Noble Energy Beats on Q2 Earnings, Projects Modest Volumes

Noble Energy Inc. NBL reported operating earnings of 87 cents per share for the second quarter of 2014, surpassing the Zacks Consensus Estimate by 10.1%. Earnings also increased 26.1% from 69 cents per share in the year-ago quarter.

The out performance reflects better sales volume and higher realized prices of products sold.
 

 

On a GAAP basis, Noble Energy's earnings were 52 cents per share versus $1.04 per share in the prior-year quarter. The variance between GAAP and pro forma earnings was due to a 52 cent loss from commodity derivatives, a 9 cent loss from asset impairments, a 12 cent gain from divestures and a 14 cent gain from income tax adjustments.

Total Revenue

Noble Energy's total revenues shot up 20.4% year over year to $1.38 billion in the second quarter. Quarterly revenues however lagged the Zacks Consensus Estimate by 1.5%.

The year-over-year upswing was attributable to a 18.9% and 17.4% increase in crude oil and condensate and natural gas sales, respectively.

Operational Results

Sales volumes in the second quarter averaged 290 thousand barrels of oil equivalent per day (MBoe/d), an increase of 14% compared to the second quarter of 2013, after adjusting for divested assets. U.S. sales volume constituted 57% of the total, while international volumes accounted for the balance.

In the U.S., Marcellus and Denver/Julesburg ("DJ") basins were yet again the prime volume drivers. Total domestic volumes in the second quarter 2014 expanded 25% year over year to 166 MBoe/d.

Noble Energy's total operating expenses during the quarter increased 8.4% year over year to $854 million due to a substantial 22.1% rise in general and administrative expenses. Operating income increased 46.5% year over year to $529 million on the back strong revenue growth.

Realized Prices

Realized oil prices in the quarter increased to $102.53 per barrel from $96.84 per barrel in the year-ago period owing to higher prices in domestic and international markets.

Natural gas realizations increased 10.1% year over year to $3.50 per thousand cubic feet (Mcf) due to strong gas prices in the U.S. and Israel.

Realized prices for natural gas liquids upped 15.3% to $34.66 per barrel from the year-ago quarter.

Financial Highlights

Noble Energy's cash and cash equivalents as of Jun 30, 2014 were $958 million versus $1,117 million as of Dec 31, 2013.

Long-term debts as of Jun 30, 2014 were $5,160 million versus $4,566 million as of Dec 31, 2013.

Discretionary cash flow for the second quarter was $887 million versus $765 million in the prior-year quarter.

Guidance

Noble Energy projects third quarter volumes in the band of 290 to 305 MBoe/d and fourth quarter volumes in the 310 to 330 MBoe/d range. The company expects second half volumes to be lower primarily due to more conservative assumptions in the DJ Basin for infrastructure capacity and timing of well tie-ins. In addition, underlifting in Equatorial Guinea and assets divesture in China will also lead to lower volumes.

Upcoming Releases

Devon Energy Corporation DVN is slated to release its second-quarter 2014 earnings on Aug 6. The Zacks Consensus Estimate is $1.40.

Pioneer Natural Resources Co. PXD is slated to release its second-quarter 2014 earnings on Aug 4. The Zacks Consensus Estimate is $1.25.

EOG Resources, Inc. EOG is slated to release its second-quarter 2014 results on Aug 5. The Zacks Consensus Estimate is $1.33.

Our View

We believe the long-term agreement signed by Noble Energy during the reported quarter to supply natural gas from its Leviathan and Tamar fields will further strengthen its position in the Eastern Mediterranean region.

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

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