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Noble Energy (NBL) Seals Crude Oil Transport Deal With EPIC

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Noble Energy, Inc. finalized an agreement with EPIC Pipeline, LP (“EPIC”) to transport crude oil from Delaware Basin area to Corpus Christi, TX. Per the contract, the company will start transporting 100 thousand barrels of oil per day (MBbl/d) through EPIC pipelines for a period of 10 years starting from the second half of 2019.  

The 730-mile EPIC crude oil pipeline has a total capacity of 590 MBbl/d and will connect the Permian Basin and the Eagle Ford area to the Port of Corpus Christi. Along with Nobel Energy, Apache Corporation (APA - Free Report) — one of the largest acreage holders in the Permian Basin — has secured oil transportation of 75 MBbl/d.

Details of the Deal

Noble Energy consistently focuses on U.S. onshore operations to strengthen cash flow and margin. The company is planning to invest nearly 70% of its planned 2018 capital expenditures for the development of these assets.

Going forward, onshore production is projected to be a major contributor to Noble Energy’s total output. The company focuses on the Delaware Basin and expects higher volumes from this region.

Further, the deal will diversify Noble Energy’s onshore marketing outlets with access to global markets at an attractive pipeline transport cost.

What Comes Next?

Per the deal, Noble Energy has secured options to acquire up to 30% ownership in the EPIC crude pipeline and around 15% ownership in the EPIC NGL pipeline.  The company is require to exercise the options by the first quarter of 2019.

Rising production volumes in the Permian Basin and the Eagle Ford area will increase the importance of EPIC’s pipelines. We believe that acquiring a portion of the pipeline will act as a tailwind for Noble Energy and boost earnings.

Price Performance

Shares of Noble Energy have outperformed the industry in the last 12 months. The company’s shares have returned 10.7% compared with the industry’s rise of 6.1%.

 



 

Zacks Rank & Key Picks

Noble Energy carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same industry are Bonanza Creek Energy, Inc. and Anadarko Petroleum Corporation . While Bonanza Creek Energy sports a Zacks Rank #1 (Strong Buy),  Anadarko Petroleum carries a Zacks Rank #2 (Buy) . You can see the complete list of today’s Zacks #1 Rank stocks here.

The companies reported an average positive earnings surprise of 215.36% & 89.24%, respectively, in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 8.5% and 4.8% in the last seven days, respectively.

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