Noble Energy Inc. (NBL) reported adjusted earnings from continuing operations of 50 cents per share for the fourth quarter of 2013, failing to meet the Zacks Consensus Estimate by 24.2%. The quarterly results also dropped by a wide 35.9% from year-ago earnings of 78 cents per share, mainly due to a surge in operating expenses.
However, full year 2013 earnings increased 20.4% year over year to $2.89 per share, buoyed by record production volumes. Yet, the figure missed our expectation by 5.6%. The year-over-year improvement mainly stemmed from increased production activities in the domestic plays as well as higher sales from Noble Energy’s Tamar natural gas field and Alen condensate field in offshore Israel and Equatorial New Guinea, respectively.
Total Revenue
Noble Energy's total revenue jumped 13.8% year over year to $1,328.0 million in the fourth quarter. Quarterly revenue scraped through the Zacks Consensus Estimate of $1,326.0 million.
The year-over-year rise in revenue was attributable to an 8.2% and an 18.3% jump in crude oil and condensates as well as natural gas sales, respectively, compared to the year-ago quarter.
In 2013, total revenue was $5,015.0 million, an increase of 18.8% from the year-ago level of $4,223.0 million and 1.2% from our projection of $4,955.0 million.
Operational Results
After adjusting for asset divestitures, Noble Energy's sales volume from continuing operations in the quarter surged 16% year over year to 293 thousand barrels of oil equivalent per day (MBoe/d). Production volumes outstripped sales volume due to the timing of liftings in Equatorial New Guinea. The sales volume mix comprised 45% natural gas liquids, 29% international gas and 26% U.S. gas.
In the U.S., Marcellus and Denver/Julesburg ("DJ") basins continued with its production streak. Total domestic volumes in the fourth quarter 2013 upped 14% year over year to 166 MBoe/d.
International volumes followed suit, increasing sharply by 19% year over year to 127 MBoe/d owing to major contribution from the Tamar natural gas play.
Total operating expenses increased 21.6% year over year to $980.0 million due to a substantial 137.2% rise in exploration expenses during the quarter. As a result, the company’s quarterly operating income dropped 3.6% to $348.0 million from the year-ago period.
Realized Prices
Realized oil prices in the quarter rose to $98.09 per barrel from $97.98 per barrel in the fourth quarter of 2012 owing to favorable crude oil prices in the U.S and Equatorial Guinea.
Natural gas realizations escalated 14.5% year over year to $2.93 per thousand cubic feet due to strong gas prices in the U.S.
Realized prices for natural gas liquids moved up 6.8% to $39.38 per barrel from $36.86 per barrel in the year-ago quarter.
Financial Highlights
Noble Energy's cash and cash equivalents as of Dec 31, 2013 were $1,117.0 million versus $1,387.0 million as of Dec 31, 2012.
Long-term debts as of Dec 31, 2013 were $4,566.0 million versus $3,736.0 million as of Dec 31, 2012.
Discretionary cash flow for the fourth quarter was $925.0 million versus $841.0 million in the prior-year quarter.
Guidance
In Dec 2013, Noble Energy unveiled its 2014 total sales volumes and capital expenditure guidance.
For 2014, Noble Energy expects total average sales volumes in the range of 302–322 MBoe/d. Out of this, liquid, U.S. natural gas and international natural gas are expected to comprise 46%, 29% and 25%, respectively. At the midpoint of the guidance, total average sales volumes will likely be 18% higher than the 2013 level on the heels of strong contribution from the Tamar and the DJ Basin operations. Successful horizontal programs at the Marcellus Shale will also contribute to the surge in volumes.
For 2014, Noble Energy projects capital investment of $4.8 billion. Of the total investment planned, the company intends to invest $3.2 billion for U.S. onshore development activities and $1.5 billion for Global Deepwater programs. The rest will be assigned for corporate activities. In addition, the company provided its 2014 exploration expenses guidance in the range of $0.4–$0.5 billion.
Proved Reserves
At the end of 2013, Noble Energy had approximately 1,406 million barrels of oil equivalent (Bboe), up 18.8% from 2012. In 2013, U.S. reserves accounted for 55% of the total, while the balance 45% came from International reserves. Of the total proved reserves, 60.4% were of the developed category.
Other Oil & Gas Company Release
Anadarko Petroleum Corporation (APC) posted fourth-quarter 2013 adjusted earnings of 74 cents per share, missing the Zacks Consensus Estimate by 20.4%. Quarterly earnings were also 18.7% lower than the year-ago level, primarily due to a decrease in revenues, higher total costs and expenses and an increase in outstanding shares.
Our View
Noble Energy reported mixed financial results in the fourth quarter of 2013 with the top line beating the Zacks Consensus Estimate and the bottom line missing the same. The DJ and Marcellus basins will continue to act as key sales drivers for the company. Moreover, its exploration ventures in Eastern Mediterranean are expected to fetch lucrative returns. Noble Energy currently retains a Zacks Rank #3 (Hold). However, other better-ranked stocks from the same industry include Athlon Energy Inc. (ATHL) and Cabot Oil & Gas Corporation (COG), each with a Zacks Rank #1 (Strong Buy).
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