Balanced View on Noble Energy - Analyst Blog

On April 3, we have issued an updated research report on Noble Energy, Inc. NBL. The independent oil and gas company continues with its active exploration and production activities in the U.S. and other international locations. We appreciate Noble Energy's effort towards increasing its reserves. However, volatile oil and natural gas prices and interruption of operations as a result of accidents and natural disaster are our cause of concerns.

Noble Energy, a Zacks Rank #3 (Hold) stock, posted mixed results in fourth-quarter 2013. Quarterly earnings missed the Zacks Consensus Estimate, while revenues beat the same. On a year-over-year basis, earnings edged down primarily due to increased operating expenses. However, reported revenues jumped from the prior-year figure mainly due to higher crude oil and condensates, and natural gas sales.

Noble Energy continues to show its efficiency in terms of steady reserve replacement activities with total reserve replacement of 369% in 2013.

In addition to expanding operations at the mineral-rich Denver/Julesburg (DJ) Basin and Marcellus Shale in onshore U.S., Noble Energy is currently active in the northeast Nevada. In the region, the company is increasing its functions and plans to drill more wells in 2014.

On the international front, Noble Energy's projects based in Leviathan in the offshore Israel, the Levant Basin in offshore Eastern Mediterranean, Cyprus and Falkland Islands will likely play an important role to improve its future reserves.

Noble Energy has correctly assessed demand for natural gas in the Eastern Mediterranean region. We believe future natural gas demand is expected to increase primarily on the back of a rise in power generation. The company has already inked several contracts with Israeli and Jordanian companies to provide natural gas. Noble Energy's sizeable natural gas reserves and steady expansion program in the region will enable it to meet increasing customer demand.

On the flip side, prices of Noble Energy‘s primary products are often quite volatile. An economic slowdown can impact the worldwide demand for energy commodities, resulting in reduction of oil and natural gas prices. The volatility in commodity prices can considerably affect the company's operating results.

Key Picks from the Sector

Other better-ranked stocks in this sector include Range Resources Corporation RRC, World Point Terminals, LP WPT and EOG Resources, Inc. EOG. While Range Resources and World Point Terminals carry a Zacks Rank #1 (Strong Buy), EOG Resources holds a Zacks Rank #2 (Buy).