Houston-based Noble Energy Inc. (NBL) entered into an agreement for sale of its Kansas oil and natural gas assets to a unit of privately-owned Citation Oil & Gas Corporation for a sum of $140 million. The deal is expected to close in September 2012.
Assets involved in the company’s divestiture program include 250 producing wells on an area of roughly 14,000 acres. The area is mainly used for crude oil production. The Kansas play’s current production capacity is approximately 1000 barrels of oil equivalent per day with net proved reserves of 7 million barrels of oil equivalent.
This is the third sale undertaken by the company and is a part of its proposed asset divestment program. With this asset sale, Noble Energy completed the first phase of divestment in the onshore domestic market. Previously, Noble Energy had divested its assets in the Permian Basin and in Texas and Oklahoma for an aggregate amount of $937 million.
Meanwhile, the company also completed the sale of Dumbarton and Lochranza properties in the North Sea as announced in May 2012 for an amount of $117 million. In total, these transactions are expected to generate roughly after-tax proceeds of $1.1 billion by the end of the third quarter 2012.
Noble Energy aims to sell a series of small-scale assets located in the Mid-continent, Gulf Coast, San Juan, and Ark-La-Tex areas and the remaining North Sea resources over the period 2012 through 2013.
The gains from this sale will help the company to reinvest in its core operations like the Denver-Julesburg (DJ) Basin in Colorado and Wyoming as well as the Marcellus play, thereby enhancing future profitability. In addition, the proceeds would improve Noble Energy’s liquidity position and enable it to acquire other lucrative properties which would fetch higher returns. We believe the divestiture of these properties also cushioned Noble Energy’s operations from the ongoing depressed crude oil prices.
The company projects third quarter 2012 sales volumes to average 242–250 MBoe/d (thousand barrels of oil equivalent per day). Noble Energy expects its sales volumes to improve owing to higher contribution from Galapagos, continuation of the drilling programs in DJ Basin and Marcellus Shale, and increased sales in Israel.
The company also raised its 2012 volume guidance at the midpoint by 2 MBoe/d on a pro forma basis. The new 2012 volume range is at 236 Mboe/d to 244 Mboe/d.
Noble Energy’s closest peer, Anadarko Petroleum Corporation (APC), monetized a part of its holding in the Lucius development project in Gulf of Mexico and in the Salt Creek field in Wyoming, which led the company to accrue a total of $956 million.
The Zacks Consensus Estimates for the third quarter and full-year 2012 are currently at $1.09 per share and $5.09 per share, respectively. Noble Energy holds a Zacks #3 Rank, which translates into a short-term Hold rating.
Noble Energy is an independent exploration and production (E&P) company, having high-grade hydrocarbon assets across the U.S. and several international locations. Noble Energy chiefly focuses on organic growth from exploration and development drilling activities. This is further strengthened by suitable mergers and acquisitions and divestiture of non-core assets.
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