Noble 4Q Earnings Soar in 2010
Noble reported fourth quarter 2010 net income of $52 million, or $0.29 per share diluted, on revenues of $783 million. Included in net income for the quarter were a few items which are typically not considered by analysts in published estimates. Excluding the impact of these items, which included an unrealized commodity derivative loss and certain asset impairments, fourth quarter 2010 adjusted net income was $185 million, or $1.04 per share diluted. The Company reported net income of $8 million during the final quarter of 2009, or $0.05 per share diluted, on revenues of $760 million. Adjusted net income for the fourth quarter of 2009 was $178 million, or $1.01 per share diluted.
Discretionary cash flow for the fourth quarter 2010 was $516 million compared to $477 million for the similar quarter in 2009. Net cash provided by operating activities was $494 million, and capital expenditures were $596 million.
Key highlights for the fourth quarter of 2010 include:
- Sold 219 thousand barrels of oil equivalent per day (MBoe/d), with full year 2010 sales volumes of 216 MBoe/d
- Increased Central DJ basin volumes and liquids as a percent of total basin volumes to 56 MBoe/d and 57 percent, respectively
- Completed 10 additional horizontal Niobrara wells in the DJ basin, including the Hanscome well in the core of Wattenberg which had initial 24-hour production of over 1,250 Boe/d
- Finalized well completion work at the Galapagos project in the deepwater Gulf of Mexico
- Discovered the Company's largest exploration success in its history at Leviathan, offshore Israel, with gross mean natural gas resources of 16 trillion cubic feet
- Sanctioned the Alen project, offshore Equatorial Guinea
- Recorded year-end proved reserves of nearly 1.1 billion barrels of oil equivalent (BBoe)
- Replaced 520 percent of 2010 production, with replacement costs of $6.50 per barrel of oil equivalent (Boe)
- Ended the year with over $2.8 billion of liquidity between cash and available credit
Noble Energy reported full year 2010 net income of $725 million, or $4.10 per share diluted, on revenues of $3.0 billion. Adjusted net income for 2010 was $746 million, or $4.22 per share diluted. Discretionary cash flow and net cash provided by operating activities for the year were $1.9 billion. Total year capital expenditures were $2.1 billion.
Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "Noble Energy's fourth quarter ended 2010 with great results, based on a portfolio of strong global production and cash flows. The exploration discovery at Leviathan, which holds huge potential for Noble Energy and the State of Israel, adds to the lineup of major projects that we have identified over the last few years. Our teams continue to progress these projects, with new wells drilled in multiple areas of our vast horizontal Niobrara acreage in the Central DJ basin and the further development of the Aseng oil project in West Africa, among others. Our proved reserves increased substantially in 2010 with initial bookings at Tamar and Alen, and we still have a large amount of discovered resources in the queue for future booking. We are entering the new year in a very strong financial position, focused on executing a broad lineup of exploration and development projects that continue to transform Noble Energy."
Fourth quarter 2010 sales volumes for the Company averaged 219 MBoe/d, up six percent from the fourth quarter 2009. The mix of sales volumes for the fourth quarter 2010 was 40 percent liquids, 30 percent international natural gas, and 30 percent U.S. natural gas. Production volumes for the quarter were 220 MBoe/d.
Onshore U.S. volumes totaled 97 MBoe/d for the fourth quarter 2010 versus 90 MBoe/d in the same quarter last year. In the Central DJ basin, liquid production was up 12 thousand barrels per day, an increase of 60 percent from the fourth quarter 2009, while natural gas volumes were relatively flat. DJ basin liquids, as a percent of all basin volumes, increased from 45 percent in the fourth quarter last year to 57 percent in the 2010 period. Continued development of Wattenberg and the horizontal Niobrara play, as well as the impact of the asset acquisition early in 2010, contributed to the increases. Onshore U.S. volumes for the fourth quarter 2010 do not include the approximately 6 MBoe/d of mostly oil assets which were sold in the third quarter 2010. Offshore U.S. volumes were 22 MBoe/d and were benefitted by continued strong performance at the Swordfish field. Total U.S. volumes were eight percent higher to 119 MBoe/d for the fourth quarter 2010 versus 110 MBoe/d a year ago.
Noble Energy's international assets sold 100 MBoe/d for the final quarter of 2010, an increase of four percent from the fourth quarter of 2009. Continued market demand for natural gas in Israel resulted in 26 percent higher Israel sales volumes. Crude oil volumes in the North Sea were higher, primarily as a result of increased deliverability at the Dumbarton complex, as well as maintenance that impacted the 2009 period. The late November 2010 termination of the Block 3 production sharing contract offshore Ecuador lowered the Company's volumes slightly over 10 million cubic feet of natural gas per day on average for the fourth quarter 2010.
Crude oil and condensate prices were up significantly from the fourth quarter of 2009 to 2010. The Company's global crude oil averaged $83.02 per barrel, up 21 percent versus the fourth quarter 2009. Natural gas realizations in the U.S. declined, with the Company averaging $3.57 per thousand cubic feet (Mcf) versus $4.37 per Mcf in the fourth quarter 2009. Natural gas liquid pricing in the U.S. averaged $43.88 per barrel for the fourth quarter of 2010, representing 54 percent of the Company's average U.S. crude oil realization.
Total production costs per Boe, including lease operating expense, production and ad valorem taxes, and transportation were down nearly three percent from the last quarter of 2009 to $6.95 per Boe for the fourth quarter 2010. Lease operating expense and depreciation, depletion, and amortization per Boe decreased four percent and three percent, respectively, to $4.62 and $10.97 per Boe. The unit rates were benefitted by the Company's mix of sales volumes for the quarter, as well as the sale of higher-cost onshore U.S. assets in the third quarter 2010. Exploration expense for the fourth quarter 2010 includes $50 million in seismic expenditures. General and administrative expenses were up due to increased staffing for the development of the Company's major projects. The Company's adjusted effective tax rate for the fourth quarter 2010 was 29 percent, with 22 percent deferred.
The adjustment items to net income for the fourth quarter 2010 included a $145 million pre-tax loss on the mark-to-market of unsettled commodity derivatives. In addition, the Company recorded $44 million of asset impairments related to the Company's onshore U.S. development at Iron Horse, as well as at Noa, offshore Israel.
Estimated reserves at the end of 2010 were approximately 1.1 BBoe, up 33 percent from 2009. Reserves in the U.S. accounted for 45 percent of the total, with International the remaining 55 percent. The Company's 2010 reserve mix is 33 percent global liquids, 42 percent international natural gas, and 25 percent U.S. natural gas.
Noble Energy added total proved reserves of 412 million barrels of oil equivalent (MMBoe) in 2010. These additions replaced approximately 520 percent of 2010 production at a cost of $6.50 per Boe.
The Company's international portfolio added 303 MMBoe of reserves, accounting for approximately 75 percent of total 2010 reserve additions. Initial major-project bookings at Tamar, offshore Israel, and Alen, offshore Equatorial Guinea, were recorded in 2010. At Tamar, Noble Energy added reserves of 1.7 trillion cubic feet of natural gas, representing approximately two-thirds of the Company's net mean resources at the field. The additions at Alen are a portion of the condensate resources, with a significant amount of natural gas resources to be booked as the gas monetization project in Equatorial Guinea progresses.
U.S. additions of 109 MMBoe resulted in approximately 250 percent replacement of domestic production and were driven largely by the vertical and horizontal drilling programs at Wattenberg and the greater Central DJ basin. The asset purchase in early 2010 of primarily Wattenberg reserves represented the majority of reserves acquired.
Positive price revisions, impacting both U.S. natural gas and crude oil, benefitted the Company's proved reserves by 43 MMBoe in 2010 versus 2009. The increases came primarily in Wattenberg and other Rocky Mountain assets. Proved reserves in the U.S. were reduced 30 MMBoe as a result of the SEC rules requiring development of proved undeveloped reserves within five years. These resources, primarily located in Wattenberg, are expected to be re-booked to proved reserves as drilling occurs in future years.
The Company divested 34 MMBoe of mature onshore U.S. assets during 2010. In addition, 27 MMBoe of reserves were removed as a result of the termination of the Block 3 production sharing contract offshore Ecuador.
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