Fourth Quarter Results Wrap Up Strong Year Noble Energy
Noble Energy reported fourth quarter 2009 net income of $8 million, or $0.05 per share diluted, on revenues of $760 million. Net income for the quarter was lowered by items totaling $170 million after-tax, including unrealized commodity derivative losses and identified asset impairments, offset by the recording of recoverable deepwater Gulf of Mexico royalties. Excluding these items, which are typically not considered by analysts in published estimates, fourth quarter 2009 adjusted net income(1) was $178 million, or $1.01 per share diluted. For the fourth quarter of 2008, net income was $305 million, or $1.72 per share diluted, on revenues of $573 million. Adjusted net income(1) for the fourth quarter of 2008 was $163 million, or $0.91 per share diluted.
Discretionary cash flow(1) for the fourth quarter 2009 was $477 million, compared to $439 million for the similar quarter in 2008. Net cash provided by operating activities was $522 million and capital expenditures were $384 million(2).
Key highlights for the fourth quarter 2009 include:
- Successful new completion at the Swordfish field in the deepwater Gulf of Mexico
- Spud Deep Blue and Double Mountain exploration tests in the deepwater Gulf of Mexico
- Announced DJ Basin asset acquisition which will expand the Company's largest onshore U.S. property at Wattenberg
- Executed two Letters of Intent to sell natural gas from Tamar offshore Israel with expected gross revenues over $10 billion
- Completed field optimization efforts at Dumbarton and brought online the first well at Lochranza in the North Sea
For the full year 2009, Noble Energy reported a net loss of ($131) million, or ($0.75) per share diluted. Adjusted net income(1) for 2009 was $590 million, or $3.37 per share diluted. Discretionary cash flow(1) for the year was $1.69 billion and net cash provided by operating activities was $1.51 billion. Capital expenditures for the year totaled $1.32 billion(2).
Charles D. Davidson, Noble Energy's Chairman and CEO, said, "Our results for the fourth quarter wrap up a strong year for Noble Energy. Despite reduced investment in U.S. onshore natural gas development, we were still able to grow our annual onshore volumes. We again generated free cash flow in 2009, largely attributable to our disciplined capital allocation process and diverse asset portfolio. Â It was perhaps the most successful exploration year in our Company's history, and we continued to build upon our large inventory of opportunities. Substantial progress was made for long-term growth, as we sanctioned the Galapagos and Aseng oil projects and signed LOIs for first sales from Tamar. As we look forward into a new decade, we are focused on maintaining our strong production base, executing on our major projects, and continuing an impactful exploration program."
Total sales volumes for the fourth quarter 2009 averaged 206 thousand barrels of oil equivalent per day. In the United States, natural gas volumes were lower than the fourth quarter of 2008 due primarily to declines in the Mid-Continent region. Crude oil and condensate volumes were higher mostly due to the impact of Ticonderoga in the deepwater Gulf of Mexico returning to full production earlier in 2009. Lower oil volumes in the North Sea resulted from the FPSO repairs and facilities enhancements at Dumbarton, which have been completed. Greater natural gas volumes in West Africa were largely related to pipeline maintenance impacting the 2008 period. Natural gas volumes in Israel were reduced significantly during the fourth quarter 2009 due to warmer than normal weather and increased natural gas imports.
Crude oil price realizations for the quarter were $68.43 per barrel, up 56 percent from the fourth quarter 2008. In the U.S. and West Africa, fourth quarter 2009 crude realizations were reduced $1.71 and $4.79 per barrel, respectively, as a result of previously deferred hedge losses. U.S. natural gas prices were down from the same period in 2008, averaging $4.37 per thousand cubic feet (Mcf). In Israel, natural gas prices averaged a record $4.13 per Mcf for the fourth quarter 2009. Natural gas liquid pricing in the U.S. strengthened to $38.98 per barrel for the quarter.
Cash costs, including lease operating, production and ad valorem taxes, transportation, and general and administrative expenses were $10.50 per barrel of oil equivalent (Boe) for the quarter. Lease operating expenses were down 11 percent from the fourth quarter of 2008 to $4.80 per Boe, more than offsetting higher production taxes and transportation expenses. General and administrative expenses were up from the fourth quarter of 2008 primarily related to increased staffing for the development of major projects. Depreciation, depletion, and amortization was $11.34 per Boe for the fourth quarter 2009.
During the fourth quarter of 2009, the Company recorded a receivable of $97 million related to the favorable resolution of royalty litigation on identified leases under the Deep Water Royalty Relief Act of 1995. Also included in the fourth quarter of 2009 were before-tax asset impairments of $67 million related to certain natural gas assets onshore in the U.S. and in the deepwater Gulf of Mexico, as well as $100 million related to the Company's operations in Ecuador.
Year-end 2009 estimated reserves were 820 million barrels of oil equivalent (MMBoe). Noble Energy added total proved reserves of 79 MMBoe, representing 103 percent of 2009 production, from discoveries, extensions, performance revisions and acquisitions. These reserve additions exclude negative revisions caused by lower prices and new SEC rules requiring the development of proved undeveloped reserves (PUDs) within five years.
The U.S. made up 55 percent and International the remaining 45 percent of total reserve additions. Initial bookings at the Aseng oil project in West Africa accounted for the majority of the International additions. In the U.S., additions were primarily driven by the execution of low-risk development projects onshore in the Rockies, as well as from the sanctioning of the Galapagos development in the deepwater Gulf of Mexico.
David L. Stover, President and COO of Noble Energy, said, "Our teams did a good job of organically replacing production, despite a very constrained capital program. We began converting to proved reserves the major-project resources that our exploration programs have delivered over the past few years. However, the majority of these identified resources are yet to be booked, including our discoveries at Tamar, Belinda, Gunflint and others. We anticipate substantial multi-year growth in reserves beginning in 2010."
Price revisions lowered proven reserves by 27 MMBoe driven primarily by natural gas and the use of average pricing which was lower than 2008's year-end pricing. Had the previous price methodology still been in effect, reserves would have been 61 MMBoe higher than the 2009 total.
Proved reserves were also reduced by 18 MMBoe as a result of the new SEC rules requiring development of PUDs within five years. These reserves are expected to be re-booked to proved as drilling occurs in future years.
Capital expenditures for the fourth quarter and full year 2009 exclude a non-cash accrual of $29 million related to construction progress to-date on the Aseng FPSO
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