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Noble Energy Beats Earnings and Sales

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Noble Energy Inc. (NBL - Free Report) reported adjusted earnings per share of $1.48 for the first quarter 2013, surpassing the Zacks Consensus Estimate by a sharp 21.3%. The quarterly results however dropped 10.3% from year-ago earnings of $1.65 per share.

Earnings slipped on account of lower natural gas liquids and crude oil prices as well as rising costs.

GAAP earnings during the quarter were $1.45 compared with earnings of $1.47 in the year-ago period. The difference between GAAP and operating figures during the quarter was due to an 8 cent gain from divestitures, 6 cent gain from other adjustments and a 43 cent charge from unrealized losses on commodity derivative instruments. Income tax adjustment accounted for 9 cents and discontinued operations fetched a gain of 17 cents.

Total Revenue

Net revenue increased 5.06% to $1,143.0 million in the first quarter from $1,088.0 million in the year-ago quarter. Quarterly revenue beat the Zacks Consensus Estimate by 4.2%.

The year-over-year rise in revenue was attributable to a higher overall sales volume compared to the year-ago quarter.

Operational Results

Sales volume in the quarter expanded 9% year over year to 245 thousand barrels of oil equivalent per day (MBoe/d). Volumes escalated due to robust production from the company’s domestic operations. Sales volume mix comprised of 48% natural gas liquids, 24% international gas and 28% U.S. gas.

In the U.S., Marcellus, Denver/Julesburg ("DJ") and Galapagos plays were the primary growth drivers.  Total domestic volumes in the first quarter 2013 upped 23% year over year. International volumes decreased 6% year over year to 99 MBoe/d owing to lower sales volume from Equatorial New Guinea operations due to scheduled underliftings of crude oil.

Production costs including lease operating expenses, production and ad valorem taxes, and transportation were up 4% to $8.45 per barrel of oil equivalent (Boe) from the first quarter of 2012.

Total operating expenses climbed 14.7% year over year to $718.0 million due to 24.4% and 15.5% increase in depreciation, depletion and amortization charges as well as general and administrative expenses, respectively.

Operating income during the quarter stood at $425.0 million, down 8% from $462.0 million in the year-ago period. The rise in costs relative to revenue expansion resulted in the company posting declining profits.

With successful appraisals in the Leviathan Basin, the gross resource estimate reached 18 trillion cubic feet (Tcf) up 5.8% from the prior estimate. In Tamar field the resource estimate touched 10 Tcf, up 11.1% from the earlier estimate.  

Realized Prices

Realized oil prices in the quarter decreased 8.2% year over year to $100.9 per barrel owing to depressed crude oil prices in overseas and domestic businesses.

Natural gas realizations for the company jumped 19.2% year over year to $2.60 per thousand cubic feet on account of higher price levels in the U.S. and Israel.

Realized prices for natural gas liquids were down 5.8% to $39.19 per barrel from $41.62 per barrel in the year-ago quarter.

Financial Highlights

Cash and cash equivalents as of Mar 31, 2013 were $1,305.0 million versus $1,387.0 million as of Dec 31, 2012.

Long-term debts as of Mar 31, 2013 were $3,723.0 million versus $3,736.0 million as of Dec 31, 2012.

Discretionary cash flow for the first quarter was $761.0 million versus $690.0 million in the prior year quarter.


The company retained its 2013 sales volume forecast in the range 270 MBoe/d to 282 MBoe/d. The company expects second quarter volumes to average 254 MBoe/d to 260 MBoe/d. The company is expected to benefit from the sales related to the Tamar prospect, going forward. Production volumes are estimated to average roughly 300 MBoe/d in the latter half of 2013.

Other Oil & Gas Company Releases

Anadarko Petroleum Corporation (APC - Free Report) is expected to release first quarter results on May 6, 2013. The Zacks Consensus Estimate for the quarter is 90 cents.

Quicksilver Resources Inc. earnings are set to release on May 7, 2013. The Zacks Consensus Estimate for the quarter is at a loss of 2 cents.

EPL Oil & Gas Inc. is expected to bring out first quarter results on May 2, 2013. The Zacks Consensus Estimate for the quarter is 85 cents per share.

Our View

First quarter results at Noble Energy were promising with both earnings and revenue outpacing the Zacks Consensus Estimate. We believe the production start-up at Tamar natural gas field will boost the company’s returns in the subsequent quarters.

Following Tamar, the company’s Alen prospect in West Africa is on track to come online in the third quarter and will propel its growth trajectory. Moreover, operations at the resource-rich DJ and Marcellus Basin will continue to act as tailwinds, going forward. Noble Energy currently retains a Zacks Rank #3 (Hold).

Based in Houston, TX, 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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