Noble Energy Budgets $460 Million in 2004

Noble Energy reports budgeted capital expenditures of $460 million for 2004, a decline of over 15 percent compared to 2003 capital expenditures of $544 million. The $84 million year-on-year decline in the capital budget results from the completion of two major international projects, the Phase 2A condensate expansion project in Equatorial Guinea and the Mari-B natural gas project in Israel.

Approximately 35 percent of the 2004 capital budget has been allocated for exploration opportunities, and 65 percent has been dedicated to production and development projects. Domestic spending is budgeted for $270 million, or 59 percent of the 2004 capital budget, and international expenditures are budgeted for $190 million, or 41 percent.

"Over the past two years, we have completed major, capital intensive projects in Ecuador, China, Israel and Phase 2A in Equatorial Guinea," stated Charles D. Davidson, Noble Energy's Chairman, President and CEO. "With these important projects completed, our international capital commitments are declining rapidly. At the same time, they are contributing significantly to our financial and operating results. As a result, Noble Energy is now in the early stages of a significant transformation to a company with enhanced financial flexibility, and our 2004 capital budget reflects that."

Noble Energy's 2004 domestic capital budget is $270 million, with approximately two-thirds earmarked for the offshore division and one-third for the onshore division. Of the total domestic capital budget, approximately 55 percent is earmarked for exploration, and 45 percent is for production and development.

Of the $190 million international capital budget for 2004, 84 percent is dedicated to production and development projects. Planned expenditures have been allocated to the regions where Noble Energy is most active as follows:

  • Middle East and Africa, $95 million;
  • Far East and Latin America, $75 million; and
  • North Sea, $20 million.

  • In the Middle East and Africa, $89 million has been allocated to Equatorial Guinea, primarily to complete the Phase 2B Alba field condensate and LPG expansion project. Phase 2B is scheduled to be completed by the end of 2004. Upon completion of Phase 2B, gross condensate and LPG production from the Alba field will increase to approximately 52,000 barrels per day (Bpd) and 16,700 Bpd, respectively. Phase 2A, which was completed and commenced production in late November 2003, is an expansion project designed to increase condensate production from 18,300 Bpd to over 46,000 Bpd. Phase 2A is expected to reach full production by the end of the first quarter of 2004.

    In the Far East and Latin America, additional development drilling in Ecuador is planned for the first half of 2004. Approximately $55 million has been budgeted for one sidetrack and up to three development wells. If successful, the 2004 development drilling program in Ecuador is expected to add sufficient natural gas deliverability to supply the company's power plant in Machala for the next decade.

    Average barrels of oil equivalent production from continuing operations in 2004 is expected to increase in a range from ten percent to 17 percent compared to the full year 2003. Noble Energy's production profile will be impacted by several factors, including:

  • The timing of the production increases in Israel and Phase 2A in Equatorial Guinea during 2004;
  • Seasonal variations in rainfall in Ecuador that affect the company's natural gas-to-power project; and
  • Potential weather-related shut-ins in the U.S. Gulf of Mexico and Gulf Coast areas.

  • Major international projects scheduled to contribute incremental production this year include:

  • Initial natural gas sales offshore Israel. The project was commissioned in the fourth quarter of 2003, and sales are expected to reach 40 MMcfpd, net to Noble Energy, by the end of the first quarter of 2004. Production is projected to continue to increase throughout 2004, adding another 30 to 50 MMcfpd, net to Noble Energy; and
  • Phase 2A condensate expansion in Equatorial Guinea, which started up during November 2003 and is expected to add nearly 10,000 Boepd, net to Noble Energy, by the end of the first quarter of 2004.

  • Compared to the full year 2003, costs and expenses may vary as follows:

  • Exploration expense is expected to range from $135 million to $150 million.
  • Selling, general and administrative expenses are expected to range from $1.30 per barrel of oil equivalent (BOE) to $1.50 per BOE.
  • Oil and gas operating expense is expected to range from $4.35 per BOE to $4.65 per BOE.
  • Depreciation, depletion and amortization is expected to range from $7.40 per BOE to $7.75 per BOE.
  • An effective tax rate of 38 percent to 48 percent is expected. Of the total book taxes planned for 2004, ten percent to 30 percent are expected to be deferred.

  • The above estimates do not include the impact of Noble Energy's possible asset purchases or sales, if any.

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