Noble Energy 3Q Earnings Soar by 90%
Noble Energy reported third quarter 2011 net income of $441 million, or $2.39 per share diluted, on revenues of $924 million. The Company's third quarter 2010 net income was $232 million, or $1.31 per share diluted, on revenues of $755 million. Net income for the third quarter 2011 includes unrealized commodity derivative gains and other items. Excluding these items, third quarter 2011 adjusted net income was $234 million, or $1.24 per share diluted. Adjusted net income for the third quarter of 2010 was $225 million, or $1.27 per share diluted.
Discretionary cash flow for the third quarter 2011 was $588 million, compared to $500 million for the similar quarter in 2010. Net cash provided by operating activities was $556 million, and capital expenditures were $738 million.
Key highlights for the third quarter 2011 include:
- Total sales volumes of 224 thousand barrels oil equivalent per day (MBoe/d), up 4 percent from the previous quarter 2011
- Produced a record 65 MBoe/d in the DJ basin with horizontal production exiting the quarter at over 11 MBoe/d, a 64 percent increase over the prior quarter exit rate
- Completed 25 new horizontal Niobrara wells and added a fifth rig to the program
- Established a new significant position in the Marcellus shale with the acquisition of 314,000 net acres and 50 million cubic feet per day (MMcf/d) of existing net production
- Record natural gas sales in Israel of 228 MMcf/d, an increase of 28 percent from third quarter last year
- Drilled two wells at the Noa development project offshore Israel, ahead of schedule and below anticipated costs
- The Aseng floating production, storage and offloading (FPSO) vessel departed the shipyard for Equatorial Guinea
- Spud the Cyprus A prospect on Block 12 offshore Cyprus
Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "It was an outstanding quarter for Noble Energy as we reported record volumes from the DJ basin, along with record natural gas sales in Israel. We expect a strong finish to 2011 as our activity continues to accelerate in the horizontal Niobrara play, and we integrate our newly established core position in the Marcellus shale. The fourth quarter should also see first oil production from the Aseng project in Equatorial Guinea and the Raton South development in the Gulf of Mexico. In addition, we anticipate well results from several impactful exploration opportunities. This positive outlook for the fourth quarter together with performance to date has led us to raise production guidance for the second time this year, which now is expected to exceed the top end of our original guidance range."
The Company's total sales volumes for the third quarter 2011 averaged 224 MBoe/d. Production volumes were 223 MBoe/d, with the difference attributable to an overlifted position of crude oil and condensate in Equatorial Guinea. Excluding the 2010 sale of certain onshore U.S. assets and the impact of the Company's exit from Ecuador, sales volumes were up slightly from the third quarter 2010.
International sales volumes were 111 MBoe/d, up from the third quarter last year even with the termination of the Company's activities in Ecuador. Strong power generation demand and lower competing imports led to a significant increase in natural gas sales in Israel. In Equatorial Guinea, liquid sales were higher largely due to the timing of liftings in the third quarters of 2011 and 2010. In the North Sea, volumes were negatively impacted by maintenance downtime at the GPIII floating production vessel. The Company's 2010 volumes included 28 MMcf/d of natural gas in Ecuador, where its production sharing contract was terminated in late 2010.
Noble Energy's U.S. volumes were 113 MBoe/d for the third quarter of 2011, down versus the prior year period as a result of the 2010 sale impact of approximately 4 MBoe/d of Mid-continent and Illinois basin oil assets and natural declines in various onshore U.S. and Deepwater Gulf of Mexico assets. In the DJ basin, quarterly volumes were up significantly from the same period in 2010 with the continued acceleration of the Company's vertical and horizontal drilling programs in Wattenberg.
The Company's barrel of oil equivalent (Boe) realizations were up 11 percent for the third quarter 2011 versus 2010 driven by higher prices for crude oil, natural gas liquids and natural gas. International natural gas as a percentage of total Company volumes grew to 36 percent for the third quarter 2011, with global liquids representing 37 percent, and U.S. natural gas dropping to 27 percent.
Total production costs per Boe, including lease operating expenses, production and ad valorem taxes, and transportation were $7.42 per Boe, up approximately 11 percent from the third quarter 2010. The increase was largely attributable to higher production and ad valorem taxes caused by stronger commodity prices. The other components were up slightly compared to 2010 with lease operating expense at $4.76 per Boe and transportation at $0.82 per Boe for the third quarter 2011. Depreciation, depletion, and amortization was unchanged at $10.92 per Boe. Exploration expense included the remaining dry hole cost associated with the Kora well and higher surrendered lease charges. General and administrative expenses were up primarily related to increased staffing for the Company's major development projects and exploration activities. Noble Energy's adjusted effective tax rate was 44 percent, with 26 percent deferred. Income taxes for the third quarter 2011 were impacted by a $46 million retroactive charge for the United Kingdom tax rate increase.
Other income/expense for the third quarter includes an $18 million deferred compensation income item relating to the quarterly value change of Noble Energy stock held in a benefit program.
Noble Energy has raised its full year 2011 sales volume guidance to range from 220 to 222 MBoe/d to reflect the strong year-to-date performance from each of its core operating areas, as well as the impact of the Marcellus joint venture. For the fourth quarter 2011, the Company expects sales volumes to average 226 to 234 MBoe/d which includes 10 MBoe/d from the Marcellus. Onshore U.S. volumes should be up versus the third quarter, with the addition of the Marcellus position and growth from the DJ basin offsetting natural declines in other onshore natural gas areas. The deepwater Gulf of Mexico is expected to remain relatively flat with Raton South coming online late in the quarter. Despite better operational performance in the North Sea and the early start up of Aseng in Equatorial Guinea, international volumes are anticipated to decrease in the fourth quarter mainly due to lower seasonal demand for natural gas in Israel. All other annual guidance metrics remain within their previous ranges.
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