Noble Doubles 3Q Net Profit in 2010
Noble Energy reported third quarter 2010 net income of $232 million, or $1.31 per share diluted, on revenues of $755 million. Net income for the quarter included an unrealized commodity derivative gain, a gain on the sale of certain non-core assets, as well as an asset impairment charge. Excluding these items, which would typically not be considered by analysts in published estimates, third quarter 2010 adjusted net income was $225 million, or $1.27 per share diluted. The Company reported net income of $107 million during the third quarter of 2009, or $0.61 per share diluted, on revenues of $621 million. Adjusted net income for the third quarter of 2009 was $193 million, or $1.10 per share diluted.
Discretionary cash flow for the third quarter 2010 was $485 million compared to $499 million for the similar quarter in 2009. Net cash provided by operating activities was $608 million. Organic capital expenditures for the third quarter of 2010 were $619 million, which excluded a non-cash accrual for construction progress on the Aseng FPSO.
Key highlights for the third quarter of 2010 include:
- Record total sales volumes of 230 thousand barrels of oil equivalent per day (MBoe/d)
- Record Israel natural gas sales of 178 million cubic feet per day (Mmcf/d)
- Sanctioned Tamar project, offshore Israel
- Completed two new Mari-B wells, offshore Israel, maintaining field deliverability of 600 Mmcf/d, gross
- Produced Central DJ basin liquid volumes of 30 thousand barrels per day, up over 35 percent from the third quarter 2009
- Increased Central DJ basin position to over 830,000 net acres
- Closed on the previously announced sale of certain Mid-Continent and Illinois basin assets for $552 million
- Commenced completion activities at Santa Cruz and Isabela in the deepwater Gulf of Mexico
- Concluded field drilling and initiated completions at Aseng, offshore Equatorial Guinea
Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "It was an outstanding quarter for Noble Energy, with significant results in all areas of our business. Strong liquid production in the Central DJ basin, deepwater Gulf of Mexico, and the North Sea, along with record natural gas volumes in Israel, delivered robust financial results. Operationally, we continued to progress the major project developments in all four of our core areas. We advanced our horizontal Niobrara drilling program in the Central DJ Basin and were able to perform completion activities in the deepwater Gulf of Mexico at Galapagos, despite the offshore Moratorium. In addition, our international teams furthered the development work at Aseng and sanctioned the Tamar project. All of the Company's efforts are maintaining this strong momentum as we move towards a future of sustained production and cash flow growth."
Noble Energy's sales volumes for the third quarter of 2010 averaged 230 MBoe/d. Total Company production was 232 MBoe/d, exceeding sales for the quarter as a result of the timing of international oil liftings. For the third quarter of 2010, the mix of sales volumes was 38 percent global liquids, 33 percent international natural gas, and 29 percent U.S. natural gas.
Onshore U.S. volumes totaled 100 MBoe/d for the quarter versus 93 MBoe/d in the same quarter last year, with the majority of the increase attributable to higher crude oil and natural gas liquids from the Central DJ basin. Total Central DJ basin volumes grew to 55 MBoe/d in the third quarter 2010, with liquids increasing to 54 percent of total volumes. Continued development of Wattenberg and the horizontal Niobrara play, along with the asset acquisition earlier in 2010, accounted for the increases. The closed asset sale of mature oil assets reduced onshore U.S. volumes by nearly 3 MBoe/d in the third quarter 2010. Offshore U.S. volumes were 20 MBoe/d, down slightly as a result of lower natural gas production in the deepwater Gulf of Mexico at Raton and Swordfish. Total U.S. volumes were 120 MBoe/d for the third quarter 2010, up four percent from a year ago.
Internationally, average daily sales were up eight percent from the third quarter 2009 to 110 MBoe/d. Strengthened market and seasonal demand led to a 24 percent increase in natural gas sales in Israel. Crude oil volumes in the North Sea were significantly higher, primarily as a result of increased deliverability at the Dumbarton complex, which included the addition of two Lochranza wells in 2010. At the Alba field in Equatorial Guinea, liquid sales were lower due to the timing of liftings, which resulted in an underlifted position for the third quarter 2010 of nearly 4 MBoe/d.
Third quarter 2010 commodity prices were up significantly from the 2009 period. The Company's global crude oil averaged $73.41 per barrel, up 16 percent. Natural gas realizations in the U.S. averaged $3.87 per thousand cubic feet (Mcf) versus $3.05 per Mcf in the third quarter 2009. Natural gas liquid pricing in the U.S. averaged $36.30 per barrel for the third quarter of 2010, representing 51 percent of the Company's average U.S. crude oil realization.
Total production costs per barrel of oil equivalent (Boe), including lease operating expenses, production and ad valorem taxes, and transportation were relatively flat with the third quarter of 2009 at under $6.70 per Boe. Lease operating and transportation expenses averaged $4.49 and $0.80 per Boe, respectively, for the third quarter 2010. Depreciation, depletion, and amortization per Boe was $10.92 for the third quarter 2010, up slightly as a result of increased sales volumes in the DJ basin and the North Sea. General and administrative expenses were up due to increased staffing for the development of the Company's major projects.
Other operating income/expense for the third quarter 2010 includes a $13 million pre-tax gain on the sale of a portion of the Company's interest in the White Cliffs pipeline that transports crude oil from Platteville, Colorado to Cushing, Oklahoma. Included in other income/expense is a $15 million pre-tax deferred compensation charge relating to the quarterly value change of Noble Energy stock held in a benefit program.
The adjustment items to net income for the third quarter 2010 include a $5 million pre-tax gain on the mark-to-market of unsettled commodity derivatives, as well as a $114 million pre-tax gain on the sale of certain Mid-Continent and Illinois basin assets that closed in the period. Offsetting these items was a $100 million asset impairment, primarily related to onshore U.S. developments at Iron Horse and the New Albany shale.
2010 VOLUME GUIDANCE INCREASE
Noble Energy increased its 2010 annual volume guidance range to between 214 and 217 MBoe/d, which represents the upper half of the Company's prior guidance. Strong sales volumes year-to-date have resulted in the increase. The Company expects fourth quarter 2010 volumes to average 212 to 222 MBoe/d. In the U.S., volumes will be impacted by the onshore divestiture for a full quarter, as well as natural declines in the Mid-Continent and onshore Gulf Coast areas. Central DJ basin volumes should be modestly higher than the third quarter. Oil volumes in Equatorial Guinea will likely be higher as compared to the underlifted third quarter. In addition, North Sea oil volumes should be slightly lower and natural gas sales in Israel are expected to be reduced due to seasonal demands. All other annual guidance metrics remain unchanged.
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