On Jul 5, 2013, the shares of Noble Energy Inc. (NBL) climbed to its 52-week high of $62.76 primarily on the back of the company’s strong liquidity position, a series of property sales and solid exploration ventures. We believe these catalysts will likely enhance its future performance.
Noble Energy strives to maintain a stable liquidity position to keep its financials sound. The cash balance as of Mar 31, 2013 was $1.3 billion while discretionary cash flow for the first quarter was $761 million. The company’s available liquidity at the end of Mar 31, 2013 was $5.3 billion. In 2013, the company intends to invest $3.9 billion for several projects. A strong liquidity position will help Noble Energy to meet its future capital requirements.
Recently, Noble Energy made a number of significant transactions. The company inked a deal with the Cyprus government for the development of a Liquefied Natural Gas terminal on the Eastern Mediterranean. The company reported positive appraisal results from its Gunflint prospect in the deepwater Gulf of Mexico. Further, Noble Energy announced its seventh natural gas discovery at the Karish field off the coast of Israel in the Levant basin.
Apart from investment in growth projects, Noble Energy’s strong liquidity position allows it to improve shareholder value through regular dividend payments. Recently, the quarterly dividend rate increased 12% to 28 cents per share from 25 cents.
The present valuation makes the shares of Noble Energy look attractive. The forward price/earnings (“P/E”) multiple of 26.0x is lower than the peer group average of 27.6x, reflecting a discount of 5.8%. In addition, Return on Equity ("ROE") of the company is 10.8%, higher than the peer group average of 7.0%.
Noble Energy currently has a Zacks Rank #3 (Hold). However, other stocks in the industry that are worth considering include Encana Corporation (ECA), Oasis Petroleum Inc. (OAS) and PetroQuest Energy Inc. (PQ), each with a Zacks Rank #1 (Strong Buy).
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