Noble Reports Third Quarter 2007 Results
Noble Energy reported third quarter 2007 net income of $222.7 million, or $1.30 per basic share ($1.28 per share diluted). This compares to adjusted third quarter 2006 net income of $230.0 million or $1.31 per basic share ($1.27 per share diluted) after adjusting for the gain on our Gulf of Mexico Shelf Asset Sale.
Reported third quarter 2006 net income was $318.1 million or $1.80 per basic share ($1.75 per share diluted). Discretionary cash flow for the third quarter 2007 was $556.1 million, as compared to $533.5 million for the third quarter 2006. Net cash provided by operating activities during the third quarter 2007 was $547.7 million.
Third quarter 2007 results included deferred compensation expense of $8.4 million pretax ($5.3 million after tax). Excluding the effects of deferred compensation, third quarter adjusted net income would have been $228.0 million, or $1.33 per basic share.
Third quarter 2007 production was 214,486 barrels of oil equivalent per day (Boepd) compared to 187,664 Boepd for the same period last year. Sales volumes during the third quarter 2007 were 213,309 Boepd. Capital expenditures for the quarter totaled $449.1 million.
Key accomplishments for the third quarter include:
- Daily equivalent production volume increase of 14% versus third quarter 2006;
- Successful appraisal well of the Belinda prospect in Block O, offshore Equatorial Guinea;
- Oil discovery in the Benita appraisal well in Block I, offshore Equatorial Guinea;
- Exploration success at the YoYo prospect in the PH-77 license, offshore Cameroon;
- Net sales of 155 million cubic feet per day (MMcfpd) of natural gas to the liquefied natural gas (LNG) plant in Equatorial Guinea;
- Continued ramp-up of the Dumbarton field in the North Sea with net production for the quarter averaging approximately 13,400 barrels of oil per day (Bopd);
- Record quarterly net natural gas production in Israel of 131 MMcfpd
North America operations reported pre-tax operating income for the third quarter 2007 of $181.3 million compared to $435.4 million for the third quarter 2006, which included a pretax gain on sale of the Gulf of Mexico Shelf assets of approximately $203.5 million.
North American production volumes were 107,365 Boepd in the third quarter 2007 compared to 119,872 Boepd for the same quarter last year. Liquids and natural gas production volumes were 39,992 Bopd and 404.2 MMcfpd, respectively, for the current quarter compared to 48,193 Bopd and 430.1 MMcfpd for the third quarter of 2006. As compared to the third quarter 2006, a decrease of approximately 4,000 Boepd was due to the sale of our Gulf of Mexico Shelf properties in the third quarter 2006, and a decrease of approximately 8,600 Boepd in the deepwater Gulf of Mexico resulted from a combination of well performance, workovers, storm impacts, and third-party facility restrictions. Decreases of approximately 2,500 Boepd related to natural decline in onshore Gulf Coast properties and 1,350 Boepd from our Main Pass properties were fully offset by an increase of approximately 4,050 Boepd in our remaining North America properties. Third quarter 2007 production was impacted 1,000 Boepd due to third-party processing downtime in the Rocky Mountains.
North America operations benefited from higher realized natural gas prices during the quarter. The average realized natural gas price was $6.77 per thousand cubic feet (Mcf) for the third quarter 2007 compared to $6.41 per Mcf last year. Realized liquids prices decreased slightly to $55.85 per barrel (Bbl) compared to $56.84 per Bbl during the third quarter of 2006. The following table provides a detailed breakdown of the major components impacting our realized natural gas and crude oil prices for the quarter.
$ Per Mcf $ Per Bbl Natural Gas Market Price 3.93 Crude Oil Market Price 71.49 Cash Flow Hedges Settled 0.15 Cash Flow Hedges Settled (15.64) Gulf of Mexico OCL Addback* 1.14 - NGL Processing Uplift 1.55 - Realized Natural Gas Price $6.77 Realized Crude Oil Price $55.85 * Natural gas prices included a third quarter benefit that was attributable to previously recognized losses for hedge contracts that were re-designated concurrent with the 2006 Gulf of Mexico Shelf Asset Sale (see Schedule 8 - Impact of Loss Associated with Gulf of Mexico Shelf Asset Sale).
International operations reported operating income for the third quarter 2007 of $231.3 million compared to $158.9 million in the third quarter last year. Total third quarter 2007 production volumes were 107,121 Boepd compared to 67,792 Boepd for the same quarter last year, an increase of 58 %. Liquids production volumes were 45,628 barrels per day (Bpd) compared to 36,776 Bpd for the third quarter of 2006. Natural gas production was 369.0 MMcfpd compared to 186.1 MMcfpd in the same quarter last year. Third quarter 2007 international sales were 105,944 Boepd, compared to 63,714 Boepd for the third quarter of 2006.
Operating income for the third quarter increased to $112.3 million this year compared to $107.2 million last year. Total sales volumes in Equatorial Guinea (exclusive of methanol operations) were 55,813 Boepd, an increase of 90 % compared to 29,331 Boepd during the third quarter of 2006. Higher sales volumes resulted primarily from increased natural gas sales to the LNG plant of approximately 155 MMcfpd in the quarter.
Alba field condensate and natural gas sales (exclusive of Alba Plant and methanol operations) accounted for $66.9 million, or 60 %, of the operating income from West Africa. Third quarter 2007 condensate and natural gas sales volumes averaged 48,341 Boepd compared to 20,399 Boepd last year. The average realized price for condensate during the third quarter was $73.25 per Bbl compared to $66.93 per Bbl for the same period last year.
Alba Plant reported $30.7 million of income, net to Noble Energy's interest, compared to $30.5 million during the third quarter 2006. Net Alba Plant LPG and condensate sales volumes totaled 7,472 Bpd compared to 8,932 Bpd for the same period last year. The average Alba Plant realized price during the third quarter was $57.24 per Bbl compared to $48.88 per Bbl for the same period last year.
Income from methanol operations increased to $14.6 million, net to Noble Energy's interest, compared to $3.3 million during the third quarter 2006. The Company's share of methanol sales volumes was 43.5 million gallons (Gal) compared to last year's 18.8 million Gal, which was impacted by compressor repairs following a turnaround and expansion project. Third quarter realized methanol prices were 80 cents per Gal compared to 83 cents per Gal for the third quarter 2006.
In the North Sea, operating income for the third quarter 2007 was $77.5 million compared to $15.7 million for the same period last year. The increase was primarily due to increased crude sales from the Dumbarton field in the UK, which commenced production in late January 2007. In the third quarter 2007, Dumbarton production averaged approximately 13,400 Bopd.
Third quarter 2007 operating income was $28.0 million compared to $24.8 million for the same period in 2006. Natural gas production averaged a record 131.1 MMcfpd for the third quarter 2007 compared to 116.7 MMcfpd the previous year. Increased seasonal demand for natural gas contributed to the production growth. Sales prices averaged $2.95 per Mcf for the third quarter 2007 as compared to $2.84 per Mcf for the prior year period.
Argentina, China, Ecuador and Suriname combined recorded third quarter 2007 operating income of $13.6 million compared to $11.2 million for third quarter last year. In China, third quarter operating income was $12.1 million. Net oil production in China averaged 3,780 Bopd for the third quarter. In Argentina, operating income was $2.9 million, and net production averaged 2,850 Bopd. The Machala power plant reported operating income of $2.9 million. For the quarter, 223,663 megawatt-hours were sold at an average price of 7.4 cents per kilowatt-hour.
Note 1 - Adjusted net income should not be considered a substitute for net income as reported in accordance with GAAP and is provided for comparison purposes to prior periods and to earnings forecasts prepared by analysts and other third parties. Management believes and certain investors may find that adjusted net income is beneficial in evaluating the Company's financial performance.
Fourth quarter production is expected to range from 193,000 to 197,000 Boepd, which represents an increase of six to eight % above fourth quarter 2006. The above guidance assumes net natural gas sales to the LNG plant of 50 MMcfpd in the fourth quarter 2007 versus actual sales of 155 MMcfpd in the third quarter, with the decrease a result of fourth quarter downtime for third-party plant repairs. Compared to the third quarter 2007, other international production is expected to be down 2,000 to 5,000 Boepd mostly due to the seasonal decline in natural gas demand in Israel. Production in North America is expected to increase 1,000 to 2,000 Boepd from the third quarter.
For the fourth quarter 2007, costs and expenses are expected to range as follows:
- Exploration expense is expected to range from $45 million to $60 million;
- General and administrative expenses is expected to range from $52 million to $56 million;
- Oil and gas operations expense is expected to range from $78 million to $82 million;
- Depreciation, depletion and amortization is expected to range from $185 million to $190 million.
For the year 2007, an effective tax rate is expected on the low end of the original estimated range of 30 to 36 %. Of the total book taxes planned for 2007, deferred taxes are expected to be between 60 and 65 % as compared to the previous estimate of 55% to 60%.
Capital expenditures for the year are expected to total approximately $1.7 billion.
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