Independent oil and gas producer Noble Energy Inc. (NBL) reported adjusted earnings per share of $1.18 for the fourth quarter of 2011, which surpassed the Zacks Consensus Estimate of $1.12. The quarterly results were 14 cents lower than the year-ago earnings of $1.04 per share.
GAAP loss during the quarter was $1.67 per share compared with earnings of 29 cents per share in the year-ago period. The difference between the GAAP and operating figures during the reported quarter was due to unrealized commodity derivative instruments losses of 91 cents, asset impairment charges of $3.46 and a 1 cent loss on divestiture. Income tax adjustment accounted for $1.54 per share.
Operating earnings per share in fiscal 2012 were $5.31 versus $4.22 in 2010. The adjusted earnings per share surpassed the Zacks Consensus Estimate of $5.15.
Revenue
Noble Energy’s net revenue of $985 million in the fourth quarter was $35 million higher than the Zacks Consensus Estimate and 25.8% higher than $783 million reported in the fourth quarter of 2010.
The year-over-year growth in revenue during the quarter was driven by better performance of crude oil and condensate (up 35.4%) and natural gas (up 15.5%) from the year-ago period.
Total revenue for the fiscal year was $3,763 million versus $3,022 million in 2010. The results also surpassed the Zacks Consensus Estimate of $3,758 million.
Operational Results
Sales volumes in the quarter under review increased 8.0% year over year to 233 thousand barrels of oil equivalent per day (MBoe/d). The growth was attributable to the strong performance of the company in both international and domestic operations.
Domestic volumes improved due to addition of the Marcellus JV, and continued growth in the horizontal Niobrara play in the DJ Basin. International volumes were driven by early startup of the Aseng oil project offshore Equatorial Guinea and higher sales from the Mari-B field, which satisfies Israeli natural gas demand.
Production costs including lease operating expenses, production and ad valorem taxes, and transportation were up 13% to $7.88 per Boe from the fourth quarter of 2010. The increase in production costs was primarily due to mix of sales volumes, particularly with the startup of Aseng offshore Equatorial Guinea and the increased production from the DJ Basin.
Realized Prices
Realized oil prices in the quarter improved significantly to $101.12 per barrel, representing a 21.8% jump from the year-ago quarter. Though natural gas prices remain at depressed levels in the US, higher international realization helped drive the overall natural gas price realization.
Natural gas realizations for the company improved 7.7% year over year to $2.81 per thousand cubic feet from $2.61 per thousand cubic feet in the year-ago quarter.
Realized prices for natural gas liquids (NGL) were up 5.0% to $46.11 per barrel from $43.88 per barrel in the year-ago quarter.
Proved Reserves
Noble Energy’s estimated reserves at the end of 2011 were 1. 2 BBoe (billion barrels of oil equivalent), up 11% from 2010 levels. The reserves consisted of 31% global liquids, 42% international natural gas, and 27% U.S. natural gas. During the year the company replaced 244% of its 2011 production.
Financial Update
Cash and cash equivalents as of December 31, 2011 were $1.45 billion versus $1.08 billion as of December 31, 2010.
Long-term debts as of December 31, 2011 were $4.1 billion versus $2.27 billion as of December 31, 2010.
Discretionary cash flow for the year escalated 26% year over year to $2.5 billion.
Guidance
The company expects its 2012 sales volumes to range from 244 MBoe/d to 256 MBoe/d. The midpoint of the range represents a 13% jump from the 2011 level. Noble expects most of the growth to come from crude oil and condensate, which is estimated to grow over 40% year over year.
The company expects first quarter 2012 volumes to average 228 MBoe/d to 236 MBoe/d essentially flat from the sequentially preceding quarter.
The company projects capital expenditure of $3.5 billion for 2012. The expenditure spread over the company’s global operations is primarily focused on onshore US.
Peer Update
Anadarko Petroleum Corporation (APC), which competes with Noble Energy, announced operating earnings for the fourth quarter 2011 of 85 cents per share versus 38 cents per share in the year-ago quarter. The results also surpassed the Zacks Consensus Estimate of 60 cents.
For the full year 2011, Anadarko earned $3.37 per share, surpassing the Zacks Consensus Estimate of $3.11.
Our View
Sales volume expansion and better realized price for its products helped the company to post strong results.
During the year the company has entered into a joint venture with CONSOL Energy Inc. (CNX) to develop the latter’s Marcellus Shale properties. We believe the reserve rich Marcellus Shale will boost the top line of the company in the long term.
In the Mediterranean region the company, along with its partners, has gradually increased its position in the Levant Basin. The Levant basin is estimated to hold 122 Tcf of recoverable natural gas. The latest finding in offshore Israel has taken the total tally thus far to 35 Tcf of natural gas.
We believe this strategic alliance, increasing presence in the Mediterranean, capital allocation in China, the North Sea and several new venture opportunities will help the company to continue with its growth path.
Based in Houston, Texas, Noble Energy operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids. Noble Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
To read this article on Zacks.com click here.
Zacks Investment Research
