Noble Energy, Inc. is scheduled to report third-quarter 2016 results on Nov 2, before the market opens. Last quarter, the company reported a positive earnings surprise of 22.58%. It is worth noting that Noble Energy has outperformed the Zacks Consensus Estimate in three out of the trailing four quarters, with an average positive surprise of 296.11%.

 Let’s see how things are shaping up for this quarter.

Factors to Consider

Volatility in crude oil prices in the third quarter is expected to weigh on Noble Energy’s top line. In fact, the commodity price environment is expected to remain challenging through the second half of 2016 into 2017.

Late in the third quarter, Noble Energy entered into a gas sales and purchase agreement to supply natural gas from the Leviathan fields to Jordan’s National Electric Power Company Ltd. for electricity production. Gross revenue from this deal is expected to touch $10 billion, thereby substantially boosting Noble Energy’s revenues.

Further, in July, the company commenced production at the Gunflint oil development field in the deepwater Gulf of Mexico, which is expected to boost crude oil production, going forward.

Additionally, seasonal demand in Israel is expected to peak in the third quarter and the government’s mandate of reducing coal-fired power generation will drive demand for natural gas supplied by Noble Energy to the country.

For the third quarter, Noble Energy expects capital expenditure in the range of $400–$450 million and total sales volumes in 405–415 MBoe/d band. Nearly 80% of the planned third quarter expenditure will be directed toward the U.S. onshore assets.

However, Eagle Ford production volumes will be lower in the third quarter owing to shut-in impacts for offsetting fracking activity.

Earnings Whispers

Our proven model does not conclusively show that Noble Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -9.09%. This is because the Most Accurate estimate is pegged at a loss of 24 cents and the Zacks Consensus Estimate stands at a loss of 22 cents.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Though Noble Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Peer Release

Murphy Oil Corporation (MUR Quick QuoteMUR - Free Report) reported third-quarter 2016 loss of 18 cents per share, narrower than both the Zacks Consensus Estimate of a loss of 21 cents and the year-ago loss of 72 cents.

Stocks to Consider

Here are a couple of stocks in the Oil-U.S. Exploration & Production space worth considering on the basis of our model, as they have the right combination of elements to post an earnings beat this quarter:

Cobalt International Energy, Inc. has an Earnings ESP of +20.00% and a Zacks Rank #3. The company is expected to release third-quarter 2016 results on Nov 1.

Apache Corp. (APA Quick QuoteAPA - Free Report) is expected to release third-quarter 2016 results on Nov 3. The company has an Earnings ESP of +7.14% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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