Noble Energy Announces Third Quarter 2013 Results
Noble Energy, Inc. (NYSE: NBL) announced today third quarter 2013 net income of $205 million, or $0.56 per diluted share, and income from continuing operations(1) of $195 million, or $0.53 per diluted share. Excluding the impact of unrealized commodity derivative losses and certain other items, third quarter 2013 adjusted income from continuing operations(2) was $351 million, or $0.97 per diluted share. For the third quarter of 2012, the Company had income from continuing operations(1) of $164 million, or $0.45 per diluted share, and adjusted income from continuing operations(2) of $147 million, or $0.41 per diluted share.
Discretionary cash flow from continuing operations(2) for the third quarter of 2013 was a record $984 million compared to $710 million for the same quarter of 2012. Net cash provided by operating activities was $909 million and capital expenditures were $1.1 billion during the third quarter of 2013.
Key highlights for the third quarter of 2013 include:
• Achieved record quarterly sales volumes totaling 293 thousand barrels of oil equivalent per day (MBoe/d), including record volumes from the DJ Basin, Marcellus, West Africa and Israel
• Delivered record discretionary cash flows of $984 million, an increase of $219 million compared to the second quarter of 2013
• Increased horizontal net production from the DJ Basin to 61 MBoe/d, which represents 63 percent of the total volumes in the region
• Completed construction of the Wells Ranch Central Processing Facility in the DJ Basin
• Seven new pads in the Marcellus Shale contributed to record volumes
• Announced Troubadour exploration success and increased gross discovered resources at the Rio Grande complex to 50 – 100 million barrels of oil equivalent (MMBoe)
• Achieved record natural gas sales of 255 million cubic feet per day (MMcf/d) in Israel
• Successfully appraised the Cyprus A discovery in Block 12
• Executed an agreement to sell non-core San Juan assets in New Mexico for proceeds of approximately $65 million
Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “The third quarter was another record setting quarter, with sales volumes up 13 percent over last quarter and discretionary cash flow increasing by 29 percent. We spudded exploration wells at the Dantzler prospect in the deepwater Gulf of Mexico, the Wilson oil prospect in Nevada, and the Paraiso oil prospect offshore Nicaragua, with results expected by year end. Noble Energy sanctioned the Big Bend portion of the Rio Grande project as well as Gunflint, which will further enhance our deepwater Gulf of Mexico position. I continue to be excited about our strong growth outlook, led by the DJ Basin and Marcellus Shale plays.”
VOLUMES AND PRICES
Third quarter 2013 sales volumes from continuing operations averaged a record 293 MBoe/d, an increase of 26 percent compared to the third quarter of 2012, after adjusting for divested assets. Sales volumes exceeded production volumes in the quarter by approximately 5 MBoe/d due to the timing of liftings in Equatorial Guinea. The sales volume split for the quarter was 43 percent liquids, 29 percent international natural gas, and 28 percent U.S. natural gas.
Sales volumes from international assets were a record 134 MBoe/d for the third quarter of 2013, an increase of 33 percent compared to the third quarter of 2012, excluding volumes from discontinued operations in the North Sea. The increase was driven by the Tamar natural gas field offshore Israel and the Alen condensate field offshore Equatorial Guinea, both of which commenced operations in 2013.
U.S. volumes totaled 159 MBoe/d for the third quarter of 2013, an increase of 22 percent compared to the same quarter last year, excluding volumes from divested assets. Continued growth from the horizontal plays in the DJ Basin and Marcellus Shale were the primary contributors to the increase. U.S. sales volumes in the third quarter of 2013 were impacted on average by 2 MBoe/d from storm flooding in northern Colorado.
Global crude oil and condensate prices averaged $104.95 per barrel for the third quarter of 2013, compared to $99.30 per barrel in the same quarter of last year. Natural gas realizations averaged $3.57 per thousand cubic feet (Mcf) in the U.S. and $5.08 per Mcf in Israel. Natural gas liquid pricing in the U.S. averaged $31.26 per barrel, which represented 30 percent of the average West Texas Intermediate crude oil price for the quarter.
Third quarter 2013 total production costs per unit, including lease operating expense (LOE), production and ad valorem taxes, and transportation were $8.20 per barrel of oil equivalent (Boe). LOE and depreciation, depletion, and amortization (DD&A) per Boe were $5.08 and $15.28, respectively. Production taxes were impacted by higher activity in the U.S. onshore.
Interest expense for the quarter was affected by the early completion of major projects, which reduced the amount of capitalized interest. Impairments were related to the declining production at Mari-B and the sale of San Juan assets. The adjusted effective tax rate was 33 percent, with 70 percent deferred. The tax rates reflected an increase in the Israel corporate tax rate, and adjustments in the estimated annual tax provision.
In the DJ Basin, production averaged a record 97 MBoe/d during the third quarter, which is a nine percent increase from the second quarter of 2013 and 31 percent over the third quarter of last year. The horizontal program accounted for a record 61 MBoe/d of production, while liquids represented 60 percent of the total volumes. The Company is currently operating seven horizontal drilling rigs in the greater Wattenberg area and two in Northern Colorado. During the quarter, 91 operated horizontal wells were spud, of which seven were extended-reach lateral wells. In East Pony, a 40-acre down-spacing pilot was completed. The test comprised of eight standard length lateral wells drilled on a half section, with five wells in the Niobrara B, two in the C, and one in the A bench. In addition, the Company completed construction of the central processing facility and gathering system as part of the Wells Ranch Integrated Development Plan (IDP). This part of the IDP is designed to handle up to 22,000 barrels of oil per day and 50 MMcf/d of natural gas. The central processing facility will allow for more efficient development by consolidating facilities, and reducing land use and truck emissions.
In the Marcellus Shale, production achieved a record average rate of 168 million cubic feet equivalent per day (MMcfe/d) for the third quarter of 2013, an increase of 50 percent compared to the second quarter of 2013 and 64 percent compared to the third quarter last year. The 11 well SHL-8 pad located in West Virginia and the seven well WFN-1 pad in southwest Pennsylvania were brought online during the quarter at a gross rate of over 90 MMcfe/d. The Company is currently operating five horizontal drilling rigs in the liquids-rich areas, with two in Majorsville, one each in Pennsboro and Oxford, and the fifth in Moundsville. During the quarter, 15 operated wells were drilled ranging in lateral length from 8,700 to over 10,000 feet. Joint venture partner, CONSOL, drilled 12 wells and brought online 22 wells. The NV38 pad reported excellent initial production rates, with four of the seven wells completed using shorter frac stage lengths. The initial production rate from the C well in this pad was more than 19 MMcf/d gross. CONSOL is operating three horizontal rigs in the dry gas area.
In the Gulf of Mexico, an exploration discovery at Troubadour, combined with our previous success at Big Bend, raised the discovered resources for the Rio Grande complex to 50 – 100 MMBoe gross. The Big Bend portion of Rio Grande and Gunflint were sanctioned by the Company in October as subsea tieback projects. Drilling commenced at Dantzler, a middle Miocene prospect with a gross resource estimate of 55 – 220 MMBoe. The Company has a 45 percent working interest in the prospect. Also, a well was drilled and brought onto production at the non-operated Ticonderoga field during the quarter. This well is expected to ramp up to 3,500 Boe/d net in the fourth quarter. Production in the deepwater Gulf of Mexico averaged 19 MBoe/d for the third quarter of 2013.
In the Eastern Mediterranean, the Tamar field reported nearly 100 percent uptime for the quarter and a natural gas production rate of more than one billion gross cubic feet per day at certain peak intra-day demand periods. Despite cooler temperatures in July and the holidays in September, Israel production averaged a record 255 MMcf/d, a 16 percent increase compared to the second quarter of 2013. The compression project at the Ashdod onshore receiving terminal continued to progress during the quarter and is about 30 percent complete. A rig is currently on location drilling the Tamar SW exploration prospect offshore Israel and is expected to reach total depth by the end of 2013. Tamar SW has a gross resource range of 500 – 900 billion cubic feet of natural gas. In Cyprus, the Company announced the Cyprus A-2 appraisal well encountered the presence of high quality sands and confirmed strong deliverability. Gross mean resources at the Cyprus A discovery are five trillion cubic feet of natural gas. A 3-D seismic shoot covering approximately 1,500 square miles was completed on the Cyprus Block 12 to better define additional exploration potential.
In West Africa, total sales volumes averaged 87 MBoe/d for the third quarter of 2013. Gross production volumes at Alen and Aseng were 15 and 47 thousand barrels per day, respectively. Commissioning at Alen continued during the third quarter with optimization of gas compression and injection systems. The Diega I-8 appraisal well was completed and encountered 39 feet of high quality sands. A flow test is underway to evaluate reservoir performance and progress development of the discovery.
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