Noble Posts Favorable Q1 Earnings - Analyst Blog

Noble Energy Inc. NBL reported adjusted earnings from continuing operations of 82 cents per share for the first quarter of 2014, breezing past the Zacks Consensus Estimate by 9.3%. The quarterly results also increased 13.8% from the year-ago earnings of 72 cents per share.

The outperformance reflects continued production growth in the U.S. onshore plays as well as rising volumes from international assets.

On a GAAP basis, earnings were 55 cents per share versus earnings of 72 cents in the prior-year quarter. The variance between GAAP and pro forma earnings was due to a 12 cent loss from commodity derivatives, a 27 cent loss from asset impairments and a 12 cent gain from income tax adjustments.

Total Revenue

Noble Energy's total revenues shot up 20.6% year over year to $1,379 million in the first quarter. Quarterly revenues also beat the Zacks Consensus Estimate by 2.3%.

The year-over-year upswing was attributable to a whopping 81.6% and 34.5% jump in natural gas and liquids sales, respectively.

Operational Results

After adjusting for asset divestitures, Noble Energy's sales volume from continuing operations in the quarter surged 20% year over year to 286 thousand barrels of oil equivalent per day (MBoe/d). Production volumes surpassed sales volume due to the timing of liftings in Equatorial New Guinea.

In the U.S., Marcellus and Denver/Julesburg ("DJ") basins were yet again the prime volume drivers.  Total domestic volumes in the first quarter 2014 expanded 16% year over year to 163 MBoe/d.

International volumes followed suit, increasing sharply by 23% year over year to 116 MBoe/d owing to increased contribution from the Tamar gas and Alen condensate fields located in the Eastern Mediterranean as well as in Equatorial New Guinea, respectively.

Total operating expenses during the quarter increased 35.8% year over year to $975 million due to a substantial 23.9% rise in lease operating expenses. Operating income fell 4.9% year over year to $404 million as cost inflation more than offset the revenue upturn.

Realized Prices

Realized oil prices in the quarter dipped to $100.23 per barrel from $100.90 per barrel in the year-ago period owing to lower international prices.

Natural gas realizations escalated 47.3% year over year to $3.83 per thousand cubic feet due to strong gas prices in the U.S. and Israel.

Realized prices for natural gas liquids upped 13.5% to $44.50 per barrel from the year-ago quarter.

Financial Highlights

Noble Energy's cash and cash equivalents as of Mar 31, 2014 were $1,354 million versus $1,117 million as of Dec 31, 2013.

Long-term debts as of Mar 31, 2014 were $5,011 million versus $4,566 million as of Dec 31, 2013.

Discretionary cash flow for the first quarter was $870 million versus $757 million in the prior-year quarter.

Guidance

Noble Energy narrowed its 2014 volume guidance to the range 302−310 Mboe/d from the prior 302−322 Mboe/d reflecting the divestment of certain non-core U.S. assets as well as assets located off the coast of China.

The company projects second quarter volumes to be in the band 290−296 MBoe/d including adjustments related to domestic asset divestiture.

Other Upcoming Release

Range Resources Corp. RRC is slated to release its first-quarter earnings results on Apr 28, 2014. The Zacks Consensus Estimate for the first quarter is 38 cents.

Abraxas Petroleum Corp. AXAS is scheduled to release its first-quarter earnings results on May 8, 2014. The Zacks Consensus Estimate for the first quarter is 5 cents.

EOG Resources Inc. EOG is scheduled to release its first-quarter earnings results on May 5, 2014. The Zacks Consensus Estimate for the first quarter is $1.19.

Our View

Noble Energy reported a stellar top- and bottom-line beat in the first quarter 2014 thanks to a superior performance from both its domestic and foreign assets.

Looking ahead, Noble Energy's Tamar and Leviathan assets will continue to drive sales given the hot demand for gas in Israel. The company's recent export sales agreement with Jordan and Palestine will further consolidate sales.

Noble Energy currently carries a Zacks Rank #3 (Hold).