Noble Energy's Earnings Down for Q4, Up for 2006
Noble Energy, Inc. reported full year and fourth quarter 2006 results. For the full year, net income was a record $678.4 million, or $3.86 per basic share.
Excluding the after tax impact of $183.4 million related to the previously announced sale of the company's Gulf of Mexico Shelf assets, the reclassification of certain cash flow hedges associated with those assets, and certain charges taken in the fourth quarter, Noble Energy's adjusted full year net income, a non-GAAP measure, would have been $861.8 million, or $4.91 per basic share (see Schedule 8, Reconciliation of Net Income to Adjusted Net Income, Non-GAAP). Discretionary cash flow for the year reached an all time high of $2.1 billion (non-GAAP measure, see Schedule 3, Determination of Discretionary Cash Flow and Reconciliation).
For the fourth quarter 2006, the company reported net income of $165.0 million, or 95 cents per basic share. Excluding certain net charges totaling $13.1 million after tax (see Schedule 8, Reconciliation of Net Income to Adjusted Net Income, Non-GAAP), Noble Energy's adjusted fourth quarter net income, a non-GAAP measure, would have been $178.1 million, or $1.03 per basic share. Discretionary cash flow for the fourth quarter was $486.9 million. Fourth quarter 2006 net cash provided by operating activities was $389.5 million. Capital expenditures for the quarter totaled $422.7 million. During the fourth quarter, Noble Energy repurchased 4.2 million shares of its common stock for $206.0 million, bringing the total repurchases for 2006 to 8.4 million shares for $398.5 million.
Significant financial and operating factors for 2006 include: * Completed the acquisition of U.S. Exploration Holdings, Inc. in March * Increased daily equivalent production by 28 percent versus 2005 * Deepwater exploration success at Raton, Redrock and Raton South * First production from the Lorien and Ticonderoga deepwater Gulf of Mexico developments * First natural gas sales to the Reading power plant in Tel Aviv, Israel * Acquired 50 percent interest in Block PH-77 offshore Cameroon * Increased common stock dividend by 83 percent versus 2005 * Divested of Gulf of Mexico shelf assets for $625 million
Charles D. Davidson, the company's Chairman, President and CEO, said, "The outstanding financial and operating results from Noble Energy in 2006 reflect the successful implementation of a multi-year process to reposition the company for long-term growth. Through our balanced and diversified asset base, we are generating strong financial results that provide us with a solid foundation for growth and strong shareholder returns. Our domestic onshore business consists of thousands of lower risk projects that, when combined with many of our international projects, provides a stable and growing source of production and cash flow. At the same time, our deepwater Gulf of Mexico and international exploration portfolios offer exposure to significant resources in the medium and long terms."
FULL YEAR 2006
Full year 2006 net income was $678.4 million, or $3.86 per basic share, compared to net income of $645.7 million, or $4.20 per basic share, for the previous year. Excluding certain net charges totaling $183.4 million after tax, adjusted full year net income (a non-GAAP measure) would have been $861.8 million, or $4.91 per basic share. Discretionary cash flow for 2006 was $2.1 billion compared to the previous year's $1.4 billion.
Realized liquids prices increased 20 percent year-on-year to $54.47 per barrel (Bbl) compared to $45.35 per Bbl the previous year. The company's average realized natural gas price decreased four percent to $5.55 per thousand cubic feet (Mcf) from $5.78 per Mcf the previous year.
Production volumes for the year increased 28 percent to 185,954 barrels of oil equivalent (Boepd) from 145,440 Boepd. Sales volumes for the year were 186,768 Boepd. Daily sales volumes exceeded production by 813 Boepd, primarily because of the timing of liftings in Equatorial Guinea. North America production increased 37,816 Boepd, or 45 percent, to 121,083 Boepd. The sale of the company's Gulf of Mexico shelf assets, which closed on July 14, lowered production volumes by approximately 10,700 Boepd in 2006. International production increased 2,698 Boepd, or four percent, to 64,871 Boepd, primarily because of increased production in Israel.
FOURTH QUARTER 2006
Fourth quarter 2006 net income was $165.0 million, or 95 cents per basic share, compared to fourth quarter 2005 net income of $221.9 million, or $1.27 per basic share. Excluding certain net charges totaling $13.1 million after tax, adjusted fourth quarter net income (a non-GAAP measure) would have been $178.1 million, or $1.03 per basic share. Discretionary cash flow for the fourth quarter 2006 increased to $486.9 million compared to $460.2 million the previous year.
Realized liquids prices increased seven percent to $51.32 per Bbl compared to $47.78 per Bbl for the same period the previous year. The company's average realized natural gas price decreased 20 percent to $5.56 per Mcf from $6.91 per Mcf for the fourth quarter the previous year.
Fourth quarter 2006 production increased nine percent to 182,028 Boepd from 167,075 Boepd for the same period in 2005. Severe weather in the Rocky Mountains reduced fourth quarter production by approximately 2,000 Boepd. Fourth quarter 2005 production included approximately 17,000 Boepd from the company's Gulf of Mexico shelf assets, which were sold in 2006. Daily sales volumes exceeded production by 3,045 Boepd, primarily because of the timing of liftings in Equatorial Guinea.
NORTH AMERICA - FOURTH QUARTER 2006
North America reported operating income for the fourth quarter of $146.4 million. Excluding the effect of the royalty litigation reserve ($15.5 million pretax) and gains on the sale of assets ($7.1 million pretax), operating income would have been $154.8 million. The decline in quarter-on- quarter operating income primarily reflects lower realized liquids and natural gas prices, as well as increased exploration expense. Higher volumes and lower derivative losses partially offset the effects of these items.
North America benefited from higher production during the fourth quarter, which increased 16 percent to 115,967 Boepd from 100,034 Boepd for the same period in 2005. The average liquids price was $48.33 per Bbl compared to $52.72 per Bbl during the fourth quarter of 2005. The average realized natural gas price was $6.79 per Mcf compared to $8.83 per Mcf the previous year.
During the fourth quarter, the company had 23 drilling rigs running onshore (nine in the Rocky Mountains, 11 in the Mid-continent and three in the Gulf Coast) and 47 workover rigs (30 in the Rocky Mountains, 15 in the Mid- continent and two in the Gulf Coast). During 2006, Noble Energy drilled 687 net onshore wells, of which 26 were in the Gulf Coast, 435 were in the Rocky Mountains and 226 were in the Mid-continent. The company also completed 708 refrac, trifrac, deepening and recompletion projects for 2006, most of which were in the Wattenberg field.
During the second quarter, the company announced two deepwater discoveries, Redrock and Raton. In January 2007, Noble Energy announced that the Raton South appraisal well encountered hydrocarbons in the anticipated sand intervals. Development options for Redrock, Raton and Raton South are currently under review, along with a fast-track subsea development of a natural gas zone discovered in the original Raton well. Noble Energy is the operator of Raton, Redrock and South Raton with a 50 percent working interest.
INTERNATIONAL OPERATIONS - FOURTH QUARTER 2006
International operations reported operating income for the fourth quarter of $164.8 million, an increase of $46.1 million, or 39 percent, compared to $118.7 million in the fourth quarter the previous year. Fourth quarter 2006 production totaled 66,061 Boepd.
Total operating income in Equatorial Guinea increased 63 percent to $120.3 million compared to $73.8 million the previous year.
Alba field condensate and natural gas sales (exclusive of Alba Plant, LLC and methanol operations) accounted for $89.8 million, or 75 percent, of operating income from Equatorial Guinea. Alba Plant, LLC reported $19.9 million of income from LPG and condensate sales, net to Noble Energy's interest, compared to $16.9 million for the fourth quarter 2005. The increase in operating income for Alba Plant, LLC reflects increased plant sales of 1,821 barrels per day.
Income from methanol operations decreased slightly to $10.6 million, net to Noble Energy's interest, compared to $12.6 million during the fourth quarter 2005. The company's share of methanol sales volumes was 24.7 million gallons compared to the previous year's 40.2 million gallons. The sales decline relative to the previous year's fourth quarter was due to compressor maintenance and repairs, which were completed during the quarter, and the replacement of inventories. Fourth quarter realized methanol prices were a record $1.13 per gallon.
In the North Sea, operating income for the fourth quarter of 2006 was $13.6 million compared to $23.3 million the previous year, resulting primarily from lower crude oil sales due to natural field decline and the timing of liftings. In the U.K. sector of the North Sea, the Dumbarton development, sanctioned during the fourth quarter 2005, commenced production in January 2007. Noble Energy expects production from Dumbarton to average 9,000 Boepd, net, during 2007.
Fourth quarter operating income was $18.5 million compared to $10.6 million for the same period in 2005. Natural gas production, net to Noble Energy, averaged 96.6 MMcfpd for the fourth quarter 2006, compared to 64.0 MMcfpd the previous year. The increased natural gas volumes reflect the completion of infrastructure and conversion to natural gas of the Reading Plant in Tel Aviv and the Eshkol power plant's natural gas turbine running as a combined-cycle base load unit.
Argentina, China, Ecuador and Suriname
Argentina, China, Ecuador and Suriname combined recorded fourth quarter 2006 operating income of $12.5 million compared to $11.0 million for fourth quarter the previous year.
In China, fourth quarter operating income was $10.4 million. Net production in China averaged 4,135 barrels of oil per day for the fourth quarter. In Argentina, fourth quarter operating income was $4.0 million, and net production averaged 3,666 Boepd.
The Machala power plant reported operating income of $5.5 million for the fourth quarter. For the quarter, 262,470 megawatt-hours were produced at an average price of 8.4 cents per kilowatt-hour.
Noble Energy is one of the nation's leading independent energy companies and operates throughout major basins in the United States including Colorado's Wattenberg Field, the Mid-continent region of western Oklahoma and the Texas Panhandle, the San Juan Basin in New Mexico, the Gulf Coast and the Gulf of Mexico. In addition, Noble Energy operates internationally in Argentina, China, Ecuador, the Mediterranean Sea, the North Sea, West Africa and Suriname. Noble Energy markets natural gas and crude oil through its subsidiary, Noble Energy Marketing, Inc.