Noble Records Exceptional Earnings & Largest Deepwater Discovery in 3Q
Noble has reported third quarter 2008 net income of $974 million, or $5.37 per share diluted. The results included a previously disclosed $943 million ($637 million after-tax) non-cash gain, which represents the unrealized mark-to-market change in the Company's financial commodity contracts. Excluding this item and certain other items typically not included by analysts in published estimates, third quarter 2008 adjusted net income(1) was $395 million, or $2.08 per share diluted. For the same period in 2007, net income was $223 million, or $1.28 per share diluted. Noble Energy sells forward a portion of its production utilizing financial commodity contracts. Beginning with 2008, the Company changed its accounting method for these contracts to mark-to-market accounting in order to provide greater flexibility and transparency.
Discretionary cash flow(1) for the third quarter 2008 was $657 million, compared to $556 million for the same period in 2007. Net cash provided by operating activities was $713 million.
Key highlights for the third quarter 2008 include:
- Significant oil discovery at the Gunflint prospect in the deepwater Gulf of Mexico.
- Successful appraisal of the South Raton discovery in the deepwater Gulf of Mexico.
- Record quarterly natural gas sales in Israel of 155 million cubic feet per day.
- Production commenced from the phase two development of Dumbarton in the North Sea.
- Successful oil test offshore Equatorial Guinea at the Diega discovery.
"Noble Energy has delivered exceptional third quarter 2008 operating and financial results from our diversified and balanced portfolio. We had significant exploration success during the quarter, which included our largest discovery to date in the deepwater Gulf of Mexico. In addition, we are excited about the successful flow test results at the Diega oil discovery in Equatorial Guinea. During the quarter, we were able to offset lost volumes from the hurricanes with better performance in other areas. As we head toward the end of the year, we are very encouraged that our performance to date has put us in a great position to achieve our operating objectives for the year. Our strong balance sheet and cash flows have positioned us well during this period when we are experiencing a weakening economy and related declines in commodity prices," said Noble Energy's Chairman, President and CEO, Charles D. Davidson.
Noble Energy's operating income for the third quarter 2008 was $546 million, up 45 percent from the same quarter last year. Sales volumes averaged 211 thousand barrels of oil equivalent per day (Boe/d), with 60 percent natural gas and 40 percent liquids. United States volumes were up four percent over the third quarter last year, despite temporary shut-ins of production due to hurricanes Gustav and Ike, which reduced volumes on average 7,500 Boe/d during the quarter.
Effective in 2008, Noble Energy began reporting natural gas liquid volumes separately where the company has the right to the liquids recovered from its natural gas processed at third-party plants. As a consequence, reported natural gas volumes in the United States are lower compared to 2007. Where the rights to the liquids do not exist, the processing revenue will continue to be included in natural gas revenues and benefit realized prices.
Volumes in Israel grew 18 percent over the third quarter of last year due to strength in natural gas demand. Total international volumes were down versus the third quarter 2007, primarily due to lower volumes in West Africa and the North Sea. In addition, the third quarter of 2008 did not include any volumes from the Argentina assets sold earlier this year. Operations in West Africa were impacted by facility maintenance downtime, which resulted in reduced natural gas sales. North Sea oil volumes were lower due to expected declines in the original phase of development at Dumbarton.
Commodity prices were up significantly versus third quarter 2007. On average for the quarter, Noble Energy realized $101.82 per barrel for crude oil and condensate and $5.31 per thousand cubic feet for natural gas. United States natural gas liquids prices averaged $57.06 per barrel. Crude oil and natural gas realizations for the quarter were impacted by $89 million and $4 million, respectively, in previously deferred commodity hedge losses.
Lease operating expense totaled $5.05 and depreciation, depletion, and amortization was $9.99 per barrel of oil equivalent in the third quarter 2008. Higher lease operating unit costs compared to the third quarter 2007 were primarily the result of increased operating and maintenance costs in the North Sea. DD&A unit costs were down slightly, largely due to increased volumes from lower cost operations in Israel. Production and ad valorem taxes were up due to higher crude oil, natural gas, and natural gas liquid revenues. General and administrative expenses increased due to costs associated with higher levels of staffing.
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