Noble Energy Finishes 'Strong' in 2Q10
Noble Energy reported today second quarter 2010 net income of $204 million, or $1.10 per share diluted, on revenues of $751 million. Net income for the quarter included an unrealized commodity derivative gain, as well as a rig contract termination expense. Excluding these items, which would typically not be considered by analysts in published estimates, second quarter 2010 adjusted net income(1) was $198 million, or $1.07 per share diluted. For the second quarter of 2009, the Company reported a net loss of ($57) million, or ($0.33) per share diluted, on revenues of $491 million. Adjusted net income(1) for the second quarter of 2009 was $116 million, or $0.66 per share diluted.
Discretionary cash flow(1) for the second quarter 2010 was $480 million, compared to $374 million for the similar quarter in 2009. Net cash provided by operating activities was $256 million. Organic capital expenditures for the second quarter of 2010 were $519 million, which excluded a non-cash accrual for construction progress on the Aseng FPSO.
Key highlights for the second quarter of 2010 include:
- Total sales volumes of 219 thousand barrels of oil equivalent per day (MBoe/d), up substantially from the first quarter of 2010 and second quarter of last year
- Israel sales volumes increased 27 percent from the second quarter of 2009
- Announced agreement to sell certain non-core U.S. onshore assets, representing 5,700 Boe/d of production and 29 million barrels of oil equivalent reserves, for approximately $550 million
- Added a second rig to horizontal Niobrara drilling program in Central DJ Basin
- Completed maintenance project at Alba, offshore Equatorial Guinea, bringing the field back to full production
Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "The second quarter was very strong for Noble Energy, as we experienced robust volumes and good cost control across the business. We continued to move forward our major-project developments, with significant field development drilling at Aseng and expectations for a Tamar sanction in the near future. In the U.S., we recently received a completion permit for Santa Cruz in the deepwater Gulf of Mexico, and we have increased our horizontal Niobrara drilling in the Central DJ Basin. We remain encouraged by the strength of our current production, the progress of our major projects, and the opportunities in our worldwide exploration programs."
Noble Energy's sales volumes for the second quarter of 2010 averaged 219 MBoe/d. Production was 214 MBoe/d, with additional liftings in Equatorial Guinea and the North Sea accounting for the higher sales volume. Internationally, average daily sales were 99 MBoe/d, a five percent increase from the second quarter of 2009. Significantly higher natural gas sales in Israel resulted from increased demand for electricity and improved market share. At the Alba field in Equatorial Guinea, scheduled maintenance downtime, which was completed in mid April 2010, resulted in lower natural gas volumes versus the second quarter of 2009. Equipment modifications at the Dumbarton FPSO in the North Sea required the field to be shut in for the first half of the second quarter of 2010. Despite the downtime, total North Sea volumes were up versus the second quarter of 2009. Prior to field shut-in, a second well at Lochranza came online.
The Company's U.S. volumes were 120 MBoe/d, up over seven percent from the second quarter of 2009. Onshore volumes totaled 102 MBoe/d for the quarter versus 90 MBoe/d in the same quarter last year. The increase is a result of ongoing development work primarily at Wattenberg, combined with the Central DJ Basin asset acquisition that closed in the first quarter of 2010. Offshore volumes were down 4 MBoe/d, primarily due to third-party processing downtime impacting the Swordfish field in the deepwater Gulf of Mexico during the second quarter of 2010.
Commodity prices were substantially higher than during the second quarter of 2009, with the Company's average crude oil and natural gas realizations up 45 and 37 percent, respectively. Noble Energy's U.S. crude oil averaged $75 per barrel in the second quarter of 2010, which included a reduction of $1.35 per barrel as a result of previously deferred hedge losses. In Israel, natural gas realizations increased to $4.33 per thousand cubic feet for the second quarter of 2010 and continue to benefit from strong global liquid markets. The Company's natural gas liquid (NGL) pricing in the U.S. averaged $39.37 per barrel for the second quarter of 2010, approximately 50 percent of West Texas Intermediate.
Lease operating expenses averaged $5.02 per barrel of oil equivalent (Boe), relatively flat with the second quarter of 2009. Production and ad valorem expenses for the second quarter of 2010 were 4.8 percent of oil, gas, and NGL revenues, and transportation expenses were $0.80 per Boe. Depreciation, depletion, and amortization per Boe increased slightly from the second quarter of last year to $10.79, primarily related to higher unit rates in the Rocky Mountains. Exploration expense includes $15 million of dry hole costs in the deepwater Gulf of Mexico which was incurred early in the second quarter of 2010. General and administrative expenses were up modestly due to increased staffing for the development of the Company's major projects.
Included in other operating expense for the second quarter of 2010 is a $26 million pre-tax charge for the termination of a rig contract resulting from the Federal Deepwater Moratorium. Non-operating other expense for the second quarter 2010 includes a $13 million pre-tax deferred compensation gain relating to the quarterly value change of Noble Energy stock held in a benefit program.
UPDATED 2010 GUIDANCE
Organic capital expenditures are currently estimated at $2.2 billion for the year, down from the original capital budget of $2.5 billion. Two-thirds of the reduction is related to lower activity in the deepwater Gulf of Mexico as a result of the Federal Deepwater Moratorium. The remaining $100 million is due to cost reductions and timing changes on various major projects. The Company has lowered its 2010 exploration expense guidance to a range of $265 to $325 million.
Noble Energy's full-year volume guidance is now 211 to 217 MBoe/d, updated to include the impact of the U.S. onshore asset sale. Expected to close in early August, the sale will reduce full year volumes by over 2 MBoe/d and lower per barrel lease operating expenses by approximately ten percent. The Company's 2010 lease operating expense guidance has been lowered to range from $4.80 to $5.10 per Boe.
For the third quarter of 2010, the Company estimates average daily sales volumes to be between 212 and 220 MBoe/d. Noble Energy anticipates slightly lower crude oil and natural gas production in the U.S. versus the second quarter of 2010, primarily as a result of the onshore asset sale. In Equatorial Guinea, crude oil and condensate volumes should be down sequentially due to the expected timing of liftings. In Israel, natural gas sales should be up significantly due to the strengthening market and seasonal period demands.
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