Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update
Noble Highlights Completion Ops in 1Q; Pulls in $1.4B in Revenues
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Noble Energy, Inc. reported first quarter 2014 net income of $200 million, or $0.55 per diluted share on total revenues of $1.4 billion.
Excluding the impact of certain items which would typically not be considered by analysts in published earnings estimates, first quarter 2014 adjusted income was $298 million, or $0.82 per diluted share. Discretionary cash flow was $870 million and net cash provided by operating activities was $929 million. Capital expenditures for the first quarter 2014 totaled $951 million.
Key highlights for the first quarter of 2014 include:
- Total sales volumes of 286 thousand barrels of oil equivalent per day (MBoe/d), an increase of 20 percent from the first quarter of 2013, after adjusting for divested assets
- Delivered record horizontal production of 100 MBoe/d on average from the DJ Basin and Marcellus Shale plays, up over 60 percent versus the first quarter of last year
- Performed completion operations on initial vertical well in the Wilson play of NE Nevada, successfully recovering oil from multiple intervals
- Apparent high bidder on 12 deepwater lease blocks in the Central Gulf of Mexico Lease Sale 231
- Signed the first two regional export sales agreements for natural gas sales from Tamar and Leviathan to customers in Jordan and the Palestinian Authority
- Finalized agreement with the Israel Anti-Trust Authority
- Executed sales agreements to divest the Company's E. Texas, N. Louisiana and Powder River Basin assets
Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "Following on our strong 2013, Noble Energy continues to deliver on its growth objectives, with the first quarter laying a good foundation from which to build on for the remainder of the year. In our U.S. unconventional areas, we are creating substantial value in the DJ Basin and Marcellus development programs, through material production growth, facility and well efficiencies, and an increased application of extended reach laterals. Although early, I am quite pleased with initial drilling and completion results in our Nevada exploration play. Offshore, we are moving forward our next round of developments, including projects in the deepwater Gulf of Mexico, West Africa and Israel. The progress we have made recently regarding the Leviathan project offshore Israel has been remarkable, and we are close to executing a number of domestic and regional export sales agreements to support the field's development. We are also excited about our exploration prospects this year, with Katmai currently drilling in the deepwater Gulf of Mexico."
Operational Update
Noble has updated its operational segments, which can be accessed below:
Noble Touts DJ Basin Extended Reach Laterals, Downspacing Programs
Noble Hits 227 MMcfe/d Record in the Marcellus; Talks Laterals
Noble to Ramp Up Exploration Ops at GoM Projects
Volumes and Prices
First quarter 2014 sales volumes averaged 286 MBoe/d, an increase of 20 percent compared to the first quarter of 2013, after adjusting for divested assets. United States sales volumes comprised 57 percent of the total and the remaining 43 percent came from International operations. U.S. volumes increased 16 percent compared to the same quarter of last year, after adjusting for divested assets, driven by the continued development of the unconventional DJ Basin and Marcellus Shale plays. Internationally, volumes increased 23 percent compared to the first quarter of last year due to the Tamar natural gas field in Israel and the Alen condensate field in Equatorial Guinea, both of which commenced operations in 2013. Total sales volumes for the quarter were less than production volumes by 2 MBoe/d due to the timing of liftings in Equatorial Guinea.
Global crude oil and condensate prices averaged $100.23 per barrel for the first quarter of 2014. Natural gas realizations averaged $4.81 per thousand cubic feet (Mcf) in the U.S. and $5.60 per Mcf in Israel. Natural gas liquid pricing in the U.S. averaged 45 percent of the average West Texas Intermediate crude oil price for the quarter.
Expenses
First quarter 2014 total production costs, including lease operating expense (LOE), production and ad valorem taxes, and transportation and gathering averaged $9.01 per barrel of oil equivalent (Boe). Total company LOE was $5.64 per Boe, up slightly from the same period in 2013 as a result of the impact of major offshore project startups in 2013. Depreciation, depletion and amortization (DD&A) per Boe was $16.50, down slightly from the first quarter 2013 unit rate. Exploration expense for the quarter was $74 million, which had no substantial dry hole costs and included seismic expenditures associated with a 3D survey acquisition completed offshore the Falkland Islands.
Included in the adjustments to net income for the first quarter of 2014 was an impairment recorded to the Company's North Sea assets to reflect the updated estimate of abandonment cost and timing. Also adjusted from earnings was a non-cash commodity derivative loss. The effective tax rate on adjusted earnings for the quarter was 29 percent and the deferred tax rate on adjusted earnings was 50 percent.
Updated Guidance
To date in 2014, the Company has executed sales agreements for certain non-core U.S. onshore assets, including its positions in the E. Texas, N. Louisiana, Tri-State and the Powder River Basin. In addition, the Company is finalizing an agreement to divest its offshore China assets in the Bohai Bay. Combined, these assets were producing in excess of 10 MBoe/d at the beginning of 2014. The onshore U.S. asset sales either have closed or are planned to close by the end of April, and the China asset sale is anticipated to close in mid-2014. These assets are expected to impact volumes by approximately 6 MBoe/d on average for 2014.
As a result of these transactions, Noble Energy has adjusted its full year 2014 volume guidance to a range of 302 to 310 MBoe/d, with the midpoint of the range reflecting the 6 MBoe/d from these divestments. Second quarter 2014 volumes are anticipated to be between 290 and 296 MBoe/d, taking into account the U.S. onshore asset sales.