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Noble Energy Inc. (NBL - Free Report) reported adjusted earnings per share of $1.65 for the fourth quarter 2012, which comfortably surpassed the Zacks Consensus Estimate of $1.07. The quarterly results increased 6.4% from the year-ago earnings of $1.55.

GAAP earnings during the quarter were $1.39 compared with a loss of $1.67 in the year-ago period. The difference between the GAAP and operating figures during the quarter was due to unrealized commodity derivative instruments gains of 20 cents, asset impairment charges of 18 cents and a 7 cent loss on divestiture. Income tax adjustment accounted for 6 cents and includes a 15 cent loss from discontinued operations.

Operating earnings per share in 2012 were $4.95 versus $5.06 in 2011. Adjusted earnings per share were in line with the Zacks Consensus Estimate.


Net revenue rose sharply by 30.1% to $1,167 million in the fourth quarter from $897 million in the year-ago quarter. Quarterly revenue beat the Zacks Consensus Estimate by 3.1%.

The year-over-year rise in revenue was attributable to a superior performance from the crude oil and condensate segment.

Total revenue for 2012 was $4,223.0 million versus $3,404.0 million in 2011. The results however trailed the Zacks Consensus Estimate of $4,263 million.

Operational Results

Sales volumes in the quarter grew 18% year over year to 255 thousand barrels of oil equivalent per day (MBoe/d). The volume expansion was a function of strong production from the company’s international and domestic operations.

In the U.S., Marcellus and Denver/Julesburg ("DJ") Basin prospects were the primary output drivers with production from the former surging 19% and the latter by 15% from the third quarter 2012. Total domestic volumes in the fourth quarter 2012 upped 31% year over year.

International volumes jumped 9% year over year to 106 MBoe/d. This was driven by higher output from the Aseng oil block in Equatorial New Guinea partially tempered by lower gas sales in Israel.

Production costs including lease operating expenses, production and ad valorem taxes, and transportation were up 1% to $7.97 per barrel of oil equivalent (Boe) from the fourth quarter of 2011.

However, total operating expenses fell significantly by 35.2% year over year to $806 million due to a substantial decline in asset impairment expenses.

Operating income during the quarter stood at $361 million compared with a loss of $347 million in the year-ago period. The steep fall in costs aided by a higher top line resulted in the company booking profits.

Realized Prices

Realized oil prices in the quarter decreased 2% year over year to $97.98 per barrel owing to depressed crude oil prices in overseas and domestic businesses.

Natural gas realizations for the company plummeted 7.9% year over year to $2.56 per thousand cubic feet on account of weak price levels in the U.S.

Realized prices for natural gas liquids (NGL) were down 20% to $36.86 per barrel from $46.11 per barrel in the year-ago quarter.

Proved Reserves

Noble Energy's estimated reserves at the end of 2012 were 1.2 billion barrels of oil equivalent (Bboe), up 3% from 2011 levels. The reserves consisted of 30% global liquids, 42% international natural gas, and 28% U.S. natural gas.  During the year the company added 121 million barrels of oil equivalent (MMboe) to total proved reserves.

Financial Update

Cash and cash equivalents as of Dec 31, 2012 were $1.3 billion versus $1.4 billion as of Dec 31, 2011.

Long-term debts as of Dec 31, 2012 were $3.7 billion versus $4.1 billion as of Dec 31, 2011.

Discretionary cash flow for the fourth quarter was $824 million versus $710 million in the year-ago quarter.


The company expects its 2013 sales volumes in the range 270 MBoe/d to 282 MBoe/d. The company expects first quarter 2013 volumes to average 238 MBoe/d to 242 MBoe/d. Lease operating expenses in the first quarter 2013 are expected in the range $6.20 to $6.60 per Boe.

Other Oil & Gas Company Releases

Anadarko Petroleum Corporation (APC - Free Report) reported earnings of 91 cents per share in the fourth quarter, beating the Zacks Consensus Estimate by 21 cents. Occidental Petroleum Corporation (OXY - Free Report) reported earnings of $1.83 per share in the fourth quarter, surpassing the Zacks Consensus Estimate of $1.66 for the quarter.

Our View

Noble Energy ended the year on a positive note breaking the negative earnings surprise trend in the previous two quarters. We anticipate the company’s multiple exploration programs in the U.S. and overseas will help maintain the growth momentum.

Its continued production ramp up at the DJ Basin and Marcellus plays and commencement of Tamar and Alen blocks will offer encouraging prospects. This will be further complemented by recent reservoir discoveries at the Carla block in Equatorial New Guinea and Big Bend in Gulf of Mexico.

However, the company’s key operations are in Africa which is a hotbed for political disturbance and hence could face potential disruption in activities.  Noble Energy currently retains a Zacks Rank #3 (Hold). Zacks Ranked #1 (Strong Buy) oil and gas operator Cabot Oil and Gas Corporation's (COG - Free Report) earnings are yet to be released.

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

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