On Aug 21, we have issued an updated research report on Noble Energy, Inc. (NBL). The company’s stable financial position, steady exploration and production (E&P) activities in domestic as well as international territories, focus on new discovery and practice of paying dividends will likely act as catalysts for its future growth. However, volatile commodity prices and operational disruption due to accidents as well as natural disasters are matters of concern.
Noble Energy, a Zacks Rank #3 (Hold) stock, posted mixed results in second-quarter 2014. Quarterly earnings surpassed the Zacks Consensus Estimate, while revenues missed the same. On a year-over-year basis, earnings increased primarily on the back of an improvement in sales volume and higher realized prices of products sold. Quarterly revenues improved from the prior-year figure mainly due to higher crude oil and condensate and natural gas sales.
Noble Energy maintains a steady financial position. As of Jun 30, 2014, the company had cash and cash equivalents of $0.96 billion, up 35.7% year over year. The improvement was primarily driven by a 41.2% year-over-year surge in operating cash flow during the second quarter of 2014. A stable financial profile enabled Noble Energy to pursue a systematic E&P program.
During the second quarter, Noble Energy made an exploration discovery at the Katmai prospect in Green Canyon off deepwater Gulf of Mexico. In 2014, the company plans to invest $4.8–$5.0 billion as capital expenditure. Currently, Noble Energy is expanding its operations in the Denver/Julesburg Basin and the Marcellus Shale in the U.S. and in the Eastern Mediterranean region and West Africa. These initiatives will enable the company to increase its future reserve base.
In addition, Noble Energy and CONSOL Energy Inc. (CNX) jointly plans to form a Midstream Limited Partnership. The proposed transaction will enable both the companies to meet increasing service demand in the Marcellus Basin along with enjoying a tax advantage.
Apart from investments in growth ventures, Noble Energy pays out dividends at regular intervals. In Apr 2014, the company increased its quarterly dividend rate by 29% to 18 cents per share from the prior payout. These initiatives will help the company to attract more investors to the stock.
However, prices of Noble Energy‘s primary products, oil and natural gas, are often volatile. An economic slowdown can impact the worldwide demand for energy commodities, resulting in lower prices. The volatility in commodity prices can considerably affect the company’s financial performance.
Key Picks from the Sector
Other better-ranked stocks in the sector include Sanchez Energy Corporation (SN) and Cimarex Energy Co. (XEC). While Sanchez Energy carries a Zacks Rank #1 (Strong Buy), Cimarex Energy holds a Zacks Rank #2 (Buy).
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