Noble Energy Inc. ( NBL - Analyst Report ) , an independent oil and gas exploration and production company, having high-grade hydrocarbon assets across the U.S. and several international locations is scheduled to release its third-quarter 2012 financial results before the market bell on October 25, 2012.

Recap, Second-Quarter 2012

Noble Energy reported overall lackluster financial results in the second quarter 2012 with earnings of 77 cents per share missing the Zacks Consensus Estimate of 98 cents as well as the year-ago earnings of $1.44 per share. Quarterly earnings plummeted mainly due to a decline in the average realized price of the products sold and a steep rise in total costs.

Revenue in the said quarter increased 14.7% to $966 million from $842 million in the year-ago quarter. However, revenue fell short of the Zacks Consensus Estimate by $1,018 million.

The top-line growth was largely attributed to strong contribution from crude oil and condensate, while the results were partly pulled down by lower natural gas and natural gas liquids (“NGL”) prices.

Guidance 2012

Noble Energy expects third quarter 2012 sales volumes to average 242–250 thousand barrels of oil equivalent per day (MBoe/d). The company expects its sales volumes to improve from the second quarter due to greater contribution from Galapagos, continuation of the drilling programs in DJ Basin and Marcellus Shale, and encouraging sales in Israel. For 2012, the volume range is projected to be between 236 Mboe/d to 244 Mboe/d.

Zacks Consensus

The Zacks Consensus Estimate for the third quarter 2012 is $1.02 per share, lower than the earnings of $1.24 per share recorded in the comparable quarter, last year. At present, the Zacks Consensus Estimate for earnings of the aforementioned period range from 74 cents per share to $1.21 per share.

For full-year 2012, the Zacks Consensus Estimate is $4.89 per share, down from $5.31 per share reported in the prior year. The present Zacks Consensus Estimate ranges between $4.11 per share and $5.39 per share.

Estimate Revisions Trend

Agreement

We witness mixed estimate revisions at this point. Among a total of 19 estimates, 6 estimates moved downwards while 7 estimates moved up in the past 30 days for the third quarter. In the past 7 days, 3 estimates inched down and 2 jumped up.

For 2012, 7 out of 17 estimates moved downwards while 6 estimates moved north in the past 30 days. The last 7 days observed 4 estimates climbing up and 2 moving downward out of an aggregate of 17 estimates.

Magnitude

The Zacks Consensus Estimate for the third quarter fell by 3 cents in the last 30 days and simultaneously the last 7 days witnessed estimate shrink by a penny.

For 2012, the consensus estimate decreased by 4 cents to $4.89 in the past month. However the fall was much more pronounced by 8 cents in the first three weeks of the past month. The trend was buckled only in the past week which witnessed sharp recovery of 4 cents for the 2012 Zacks Consensus Estimate.

Surprise History

With respect to earnings surprise, the company surpassed our expectation in the last three out of four quarters.

The earnings surprise in the last four quarters ranged from (21.43%) to 23.24%. The average surprise over the last four quarters was 6.89%.

Our Recommendation

Noble Energy’s successful non-core asset divestitures in the first half of 2012 have lent constancy to its stock profile. We believe the company’s new strategy of optimizing its global oil and natural gas assets will generate favorable returns.

The projected increase in energy consumption in the US market and a steady rise in crude oil and slowly recovering natural gas prices in the international market are expected to act as growth catalysts for the company in the near term.

However, regulatory risks could result in higher capital expenditures and potential increase in exploratory costs could hurt margins. Other negatives include commodity price fluctuations, rise in the prices of key fuel inputs without an offsetting rise in power prices and weather irregularities.

Noble Energy operates in a highly competitive energy market and faces intense competition from companies like Anadarko Petroleum Corporation ( APC - Analyst Report ) and Apache Corp. ( APA - Analyst Report )

Currently, we are maintaining a long-term Neutral recommendation on Noble Energy Inc. The company has a Zacks #3 Rank implying a short-term Hold rating on the stock.