Noble Energy Announces Q1 Results
Noble Energy, Inc. on Thursday reported first quarter 2007 net income of $211.8 million, or $1.24 per basic share. Discretionary cash flow (non-GAAP measure, see Schedule 3 -- Determination of Discretionary Cash Flow and Reconciliation) for the first quarter was $448.3 million. Net cash provided by operating activities was $422.3 million. Capital expenditures for the quarter totaled $284.3 million.
Noteworthy items for the first quarter 2007 include:
-- First crude oil production from the Dumbarton development in the U.K. sector of the North Sea -- Successful appraisal of the Flyndre prospect in the U.K. sector of the North Sea -- Net production in Israel increased 25 percent to 103 million cubic feet per day (MMcfpd) -- Completed the Mari-B #7 development well in Israel with gross deliverability in excess of 180 MMcfpd -- Completed the $500 million common stock buyback program, resulting in a total of 10.4 million shares acquired at an average price of $48.17 per share -- Severe winter weather onshore North America caused temporary production shut-ins of approximately 7,000 barrels of oil equivalent per day (Boepd)
First quarter 2007 results included deferred compensation expense of $11.6 million pretax ($7.2 million after tax). Excluding the effects of deferred compensation, first quarter adjusted net income (a non-GAAP measure) would have been $219.0 million, or $1.28 per basic share (see Note 1 below).
Charles D. Davidson, the company's Chairman, President and CEO, said, "The excellent first quarter 2007 financial and operating results from Noble Energy reflect strong contributions from all of our programs including North America, West Africa, Europe, the Middle East, South America and Asia. Despite the severe winter weather impacts we experienced in the Rocky Mountains during the quarter, our diversified portfolio enabled us to produce solid earnings per share and cash flow. With North America now at full production and our Dumbarton development on line, we are well positioned to continue delivering solid results for our shareholders throughout 2007 and for the long-term."
First quarter 2007 production was 187,588 Boepd, an increase of 4.5 percent compared to 179,554 Boepd for the same period last year. During the first quarter 2007, severe winter weather in the Rocky Mountains cost the company approximately 7,000 Boepd of production in North America. Excluding the effects of severe weather, first quarter 2007 production would have been approximately 194,500 Boepd. In addition, first quarter 2006 production included approximately 18,400 Boepd from the Gulf of Mexico shelf assets, which were sold in 2006. Excluding the effects of severe weather, and adjusting for the Gulf of Mexico shelf assets sale, first quarter 2007 production would have increased approximately 20 percent compared to the same period last year on a pro forma basis. Daily production during the first quarter exceeded sales volumes by 5,454 Boepd, primarily because of the timing of liftings in Equatorial Guinea.
North America reported pre-tax operating income for the first quarter of $217.5 million, an increase of $16.1 million, or eight percent, compared to operating income of $201.4 million for the first quarter last year.
North America production was 113,622 Boepd in the first quarter 2007 compared to 114,296 for first quarter last year. The decline in production compared to last year was the result of severe winter weather and the Gulf of Mexico shelf asset sale, offset by production growth in the company's core D-J basin and deepwater Gulf of Mexico areas.
Operations benefited from higher realized prices during the quarter. The average liquids price was $46.42 per Bbl compared to $42.20 per Bbl during the first quarter of 2006. The average realized natural gas price was $8.24 per Mcf compared to $6.96 per Mcf last year. Oil and gas revenues were positively impacted by $51.0 million attributable to previously recognized losses for hedge contracts that were re-designated concurrent with the 2006 Gulf of Mexico shelf asset sale (see Schedule 6 -- Impact of Loss Associated with Gulf of Mexico Shelf Asset Sale).
During the first quarter, the company had 20 drilling rigs running onshore (10 in the Rocky Mountains, six in the Mid-continent and four in the Gulf Coast) and 50 workover rigs (34 in the Rocky Mountains, 10 in the Mid-continent and six in the Gulf Coast). During 2007, Noble Energy plans to drill 1,072 gross onshore wells, of which 36 will be in the Gulf Coast, 878 will be in the Rocky Mountains and 158 will be in the Mid-continent. The company also plans to complete 427 refrac, trifrac, deepening and recompletion gross projects in 2007, most of which will be in the Wattenberg field.
International operations reported operating income for the first quarter of $154.2 million compared to $211.3 million in the first quarter last year. Lower first quarter 2007 international operating income resulted primarily from a 3,644 Boepd decline in sales volumes to 68,513 Boepd from 72,157 Boepd last year. The decline in sales volumes was due to the timing of liftings in Equatorial Guinea, partially offset by increased North Sea sales from Dumbarton.
First quarter 2007 international production was 73,966 Boepd, an increase of 13 percent, compared to 65,257 Boepd for the first quarter of 2006. The increase in international production was primarily due to the startup of the Dumbarton development in the North Sea and increased natural gas sales in Israel.
Total operating income in Equatorial Guinea for the first quarter was $83.4 million compared to $147.9 million for the same period last year. The decline in operating income resulted from lower sales volumes, which declined 12,007 Boepd compared to the first quarter last year due to over-lifting production in that quarter versus under-lifting in the most recent quarter. Production was comparable during both periods.
Alba field condensate and natural gas sales (exclusive of Alba Plant, LLC and methanol operations) accounted for $37.9 million, or 45 percent, of operating income from Equatorial Guinea. Included in the West Africa results was $15.8 of pretax dry hole expense associated with the Adriana Southwest exploration well. Alba Plant LLC reported $20.8 million of income from LPG and condensate sales, net to Noble Energy's interest, compared to $27.1 million for the first quarter 2006. The decrease in operating income for Alba Plant LLC reflects lower plant sales and lower realized prices.
Income from methanol operations nearly doubled to $24.8 million, net to Noble Energy's interest, compared to $12.5 million during the first quarter 2006. The company's share of methanol sales volumes was 39.7 million gallons compared to the previous year's 34.1 million gallons. Last year's first quarter sales were below normal levels due to an inventory buildup in preparation for a plant turnaround. First quarter realized methanol prices were a record $1.22 per gallon, compared to 82 cents per gallon for the same period last year.
In the North Sea, operating income for the first quarter of 2007 was $32.2 million compared to $25.7 million the previous year, resulting primarily from higher crude sales due to the start up of the Dumbarton development. Dumbarton commenced production in late January 2007 with production expected to average 9,000 Boepd, net, during the year.
During the first quarter 2007, Noble Energy was awarded two new licenses in the Norwegian sector of the North Sea. Both licenses are non-operated and were the result of successful applications in Norway's APA 2006 bid round. One exploration well is expected to be drilled in 2008.
First quarter operating income was $19.7 million compared to $14.7 million for the same period in 2006. Natural gas sales, net to Noble Energy, averaged 103.1 MMcfpd for the first quarter 2007, compared to 82.6 MMcfpd the previous year. The increased natural gas sales volumes reflect increased seasonal demand for electricity and a full quarter of sales to Israeli Electric Company's Reading power plant in Tel Aviv.
Argentina, China, Ecuador and Suriname
Argentina, China, Ecuador and Suriname combined recorded first quarter 2007 operating income of $18.9 million compared to $23.0 million for first quarter last year.
In China, first quarter operating income was $10.6 million. Net production in China averaged 4,195 barrels of oil per day for the first quarter. In Argentina, first quarter operating income was $2.7 million, and net production averaged 3,064 Boepd.
The Machala power plant reported operating income of $7.1 million for the first quarter. For the quarter, 266,648 megawatt-hours were produced at an average price of 8.7 cents per kilowatt-hour.
Note 1 -- Adjusted net income should not be considered a substitute for net income as reported in accordance with GAAP. Noble Energy is providing adjusted net income 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 Noble Energy's financial performance.
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.
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