Noble Energy Inc. (NBL) posted adjusted earnings per share of $1.01 for the fourth quarter, below the Zacks Consensus Estimate of $1.04 and last year’s earnings of 91 cents.

The better-than-expected results in the quarter were driven by increased sales volumes and reduced costs compared to previous quarters and the year-ago period. For the full year 2009, adjusted net income was $3.37 per share, below the Zacks Consensus Estimate of $3.39 and last year’s earnings of $7.05.

Consolidated sales volumes in the quarter remained flat at 19 million BOE (barrels of oil equivalent), i.e. 206 thousand BOE per day, primarily driven by increased crude oil and condensate volumes in the United States and West Africa, offset by lower oil volumes in North Sea and reduced natural gas volumes in Israel. Daily sales volumes of oil, natural gas and NGL (natural gas liquids) averaged 63 thousand barrels (down 9%), 770 million cubic feet (up 3%) and 15 thousand barrels (up 7%), respectively.

In 2009, consolidated sales volumes declined 3% to 77 million BOE (i.e. 210 thousand BOE per day), driven by a 10% decline in oil volumes (64 thousand barrels per day). This was partially offset by a 2% increase in natural gas volumes (781 million cubic feet per day) and a 7% increase in NGL volumes (16 thousand barrels per day).

Revenues improved 33% to $760 million in the quarter, primarily due to increased oil realizations. However, revenue for the full year 2009 declined 41% to $2.3 billion due to lower price realizations. In the quarter, revenues from oil, natural gas and NGL were $385 million (up 42%), $203 million (down 16%) and $32 million (up 45%), respectively. For the full year, oil revenues totaled $1.3 billion (down 40%), natural gas revenues were $701 million (down 49%) and NGL revenues were $98 million (down 44%).

In the fourth quarter, realized prices for oil, natural gas and NGL averaged $68.43 per barrel (up 56%), $2.99 per thousand cubic feet (down 17%) and $38.98 per barrel (up 46%), respectively. Average realized prices for the year were $55.76 per barrel (down 32%) for oil, $2.54 per thousand cubic feet (down 50%) for natural gas and $27.96 per barrel (down 44%) for NGLs.

Year-end 2009 estimated reserves were 820 million barrels of oil equivalent (MMBoe), adding total proved reserves of 79 MMBoe (103% of 2009 production), from discoveries, extensions, performance revisions and acquisitions. The U.S. made up 55% and International the remaining 45% of total reserve additions.

Balance Sheet

Cash costs, including lease operating expenses, production and ad valorem taxes, transportation and SG&A were $10.50 per BOE in the fourth quarter. Lease operating expenses were down 11% to $4.80 per BOE, more than offsetting higher production taxes and transportation expenses.

SG&A expenses were increased year over year primarily due to increased staffing for the development of major projects. Depreciation, depletion, and amortization were $11.34 per BOE in the quarter.

The company has maintained a healthy financial and liquidity position. At year-end, cash provided by operating activities was $1.51 billion, covering the bulk of $1.32 billion capex. Discretionary cash flow for the year was $1.69 billion. Noble ended 2009 with $1.01 billion of cash and long-term debt to $2.04 billion.

Separately, the company announced its 2010 capital budget of $2.5 billion. Of the total capex, 40% is slated for major project developments, 20% for exploration and appraisal activities and 40% for maintenance and near-term growth opportunities. The company plans to spend 55% of its estimated capital in the United States and 45% in international activities.

Outlook

Noble expects 2010 sales volumes to range from 211-224 thousand BOE per day, with the midpoint of the range being up 3.5% compared to 2009 production. Going forward, the company expects volumes in U.S. to rise slightly due to onshore development activity and a partial year of production from the recently announced asset acquisition. This increase is expected to be offset by natural declines in the deepwater Gulf of Mexico.

Despite planned facility downtime in Equatorial Guinea, the international portfolio is expected to show growth, largely due to increased natural gas demand in Israel and ongoing development projects in the North Sea and China.

Furthermore, Noble has hedged about 80% of its expected 2010 natural gas production at an average floor price of $5.90 per thousand cubic feet. The company has also hedged 35% of its oil production at an average floor price of $61.48 per barrel.
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