Noble Energy Remains Neutral

We reiterate our Neutral recommendation on Noble Energy, Inc. (NBL - Analyst Report). In the first quarter of 2012, the company’s earnings surpassed the Zacks Consensus Estimate and the year-ago quarter earnings. This year-over-year growth was primarily driven by higher sales volume in both U.S. and international operations.

Noble Energy’s revenue and operating results greatly depend on crude oil and natural gas prices. The volatility in their prices directly impacts the company’s financial results and the price of its common stock.

Noble Energy has a balanced portfolio of high-quality oil and gas properties across the U.S. and several international territories. In the U.S., the onshore assets provide steady performance while offshore assets in the deepwater Gulf of Mexico offer considerable growth opportunities in the medium and longer term. As far as international operations are concerned, the company has a significant presence in Equatorial Guinea and Israel with low-cost of operations and a long-term production base.

In addition, Noble Energy is modernizing its drilling activities, which include water storage, infield transport lines and storage ponds. Subsequently, these upgrade programs will enable the company to curtail its production costs related to minimization of transportation and procurement costs.

On the flip side, Noble Energy’s operations are concentrated in certain regions of the U.S. and foreign countries. These core energy resource areas are the key areas for exploration activities. In the event of disruption of business at any of these locations owing to government intervention, accidents or natural disasters would adversely affect the company’s future production and cash flow.

The company expects second quarter and full year 2012 average sales volume to be in the range of 224–232 thousand barrels of oil equivalent per day (“MBoe/d”) and 244–256 MBoe/d, respectively. As per the Zacks Consensus Estimates, Noble Energy’s second quarter and full year 2012 earnings are pegged at $1.29 and $6.25 per share, respectively.

Noble Energy, Inc. currently retains a Zacks #3 Rank (short-term Hold rating). The company competes with Anadarko Petroleum Corporation (APC - Analyst Report).

Based in Houston, Texas, Noble Energy, Inc. operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids.