Noble Energy, Inc. reported third quarter 2012 net income of $221 million, or $1.23 per share diluted, and net income from continuing operations of $164 million, or $0.91 per share diluted. Excluding the impact of unrealized commodity derivative losses and certain other items, third quarter 2012 adjusted net income from continuing operations was $167 million, or $0.93 per share diluted.
Net income from continuing operations for the third quarter 2011 was $491 million, or $2.67 per share diluted and adjusted net income from continuing operations was $191 million, or $1.01 per share diluted.
Discretionary cash flow from continuing operations for the third quarter 2012 was a record $714 million, compared to $563 million for the same quarter in 2011. Net cash provided by operating activities was $924 million, and capital expenditures were $724 million.
Key highlights for the third quarter 2012 include:
– Record quarterly sales volume of 242 MBoe/d, up 11 percent year over year
– Horizontal net production within the DJ Basin increased to 31 MBoe/d, up 29 percent from last quarter and more than double from the third quarter of 2011
– Marcellus production grew to 102 MMcfe/d, an increase of 38 percent over last quarter
– Initiated production from the wet gas area of the Marcellus Shale that indicates a portion of our acreage is within the “super rich” area of the play
– Entered into new positions offshore Falkland Islands and Sierra Leone
– Secured a service contract for a new-build drillship capable of both reaching deep oil targets in the Eastern Mediterranean and supporting our global drilling program
– Received over $1.1 billion in proceeds from divestments of non-core assets
– Exercised option to increase credit facility from $3 billion to $4 billion, enhancing the Company’s strong liquidity position
Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “Strong liquids growth in both the DJ Basin and Gulf of Mexico contributed to our standout performance this quarter. Discretionary cash flow grew to a record level, up 27 percent over the comparable period last year, driven by a 42 percent increase in crude oil sales. Despite the impact of Hurricane Isaac in the Gulf of Mexico and unscheduled third party downtime in the DJ Basin, volumes grew by eight percent over last quarter and 11 percent year over year. Our major international projects at Tamar and Alen remain on schedule, and we expect to initiate sales from Tamar in less than six months.”
Third quarter 2012 sales volumes from continuing operations totaled 242 thousand barrels of oil equivalent per day (MBoe/d), up 11 percent from the third quarter 2011. Production volumes from continuing operations for the quarter were 247 MBoe/d, with the difference attributable to the timing of crude oil liftings in Equatorial Guinea. Sales volumes of crude oil and natural gas liquids increased 42 percent and 10 percent respectively, while natural gas declined 3 percent. Overall volumes consisted of 35 percent crude oil, 10 percent natural gas liquids, 25 percent international natural gas and 30 percent domestic natural gas.
U.S. sales volumes were 141 MBoe/d, up 25 percent from the third quarter last year. The growth was primarily attributable to the acceleration of the Company’s horizontal drilling program in the DJ Basin, the addition of the Marcellus Shale and the startup of Galapagos in the Gulf of Mexico. Divestments and natural production declines in non-core onshore properties offset a portion of the gains.
International sales volumes totaled 101 MBoe/d for the quarter, down five percent from the same period last year. The impact was primarily driven by lower natural gas sales in Israel partially offset by strong operational performance of the Aseng field in Equatorial Guinea.
The average realized price for crude oil and condensate was $99.30 per barrel for the third quarter, up three percent from the prior year period. Natural gas realizations in the U.S. averaged $2.61 per thousand cubic feet (Mcf) and $4.43 per Mcf in Israel. Natural gas liquids pricing in the U.S. averaged $29.71 per barrel, which equates to 32 percent of the average price for West Texas Intermediate (WTI – NYMEX) crude oil.
Total production costs per barrel of oil equivalent (Boe), including lease operating expense (LOE), production and ad valorem taxes, and transportation and gathering expenses were $7.10 per Boe, up slightly from the third quarter of 2011. LOE was $4.63 per Boe and depreciation, depletion, and amortization (DD&A) was $16.53 per Boe. The unit rates were impacted mostly by the growing contribution from new high-value crude oil production in the Gulf of Mexico and West Africa. Exploration expense includes leasehold costs associated with our exit from Senegal and dry hole cost associated with the Trema well, offshore Cameroon. The Company’s adjusted effective tax rate for the third quarter 2012 was 33 percent, with 60 percent deferred.
In the DJ Basin, the horizontal development program delivered strong performance in the third quarter with net production reaching 31 MBoe/d, a 29 percent increase from the second quarter of 2012. Total basin net volumes averaged 75 MBoe/d of which 59 percent was comprised of crude oil and other liquids. Production this quarter was adversely effected by 5 MBoe/d related to third-party processing plant downtime and hot weather. During the quarter, 57 horizontal wells were completed, up from the 43 wells last quarter. Three recent extended-reach lateral wells have been online over 60 days and are tracking a 750 MBoe type curve. In a new development area in Northern Colorado, 11 wells are online producing 5,500 Boe/d with 80 percent oil content. Three of the wells, part of an 80-acre pilot test, have 30-day production rates averaging 720 Boe/d. Operated rig count is expected to end the year at eight rigs with three working in the extension area and two in the core area of Wattenberg, and the remaining three in northern Colorado.
In the Marcellus Shale, activity continued to be focused in the highest return areas of the play. Volumes for the quarter were up 38 percent from the previous quarter and averaged 102 million cubic feet equivalent per day (MMcfe/d) net. Wet gas production began from the Company’s first pad, SHL-1, in late July and the SHL-3 pad in early September. Both liquid yield, which ranged from 65 to 80 barrels per million cubic feet, and natural gas rates were higher than expected from these pads. With the addition of two new-build rigs, operated rig count stands at three, two in the Majorsville area and one delineating a large JV acreage position in the Normantown area of West Virginia. In the dry gas area, our partner is operating two rigs in southwest Pennsylvania and continues completion operations in central Pennsylvania and Northern West Virginia.
In the Gulf of Mexico, production was shut-in for several weeks related to Hurricane Isaac lowering third quarter volumes by nearly 7 MBoe/d to an average of 21 MBoe/d. The Company’s Gulf of Mexico production has returned to pre-hurricane levels. Big Bend, an exploration well located on Mississippi Canyon 698, commenced drilling in September and is expected to reach total depth before year end.
In West Africa, the Aseng field produced an average of 64 thousand barrels per day (MBbl/d) or 22 MBbl/d net for the quarter, with minimal downtime. The Alba field performed as expected and had one lifting in the third quarter versus two in the second quarter. Overall underlifting for the third quarter was 5 MBbl/d in West Africa.
In the Eastern Mediterranean, Noa and Pinnacles performed better than expected and, combined with Mari-B, average production for the quarter was 116 million cubic feet per day (MMcf/d) net. The Tamar platform left Corpus Christi en route to Israel for installation in the fourth quarter and is on schedule to begin sales in less than six months.
Noble Energy expects fourth quarter 2012 volumes to average 248 to 252 MBoe/d. In the U.S., crude oil volumes will be up from the third quarter 2012 with continued activity in the DJ Basin. Domestic natural gas and natural gas liquids will be reduced by the onshore divestments that closed in the third quarter. Internationally, crude oil volumes in Equatorial Guinea will be higher as compared to the underlifted third quarter while natural gas sales in Israel and Equatorial Guinea are expected to be down slightly.
Press Release, October 26, 2012; Image: