Noble Energy Announces Fourth Quarter And Full Year 2012 Results, Including Record Sales Volumes And Cash Flow

Noble Energy, Inc. (NYSE: NBL) reported today fourth quarter 2012 net income of $251 million, or $1.39 per share diluted, and net income from continuing operations(1) of $277 million, or $1.54 per share diluted. Excluding the impact of an unrealized commodity derivatives gain and an asset impairment charge, fourth quarter 2012 adjusted net income from continuing operations(2) was $296 million, or $1.65 per share diluted. During the fourth quarter 2011, the Company had a net loss from continuing operations of $314 million, or $1.77 per share diluted, and adjusted net income from continuing operations(2) of $277 million, or $1.55 per share diluted.
Discretionary cash flow from continuing operations(2) for the fourth quarter 2012 was a record $824 million compared to $710 million for the same quarter in 2011. Net cash provided by operating activities was $762 million and capital expenditures(3) for the quarter were $1.1 billion.
Key highlights for the fourth quarter of 2012 include:
• Record quarterly cash flow of $824 million and record annual cash flow of $2.9 billion for 2012
• Record sales volume from continuing operations of 255 thousand barrels of oil equivalent per day (MBoe/d) and 239 MBoe/d for the year
• DJ Basin volumes increased to 86 MBoe/d with horizontal production contributing 39 MBoe/d, 45 percent of the total volumes
• Production in the Marcellus Shale averaged 121 million cubic feet equivalent per day (MMcfe/d) net, a 19 percent increase over third quarter 2012
• Discovery at Big Bend in the Gulf of Mexico
• New reservoir discovery at Carla offshore Equatorial Guinea
• Tamar platform installed and commissioning process initiated
• Announced a strategic partner in the Leviathan leases offshore Israel
Noble Energy reported full year 2012 net income of $1.0 billion, or $5.71 per share diluted, compared to net income of $453 million, or $2.54 per share diluted, in 2011. Adjusted net income from continuing operations(1) for 2012 was $889 million, or $4.95 per share diluted, compared to $904 million, or $5.06 per share diluted, in 2011. Discretionary cash flow from continuing operations(1) was $2.9 billion for the year, up 21 percent from 2011, and net cash provided by operating activities for the year was $2.9 billion, up 32 percent from 2011. Total year capital expenditures(2) were $3.6 billion.
Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “Delivering record quarterly cash flow of more than $800 million in the fourth quarter was an excellent culmination to an exciting year of growth for Noble Energy and has set the stage for an even better year in 2013. Record sales, with liquids accounting for 47 percent of the volumes, were a strong contributor to the quarterly results. In particular, crude and condensate sales grew more than 17 percent from the previous quarter. In 2013, we anticipate another exciting year of growth as we deliver 20 percent production growth over 2012 after adjusting for our 2012 property sales. We plan to bring Tamar and Alen to first production while continuing to grow our U.S. production from the DJ Basin and Marcellus. To support future growth, we intend to sanction this year another wave of major projects that will likely include a Phase 2 of Tamar in Israel, a Phase 1 of Leviathan also in Israel, Carla offshore West Africa, and Gunflint and Big Bend in the Gulf of Mexico. While we move these projects into development, we will also be testing significant exploration prospects including the Paraiso well offshore Nicaragua, Leviathan deep offshore Israel, and multiple prospects in the Gulf of Mexico.”
Fourth quarter 2012 sales volumes from continuing operations averaged 255 MBoe/d, up 18 percent from the fourth quarter 2011, after adjusting for assets divested in 2012. Production volumes were 254 MBoe/d with the difference attributable to the timing of crude oil liftings in Equatorial Guinea. The sales volume split for the quarter was 47 percent liquids, 24 percent international natural gas, and 29 percent U.S. natural gas.
U.S. volumes totaled 149 MBoe/d for the fourth quarter 2012, up 31 percent from the same quarter last year excluding volumes from divested assets. The increase was attributed to growth from the horizontal plays in the DJ Basin and Marcellus, and from the Gulf of Mexico largely due to the addition of Galapagos. Natural production declines were experienced in the remaining non-core U.S. assets.
Sales volumes from international assets were 106 MBoe/d for the final quarter of 2012, an increase of 9 percent from the fourth quarter of 2011, excluding volumes from discontinued operations in the UK. The increase was due to production from the Aseng oil project offshore Equatorial Guinea offset slightly by lower natural gas sales in Israel.
Crude oil prices averaged $97.98 per barrel, down 2 percent versus the fourth quarter 2011. Natural gas realizations in the U.S. averaged $3.09 per thousand cubic feet (Mcf), down 10 percent from the fourth quarter of 2011, and averaged $5.29 per Mcf in Israel. Natural gas liquid pricing in the U.S. averaged $36.86 per barrel for the quarter, representing 40 percent of the Company’s average U.S. crude oil realization.
Total production costs per barrel of oil equivalent (Boe), including lease operating expense (LOE), production and ad valorem taxes, and transportation were $7.97 per Boe, up 1 percent from the last quarter of 2011. LOE and depreciation, depletion, and amortization (DD&A) per Boe were $5.20 and $16.33, respectively. LOE rates were impacted primarily by an increase in facilities costs in the Gulf of Mexico. The increase in DD&A rates were due to increased liquids production from the DJ Basin and Gulf of Mexico, as well as the addition of natural gas production from the Noa and Pinnacles fields offshore Israel. Exploration expense for the fourth quarter 2012 was $86 million, which included costs associated with seismic acquisition in Nevada and offshore Falkland Islands. General and administrative expenses were up primarily due to increased staffing for major development and exploration activities. The Company recorded a $31 million asset impairment related to Mari-B offshore Israel. The adjusted effective tax rate for the fourth quarter 2012 was 19 percent with 45 percent deferred.
In the DJ Basin, production averaged 86 MBoe/d for the fourth quarter, a 15 percent increase over last quarter. The horizontal program accounted for 39 MBoe/d of production, 45 percent of the total. Crude oil and other liquid sales rose to 51 thousand barrels of oil per day (MBbl/d) or 59 percent. In the quarter, 53 wells were drilled and 63 were completed — contributing to full year totals of 200 wells drilled and 193 completed. Six of the wells drilled in the quarter were extended-reach lateral wells. Average production from three initial extended-reach lateral wells is showing minimal decline and appears to be exceeding the 750 thousand Boe type curve. All 15 wells in the 40-acre spacing pilot program were completed and are in early stages of flowback operations. The Company operated eight rigs in the DJ Basin with two in Northern Colorado and six in the Greater Wattenberg Area. To support the development programs in Northern Colorado, the Company sanctioned the development of the Keota Gas Plant with a processing capacity of 30 million cubic feet per day (MMcf/d). Noble Energy will operate the plant, which is scheduled to start up in the second quarter of 2014.
In the Marcellus Shale, net production averaged 121 MMcfe/d for the fourth quarter, up 19 percent from last quarter. The Company operated three horizontal rigs in the wet gas area where 20 wells from three pads are online. Production from the wet gas area was 14 MMcfe/d net for the quarter. In the dry gas area, Consol operated two rigs and production averaged 107 MMcf/d net for the quarter. Noble Energy and Consol drilled a total of 25 wells and brought 13 online during the quarter contributing to full year totals of 89 and 71 wells, respectively.
In the Eastern Mediterranean, contribution from the Noa and Pinnacles fields resulted in production of 118 MMcf/d net, essentially unchanged from the previous quarter. The Tamar jacket and topside facilities were installed in December and commissioning operations have begun. Initial production is scheduled to commence in April and be combined with Mari-B platform production to meet the growing domestic demand. The appraisal of Leviathan continues with the Leviathan 4 well currently drilling.
Estimated reserves at year-end 2012 were approximately 1.2 billion barrels of oil equivalent (BBoe), up 3 percent after adjusting for non-core asset divestitures. Reserves in the U.S. accounted for 49 percent of the total, with International contributing the remaining 51 percent. Reserves are split 30 percent global liquids, 42 percent international natural gas, and 28 percent U.S. natural gas.
Noble Energy added total proved reserves of 121 million barrels of oil equivalent (MMBoe) in 2012, including revisions. These additions replaced 136 percent of 2012 production.
U.S. net additions of 105 MMBoe resulted in 207 percent replacement of U.S. production and were driven by the horizontal drilling programs in the DJ Basin and Marcellus Shale. These net additions included negative revisions of 94 MMBoe associated with the termination of the vertical program in Wattenberg and 26 MMBoe associated with dry gas fields due to lower natural gas prices.
The international portfolio added net 16 MMBoe of reserves, or 42 percent replacement of international production, with most of the additions due to strong reservoir performance at Aseng and further appraisal of Tamar. No proved reserves have been booked for major projects expected to be sanctioned in 2013, including Leviathan.
The full year volume guidance range for 2013 remains unchanged at 270 to 282 MBoe/d. First quarter 2013 volumes are expected to average 238 to 242 MBoe/d. The volume forecast for the first quarter includes over 4 thousand barrels of oil per day underliftings in West Africa and the impact of maintenance at Swordfish in the Gulf of Mexico. Volumes will ramp up throughout the year with the initiation of production at Tamar in April and at Alen in the third quarter, as well as from the continued acceleration of activity in the DJ Basin and the Marcellus Shale wet gas area.
Expense guidance ranges for the year are also unchanged. Unit rates in the first quarter for LOE are expected to average $6.20 to $6.60 per Boe.
(1) Noble Energy has divested the majority of its North Sea properties and has reclassified the results of its entire North Sea operations as discontinued operations for all accounting periods presented in this release. See Schedule 7 for a financial summary of discontinued operations.
(2) A Non-GAAP measure, see attached Reconciliation Schedules
(3) Capital expenditures exclude the second installment payment associated with the Marcellus acquisition
Source: Noble Energy, Inc.
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