accounting purposes. [8] There was no hurricane related repair expense recorded in the third quarter 2007. [9] Barrels of oil equivalent for natural gas is calculated at a 6 to 1 ratio. Schedule 5 Noble Energy, Inc. Income Before Income Taxes (Dollars in thousands, except realized prices) (Unaudited) Three Months Ended 9/30/06 Consoli- North West North dated America Africa Sea Revenues Oil sales $392,699 $252,019 $84,048 $20,869 Gas sales 290,845 253,703 1,450 [3] 5,213 Equity investee liquids sales – – 40,164 – Equity investee methanol sales – – 15,654 – Gathering, marketing and processing 7,724 – – – Electricity sales 16,241 – – – Income from equity method investments 33,810 – – – Total Revenues 741,319 505,722 141,316 26,082 Costs and expenses Oil and gas operating costs 66,431 50,753 6,310 3,355 Workover and repair expense 10,497 10,453 [7] – – Production and ad valorem taxes 30,697 22,636 – – Transportation 4,531 3,358 – 952 Oil and gas exploration 30,904 23,366 706 1,395 Gathering, marketing and processing 4,204 – – – Equity investee liquids expense – – 9,655 – Equity investee methanol expense – – 12,352 – Electricity generation 17,876 – – – DD&A 165,765 146,010 5,353 2,603 Impairment of operating assets – – – – General and administrative 40,657 16,013 – 774 Accretion expense 2,426 1,937 26 290 Interest expense, net 28,556 – – – Deferred compensation 933 – – – Gain on derivative instruments (6,315) (6,315) – – Loss on involuntary conversion – – – – Gain on sale of assets (200,676) (200,599) – (74) Other expense (income), net (133) 2,678 (292) 1,081 Total Costs and Expenses 196,353 70,290 34,110 10,376 Operating Income (Loss) $544,966 $435,432 $107,206 $15,706 Key Statistics Sales Volumes Liquids (Bopd) 71,959 48,193 13,649 3,292 Natural Gas (Mcfpd) 616,170 430,072 40,498[3] 8,553 Equity Investee Liquids (Bpd) 8,932 – 8,932[4] – Equity Investee Methanol (Kgal) 18,769 – 18,769 – Production Volumes Liquids (Bopd) 76,975 48,193 17,324 3,675 Natural Gas (Mcfpd) 616,170 430,072 40,498 8,553 Equity Investee Liquids (Bpd) 7,994 – 7,994[5] – Total Production Boepd [8] 187,664 119,872 32,068 5,101 Average Realized Price Liquids $59.32 $56.84 $66.93 $68.90 Natural Gas 5.30 6.41 0.39 6.62 Equity Investee Liquids 48.88 – 48.88 – Equity Investee Methanol 0.83 – 0.83 – Three Months Ended 9/30/06 Other Corporate Israel Int’l [1] & Other [2] Revenues Oil sales $- $35,763 $- Gas sales 30,451 28 – Equity investee liquids sales – – (40,164) Equity investee methanol sales – – (15,654) Gathering, marketing and processing – – 7,724 Electricity sales – 16,241 – Income from equity method investments – – 33,810 Total Revenues 30,451 52,032 (14,284) Costs and expenses Oil and gas operating costs 2,134 3,817 62 Workover and repair expense – 44 – Production and ad valorem taxes – 7,942 119 Transportation – 221 – Oil and gas exploration 82 2,900 2,455 Gathering, marketing and processing – – 4,204 Equity investee liquids expense – – (9,655) Equity investee methanol expense – – (12,352) Electricity generation – 17,876 – DD&A 4,115 5,921 1,763 Impairment of operating assets – – – General and administrative 19 2,000 21,851 Accretion expense 119 54 – Interest expense, net – – 28,556 Deferred compensation – – 933 Gain on derivative instruments – – – Loss on involuntary conversion – – – Gain on sale of assets – – (3) Other expense (income), net (803) 35 (2,832) Total Costs and Expenses 5,666 40,810 35,101 Operating Income (Loss) $24,785 $11,222 $(49,385) Key Statistics Sales Volumes Liquids (Bopd) – 6,825 – Natural Gas (Mcfpd) 116,718 20,329 [6] – Equity Investee Liquids (Bpd) – – – Equity Investee Methanol (Kgal) – – – Production Volumes Liquids (Bopd) – 7,783 – Natural Gas (Mcfpd) 116,718 20,329 – Equity Investee Liquids (Bpd) – – – Total Production Boepd [8] 19,453 11,171 – Average Realized Price Liquids $- $56.96 $- Natural Gas 2.84 1.51 – Equity Investee Liquids – – – Equity Investee Methanol – – – [1] Other international includes operations in Argentina, China, Ecuador and Suriname. [2] Corporate and Other includes corporate overhead, intercompany eliminations and marketing. [3] Natural gas in Equatorial Guinea is under contract for $0.25 per MMBTU through 2026 to a methanol plant and an LPG plant. The price on an Mcf basis has been adjusted to reflect Btu content. The methanol and LPG plants are owned by affiliated entities accounted for under the equity method of accounting. [4] Equity Investee LPG volumes include condensate and natural gas liquids of 1,975 Bpd and 6,957 Bpd, respectively. These volumes are included in West Africa production and LPG sales revenue. [5] Equity Investee LPG volumes include condensate and natural gas liquids of 1,811 Bpd and 6,183 Bpd, respectively. [6] Ecuador natural gas volumes are included in Other International and Consolidated production, but are not included in natural gas sales revenue for either. Because the gas-to-power project in Ecuador is 100 percent owned by Noble Energy, intercompany natural gas sales are eliminated for accounting purposes. [7] Hurricane related repair expense was $4.2 million for third quarter 2006. [8] Barrels of oil equivalent for natural gas is calculated at a 6 to 1 ratio. Schedule 6 Noble Energy, Inc. Income Before Income Taxes (Dollars in thousands, except realized prices) (Unaudited) Nine Months Ended 9/30/07 North West Consolidated America Africa Revenues Oil sales $1,204,854 $606,421 $273,082 Gas sales 935,364 830,480 10,086[3] Equity investee liquids sales – – 109,329 Equity investee methanol sales – – 112,094 Gathering, marketing and processing 16,702 – – Electricity sales 53,745 – – Income from equity method investments 139,904 – – Total Revenues 2,350,569 1,436,901 504,591 Costs and expenses Oil and gas operating costs 228,672 155,980 25,014 Workover and repair expense 14,533 14,327 [8] – Production and ad valorem taxes 80,667 65,933 – Transportation 40,346 31,887 – Oil and gas exploration 144,796 71,156 46,182 Gathering, marketing and processing 13,093 – – Equity investee liquids expense – – 19,829 Equity investee methanol expense – – 61,690 Electricity generation 41,941 – – DD&A 540,453 427,861 18,731 Impairment of operating assets 3,661 3,661 – General and administrative 142,368 50,761 2,452 Accretion expense 6,337 4,767 77 Interest expense, net 87,105 – – Deferred compensation 23,089 – – Gain on derivative instruments (557) (557) – Loss on involuntary conversion 51,406 51,406 – (Gain) loss on sale of assets (4,381) (4,196) – Other expense (income), net (3,190) 5,131 (7,466) Total Costs and Expenses 1,410,339 878,117 166,509 Operating Income (Loss) $940,230 $558,784 $338,082 Key Statistics Sales Volumes Liquids (Bopd) 77,385 43,525 14,936 Natural Gas (Mcfpd) 679,116 410,083 126,820[3][4] Equity Investee Liquids (Bpd) 7,862 – 7,862[5] Equity Investee Methanol (Kgal) 116,792 – 116,792 Production Volumes Liquids (Bopd) 78,396 43,525 15,874 Natural Gas (Mcfpd) 679,116 410,083 126,820 Equity Investee Liquids (Bpd) 8,220 – 8,220[6] Total Production Boepd [9] 199,802 111,872 45,231 Average Realized Price Liquids $57.03 $51.04 $66.97 Natural Gas 5.24 7.42 0.29 Equity Investee Liquids 50.93 – 50.93 Equity Investee Methanol 0.96 – 0.96 Nine Months Ended 9/30/07 North Other Corporate Sea Israel Int’l[1] & Other[2] Revenues Oil sales $229,243 $- $96,108 $- Gas sales 9,861 84,937 – Equity investee liquids sales – – – (109,329) Equity investee methanol sales – – – (112,094) Gathering, marketing and processing – – – 16,702 Electricity sales – – 53,745 – Income from equity method investments – – – 139,904 Total Revenues 239,104 84,937 149,853 (64,817) Costs and expenses Oil and gas operating costs 23,954 6,896 16,312 516 Workover and repair expense – – 206 – Production and ad valorem taxes – – 14,326 408 Transportation 7,091 – 1,368 – Oil and gas exploration 12,881 1,077 4,571 8,929 Gathering, marketing and processing – – – 13,093 Equity investee liquids expense – – – (19,829) Equity investee methanol expense – – – (61,690) Electricity generation – – 41,941 – DD&A 56,849 13,011 17,863 6,138 Impairment of operating assets – – – – General and administrative 2,835 55 3,123 83,142 Accretion expense 1,009 337 147 – Interest expense, net – – – 87,105 Deferred compensation – – – 23,089 Gain on derivative instruments – – – – Loss on involuntary conversion – – – – (Gain) loss on sale of assets (225) 34 (4) 10 Other expense (income), net (2,347) (1,605) 2,373 724 Total Costs and Expenses 102,047 19,805 102,226 141,635 Operating Income (Loss) $137,057 $65,132 $47,627 $(206,452) Key Statistics Sales Volumes Liquids (Bopd) 11,926 – 6,998 – Natural Gas (Mcfpd) 5,967 110,675 25,571[7] – Equity Investee Liquids (Bpd) – – – – Equity Investee Methanol (Kgal) – – – – Production Volumes Liquids (Bopd) 11,954 – 7,043 – Natural Gas (Mcfpd) 5,967 110,675 25,571 – Equity Investee Liquids (Bpd) – – – – Total Production Boepd [9] 12,949 18,446 11,305 – Average Realized Price Liquids $70.41 $- $50.30 $- Natural Gas 6.05 2.81 – Equity Investee Liquids – – – – Equity Investee Methanol – – – – [1] Other international includes operations in Argentina, China, Ecuador and Suriname. [2] Corporate and Other includes corporate overhead, intercompany eliminations and marketing. [3] Natural gas in Equatorial Guinea is under contract for $0.25 per MMBTU through 2026 to a methanol plant, an LPG plant and an LNG plant. The price on an Mcf basis has been adjusted to reflect Btu content. The methanol and LPG plants are owned by affiliated entities accounted for under the equity method of accounting. [4] Equatorial Guinea natural gas volumes include 72,010 Mcfpd sold to an LNG plant. [5] Equity Investee LPG volumes include condensate and natural gas liquids of 1,955 Bpd and 5,907 Bpd, respectively. These volumes are included in West Africa production and LPG sales revenue. [6] Equity Investee LPG volumes include condensate and natural gas liquids of 1,896 Bpd and 6,324 Bpd, respectively. [7] Ecuador natural gas volumes are included in Other International and Consolidated production, but are not included in natural gas sales revenue for either. Because the gas-to-power project in Ecuador is 100 percent owned by Noble Energy, intercompany natural gas sales are eliminated for accounting purposes. [8] Includes $.6 million of hurricane related repair expense. [9] Barrels of oil equivalent for natural gas is calculated at a 6 to 1 ratio. Schedule 7 Noble Energy, Inc. Income Before Income Taxes (Dollars in thousands, except realized prices) (Unaudited) Nine Months Ended 9/30/06 North West Consolidated America Africa Revenues Oil sales $1,126,983 $644,103 $302,284 Gas sales 917,673 825,765 4,586[3] Equity investee liquids sales – – 104,720 Equity investee methanol sales – – 70,967 Gathering, marketing and processing 22,667 – – Electricity sales 49,672 – – Income from equity method investments 108,901 – – Total Revenues 2,225,896 1,469,868 482,557 Costs and expenses Oil and gas operating costs 195,550 147,357 21,760 Workover and repair expense 42,757 42,628[7] – Production and ad valorem taxes 83,663 66,373 – Transportation 18,463 14,022 – Oil and gas exploration 92,327 62,481 5,339 Gathering, marketing and processing 15,674 – – Equity investee liquids expense – – 23,233 Equity investee methanol expense – – 43,552 Electricity generation 43,099 – – DD&A 458,878 402,033 15,674 Impairment of operating assets 6,359 6,359 – General and administrative 113,716 44,089 1 Accretion expense 8,405 6,960 78 Interest expense, net 95,642 – – Deferred compensation 15,673 – – Loss on derivative instruments 389,723 389,723 – Loss on involuntary conversion – – – (Gain) loss on sale of assets (211,691) (209,725) – Other expense (income), net 8,203 12,912 (570) Total Costs and Expenses 1,376,441 985,212 109,067 Operating Income (Loss) $849,455 $484,656 $373,490 Key Statistics Sales Volumes Liquids (Bopd) 74,290 45,834 17,374 Natural Gas (Mcfpd) 629,279 461,843 44,232[3] Equity Investee Liquids (Bpd) 8,168 – 8,168[4] Equity Investee Methanol (Kgal) 85,233 – 85,233 Production Volumes Liquids (Bopd) 74,829 45,834 17,790 Natural Gas (Mcfpd) 629,279 461,843 44,232 Equity Investee Liquids (Bpd) 7,503 – 7,503[5] Total Production [8] Boepd 187,212 122,808 32,665 Average Realized Price Liquids $55.57 $51.48 $63.73 Natural Gas 5.54 6.55 0.38 Equity Investee Liquids 46.96 – 46.96 Equity Investee Methanol 0.83 – 0.83 Nine Months Ended 9/30/06 North Other Corporate Sea Israel Int’l[1] & Other[2] Revenues Oil sales $69,948 $- $110,648 $- Gas sales 18,775 68,441 106 – Equity investee liquids sales – – – (104,720) Equity investee methanol sales – – – (70,967) Gathering, marketing and processing – – – 22,667 Electricity sales – – 49,672 – Income from equity method investments – – – 108,901 Total Revenues 88,723 68,441 160,426 (44,119) Costs and expenses Oil and gas operating costs 7,998 6,389 11,623 423 Workover and repair expense – – 129 – Production and ad valorem taxes – – 16,910 380 Transportation 3,843 – 598 – Oil and gas exploration 9,279 143 7,684 7,401 Gathering, marketing and processing – – – 15,674 Equity investee liquids expense – – – (23,233) Equity investee methanol expense – – – (43,552) Electricity generation – – 43,099 – DD&A 5,933 10,367 19,445 5,426 Impairment of operating assets – – – – General and administrative 2,080 58 2,982 64,506 Accretion expense 868 332 167 – Interest expense, net – – – 95,642 Deferred compensation – – – 15,673 Loss on derivative instruments – – – – Loss on involuntary conversion – – – – (Gain) loss on sale of assets (2,004) – 15 23 Other expense (income), net 1,476 (1,699) 1,162 (5,078) Total Costs and Expenses 29,473 15,590 103,814 133,285 Operating Income (Loss) $59,250 $52,851 $56,612 $(177,404) Key Statistics Sales Volumes Liquids (Bopd) 3,619 – 7,463 – Natural Gas (Mcfpd) 8,460 91,656 23,088[6] – Equity Investee Liquids (Bpd) – – – – Equity Investee Methanol (Kgal) – – – – Production Volumes Liquids (Bopd) 3,867 – 7,338 – Natural Gas (Mcfpd) 8,460 91,656 23,088 – Equity Investee Liquids (Bpd) – – – – Total Production Boepd [8] 5,277 15,276 11,186 – Average Realized Price Liquids $70.79 $- $54.31 $- Natural Gas 8.13 2.74 1.20 – Equity Investee Liquids – – – – Equity Investee Methanol – – – – [1] Other international includes operations in Argentina, China, Ecuador and Suriname. [2] Corporate and Other includes corporate overhead, intercompany eliminations and marketing. [3] Natural gas in Equatorial Guinea is under contract for $0.25 per MMBTU through 2026 to a methanol plant and an LPG plant. The price on an Mcf basis has been adjusted to reflect Btu content. The methanol and LPG plants are owned by affiliated entities accounted for under the equity method of accounting. [4] Equity Investee LPG volumes include condensate and natural gas liquids of 1,759 Bpd and 6,409 Bpd, respectively. These volumes are included in West Africa production and LPG sales revenue. [5] Equity Investee LPG volumes include condensate and natural gas liquids of 1,726 Bpd and 5,777 Bpd, respectively. [6] Ecuador natural gas volumes are included in Other International and Consolidated production, but are not included in natural gas sales revenue for either. Because the gas-to-power project in Ecuador is 100 percent owned by Noble Energy, intercompany natural gas sales are eliminated for accounting purposes. [7] Includes approximately $25.6 million of hurricane related repair expense. [8] Barrels of oil equivalent for natural gas is calculated at a 6 to 1 ratio. Schedule 8 Noble Energy, Inc. Pretax Cash Flow Hedges Earnings Impact (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (Decrease) increase of oil and gas sales: Cash settlement crude oil contracts $(60,297) $(46,386) $(128,359) $(159,687) Cash settlement natural gas contracts 5,569 (7,541) (12,965) (69,477) Total cash settlements (54,728) (53,927) (141,324) (229,164) Non-cash impact of loss associated with Gulf of Mexico shelf asset sale 42,404 10,129 133,022 10,129 Net decrease of oil and gas sales (12,324) (43,798) (8,302) (219,035) Gain (loss) on derivative instruments: Loss associated with Gulf of Mexico shelf asset sale – – – (398,517) (Loss) gain from ineffectiveness and other (1,514) 6,315 557 8,794 (Loss) gain on derivative instruments (1,514) 6,315 557 (389,723) Pretax earnings decrease $(13,838) $(37,483) $(7,745) $(608,758) Impact of Loss Associated with Gulf of Mexico Shelf Asset Sale (Dollars in thousands) (Unaudited) Loss associated with Gulf of Mexico shelf asset sale ( 2Q 2006 ) $(398,517) Redesignated and mark to market contracts settled in 2006 30,651 Redesignated contracts settled in 1st, 2nd & 3rd Qtr 2007 133,022 Unsettled loss associated with Gulf of Mexico shelf asset sale $(234,844) Settlement schedule Crude Oil Natural Gas Total 4Q 2007 – 49,402 49,402 1Q 2008 5,979 54,529 60,508 2Q 2008 5,835 32,191 38,026 3Q 2008 5,763 34,055 39,818 4Q 2008 5,633 41,457 47,090 Remaining settlements $23,210 $211,634 $234,844 Schedule 9 Noble Energy, Inc. Ecuador Power Operations (Dollars in thousands, except realized prices) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Revenues Power Sales $14,539 $14,231 $47,309 $43,447 Capacity Charge 2,077 2,010 6,436 6,225 Total Revenues 16,616 16,241 53,745 49,672 Costs and expenses Field Lease Operating 658 756 1,987 2,119 DD&A 2,582 2,593 7,812 8,337 General and administrative 604 595 2,053 1,857 Plant Fuel & Other Operating Costs[1] 7,536 10,733 23,251 21,661 DD&A 1,069 1,182 2,755 3,505 General and administrative 1,230 2,017 4,083 5,620 Total Costs and Expenses 13,679 17,876 41,941 43,099 Operating Income $2,937 $(1,635) $11,804 $6,573 Natural Gas Production (Mcfpd) 24,844 20,131 25,571 22,764 Average Natural Gas Price $3.74 $3.76 $3.75 $3.76 Power Production – Total MW 223,663 182,806 678,986 603,513 Average Power Price ($/Kwh) $0.074 $0.089 $0.079 $0.082 [1] Includes increases in the allowance for doubtful accounts of $3 million and $3 million for third quarter 2007 and 2006, respectively, and $11 million and $4 million for the first nine months of 2007 and 2006, respectively. We increased the allowance to cover