Noble Energy Inc. (NBL) reported adjusted earnings per share of $1.35 for the first quarter of 2011, which surpassed the Zacks Consensus Estimate of $1.16. The quarterly results were way above the year-ago earnings of 78 cents per share reported by the company.
The year-over-year growth in earnings was mainly driven by a 9% increase in sales volume.
Revenue
Noble Energy's net revenue of $899 million in the first quarter was way above the Zacks Consensus Estimate of $800 million and 22.6% higher than $733 million reported in the first quarter of 2010.
The year-over-year growth in revenue during the quarter was driven by better performance of crude oil and condensate (up 39.8%) and natural gas and natural gas liquids (NGL) (up 11.54%).
Operational Results
Total first quarter sales volumes for Noble grew 9.1% from the year-ago quarter to 215 thousand barrels of oil equivalent per day (MBoe/d), comprising 40% liquids, 31% international natural gas, and 28% domestic natural gas. Net volumes produced in the quarter totaled 216 MBoe/d.
Realized oil prices in the quarter improved significantly by $23.03 per barrel to $97.15 per barrel, representing a 31.1% growth from the year-ago quarter. Realized prices for NGL was up 6.3% to $47.80 per barrel from $44.98 per barrel in the year-ago quarter.
On the other hand, natural gas realizations for the company as a whole declined 23.2% year over year, mainly due to a 25.4% fall in the U.S. to $4.07 per thousand cubic feet from $5.46 per thousand cubic feet.
During the reported quarter Noble’s decision to produce more volumes from low-cost areas such as Equatorial Guinea and Israel, contributed in reducing the production cost per barrel of oil equivalent (Boe). The production costs including lease operating expenses, production and ad valorem taxes, and transportation were down 6% to $7.34 per Boe from the first quarter of 2010.
During the first quarter of 2011, Noble Energy went ahead with its horizontal Niobrara drilling program in the Central DJ Basin by drilling 12 additional wells. Additionally, it received the industry's first drilling permit post-moratorium to resume deepwater drilling in Gulf of Mexico for its Santiago prospect. The company also finalized field development drilling and well completions at the Aseng oil project offshore Equatorial Guinea
Financial Update
Cash and cash equivalents of Noble Energy as of March 31, 2011 were $1.42 billion versus $1.08 billion as of December 31, 2010.
Long-term debts as of March 31, 2011 were $2.8 billion versus $2.27 billion as of December 31, 2010. During the quarter the company issued $850 million of 30-year unsecured notes and enhanced liquidity position to over $3.5 billion between cash and available credit.
Capital expenditure for the first quarter 2011 was $579 million versus $958 million at the end of the first quarter 2010. Capital expenditure in the year-earlier period included $509 million for the DJ Basin asset acquisition.
In 2011, the company expects to spend $2.7 billion on capital expenditure, with investments split evenly between the U.S. and international operations
Discretionary cash flow for the quarter was $576 million versus $447 million a year ago.
Guidance
The company expects its second quarter 2011 volumes to average 208 to 218 MBoe/d, while keeping its 2011 guidance unchanged. The company expects mixed performance in the U.S. in the sequentially following quarter as growth from the DJ Basin development programs will be offset by natural declines in the onshore natural gas and offshore areas.
The company expects its volumes from international operations to come in a little lower in the second quarter due to planned downtime in the North Sea and Equatorial Guinea.
The company estimates interest expenses for 2011 in the range of $50 million to $60 million owing to a recent debt offering.
Our Take
The company's impressive results during the quarter were supported by its strong sales revenue. We believe receiving the necessary permit to resume drilling at the Santiago prospect in the deepwater Gulf of Mexico removed a major concern for the company.
Noble Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain a Neutral rating on the stock. The company competes with Anadarko Petroleum Corporation (APC), which is scheduled to release its earnings next week.
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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