Noble Energy Announces Second Quarter 2007 Results
Noble reported second quarter 2007 net income of $209.1 million, or $1.22 per basic share ($1.21 per share diluted). Discretionary cash flow (non-GAAP measure, see Schedule 3 - Discretionary Cash Flow and Reconciliation to Operating Cash Flow) for the second quarter was $473.2 million. Net cash provided by operating activities was $350.6 million. Capital expenditures for the quarter totaled $481.1 million.
Key accomplishments for the second quarter include: * Daily equivalent production volume increase of 12 percent versus second quarter 2006, adjusted to exclude Gulf of Mexico Shelf production sold in July 2006 * Successful exploration well (Benita) in Block I, offshore Equatorial Guinea * Deepwater Gulf of Mexico exploration success at Isabela * Acquisition of approximately 280,000 net acres onshore North America in the Piceance, Niobrara, and New Albany Shale areas * Sales of natural gas to a liquefied natural gas (LNG) plant in Equatorial Guinea, representing approximately 9,700 barrels of oil equivalent per day (Boepd)
Second quarter 2007 results included deferred compensation expense of $3.0 million pretax ($1.9 million after tax). Also included in the second quarter 2007 results was a pretax charge (Loss on Involuntary Conversion) due to a revision in Hurricane Ivan and Katrina estimates for salvage and clean up of $38.3 million ($23.9 million after tax). The salvage and cleanup operation is now complete and all equipment has been released.
Charles D. Davidson, the company's Chairman, President and CEO, said, "Noble Energy's strong second quarter financial and operating results reflect continued momentum from our diversified portfolio of assets. Despite selling our Gulf of Mexico Shelf assets in the third quarter of 2006, we have increased production for the second quarter 2007 as compared to the same period 2006. In North America, we have steadily increased activity levels in the Rocky Mountains and we have acquired several new acreage positions that look promising for the future. Our international portfolio of assets performed extremely well in the second quarter with production growing in Israel, the North Sea and Equatorial Guinea over the same period last year. We are excited about our recent exploration successes in the Deepwater Gulf of Mexico and Equatorial Guinea and look forward to our remaining 2007 exploration program, including prospects in the Deepwater Gulf of Mexico, Equatorial Guinea, and Cameroon. Our balanced and diversified portfolio continues to allow us to show organic growth while providing future growth opportunities through a high impact exploration program."
Second quarter 2007 production was 197,217 Boepd compared to 194,747 Boepd for the same period last year and 187,588 Boepd for the first quarter 2007. Second quarter 2006 production included 18,928 Boepd from the Gulf of Mexico Shelf assets, which were sold in July 2006. Sales volumes during the second quarter 2007 were 199,516 Boepd, exceeding production by approximately 2,300 Boepd, primarily due to the timing of condensate liftings in Equatorial Guinea.
North America reported pre-tax operating income for the second quarter 2007 of $160.0 million compared to a pre-tax operating loss of $152.1 million for the second quarter 2006. The pre-tax operating loss in 2006 included a charge of approximately $400 million related to certain cash flow hedges that were associated with Gulf of Mexico Shelf assets sold in the third quarter 2006.
North American production volumes were 114,698 Boepd in the second quarter 2007 compared to 134,194 Boepd for the same quarter last year and 113,622 Boepd for the first quarter 2007. Liquids and natural gas production volumes were 45,068 barrels of oil per day (Bopd) and 417.8 million cubic feet per day (MMcfpd), respectively, for the current quarter compared to 51,983 Bopd and 493.3 MMcfpd for the second quarter of 2006 and 45,576 Bopd and 408.3 MMcfpd for the first quarter 2007. The decline in production volumes in the second quarter 2007 as compared to second quarter 2006 is attributable primarily to the disposition of the Gulf of Mexico Shelf assets. Compared to last quarter, second quarter 2007 production was impacted by 1,550 Boepd primarily due to third party processing downtime in the Rocky Mountains and Midcontinent, 750 Boepd due to natural declines in the Gulf Coast and Midcontinent, and 2,400 Boepd related to Deepwater facility downtime and performance. These impacts were more than offset by a 5,800 Boepd increase in the Rocky Mountains during the quarter primarily due to the recovery of the production impact from the severe winter storms experienced in the first quarter.
Domestic operations benefited from strong realized natural gas prices during the quarter. The average realized natural gas price was $7.25 per thousand cubic feet (Mcf) for the second quarter 2007 compared to $6.29 per Mcf last year. Gas revenues for the current quarter were positively impacted by $39.6 million attributable to previously recognized losses for hedge contracts that were re-designated concurrent with the Gulf of Mexico Shelf asset sale (see Schedule 8 - Impact of Loss Associated with Gulf of Mexico Shelf Asset Sale). The average liquids price was $51.34 per barrel (Bbl) compared to $53.01 per Bbl during the second quarter of 2006.
During 2007, Noble Energy plans to drill 1,033 gross domestic wells, of which 232 were drilled in the second quarter. The company also plans to complete 454 refrac, trifrac, deepening and recompletion projects in 2007, with 158 completed in the second quarter.
International operations reported operating income for the second quarter 2007 of $202.4 million, an increase of 18 percent compared to $172.0 million in the second quarter last year. Total second quarter 2007 production volumes were 82,519 Boepd compared to 60,553 Boepd for the same quarter last year and 73,966 Boepd for the first quarter 2007. Liquids production volumes were 42,459 Bpd compared to 36,609 Bpd for the second quarter of 2006 and 41,318 Bpd for the first quarter 2007. Natural gas production was 240.4 MMcfpd compared to 143.7 MMcfpd in the same quarter last year and 195.9 MMcfpd for the first quarter 2007. Second quarter 2007 international sales were 84,819 Boepd, compared to 57,815 Boepd for the second quarter of 2006 and 68,513 Boepd for the first quarter 2007.
Operating income for the second quarter increased 20 percent to $142.4 million this year compared to $118.4 million last year. Total sales volumes in Equatorial Guinea (exclusive of methanol operations) were 47,215 Boepd, an increase of 62 percent compared to 29,061 Boepd during the second quarter of 2006. Higher sales volumes resulted from increased natural gas volumes of approximately 78.2 MMcfpd, primarily representing natural gas sales to the LNG plant, as well as increased liftings of condensate and liquefied petroleum gas (LPG).
Alba field condensate and natural gas sales (exclusive of Alba Plant, LLC and methanol operations) accounted for $93.4 million, or 66 percent, of the operating income from West Africa. Second quarter 2007 condensate and natural gas sales volumes averaged 38,119 Boepd compared to 21,622 Boepd last year. The average realized price for condensate during the second quarter was $69.23 per Bbl compared to $68.76 per Bbl for the same period last year.
Alba Plant, LLC reported $38.0 million of income from liquefied petroleum gas and condensate sales, net to Noble Energy's interest, compared to $23.9 million during the second quarter 2006. Net Alba Plant, LLC LPG and condensate sales volumes totaled 9,096 Bpd compared to 7,439 Bpd for the same period last year. The increase in sales volumes is attributed to increased liftings of LPG's and condensate. The average Alba Plant, LLC realized price during the second quarter was $50.60 per Bbl compared to $46.68 per Bbl for the same period last year.
Income from methanol operations decreased slightly to $11.0 million, net to Noble Energy's interest, compared to $11.6 million during the second quarter 2006. The company's share of methanol sales volumes was 33.6 million gallons (Gal) compared to last year's 32.4 million Gal. Second quarter realized methanol prices were 87 cents per Gal compared to 84 cents per Gal for the second quarter 2006.
In the North Sea, operating income for the second quarter 2007 was $27.4 million compared to $17.9 million the previous year, resulting primarily from crude sales from the Dumbarton field in the UK, which commenced production in late January 2007. In the second quarter 2007, Dumbarton production averaged 7,200 Bopd.
Second quarter 2007 operating income was $17.5 million compared to $13.3 million for the same period in 2006. Natural gas production, net to Noble Energy, averaged 97.5 MMcfpd for the second quarter 2007, a 29 percent increase compared to 75.3 MMcfpd the previous year. The increased natural gas volumes reflect increased natural gas demand and a full quarter of sales to Israeli Electric Corporation's Reading power plant in Tel Aviv, which came online late in the second quarter 2006. Sales prices averaged $2.70 per Mcf for the second quarter 2007 as compared to $2.66 per Mcf for the prior year period.
Argentina, China, Ecuador and Suriname combined recorded second quarter 2007 operating income of $15.2 million compared to $22.4 million for second quarter last year. In China, second quarter operating income was $13.2 million. Net oil production in China averaged 4,154 Bopd for the second quarter. In Argentina, second quarter operating income was $3.5 million, and net production averaged 3,014 Boepd. The Machala power plant reported operating income of $1.7 million for the second quarter. For the quarter, 188,675 megawatt-hours were sold at an average price of 7.4 cents per kilowatt-hour.
Capital Expenditure Update
Noble Energy expects 2007 capital expenditures to be approximately $1.6 billion, compared to the $1.42 billion announced in February of this year. The increases are primarily related to the acquisition and development of property acquired in the Piceance Basin, acquisition of additional acreage in the Niobrara and New Albany Shale, and increases in our Deepwater Gulf of Mexico and West Africa programs. The increase in deepwater is primarily associated with the recent Isabela discovery. Capital additions in West Africa are due to the addition of a drilling rig, which is now operating in Cameroon.
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