Imperial Capital: Noble Energy On Track For Sustainable FCF Generation In 2020

Noble Energy, Inc. NBL is at an inflection point, with goals of lowering spending and increasing production in 2019, according to Imperial Capital.

The Analyst

Imperial Capital’s Irene Haas maintains an Outperform rating on Noble Energy with a $39 price target. 

The Thesis

Noble Energy recorded revenue, adjusted EBITDA and cash flow per share of $5 billion, $3 billion and $4.93, respectively, for the 12 months ended Dec. 31, 2018.

On that day, the company had cash of around $716 million, $6.7 billion in long-term debt and total liquidity of $4.7 billion, Haas said in a Wednesday note. 

For 2019, Noble Energy has guided to consolidated capex of around $2.7 billion. This is lower than the $3.5 billion recorded in 2018 and is below Imperial Capital’s estimate of $3.8 billion.

The company expects 5-percent production growth, with growth in onshore U.S. offsetting a decline in production from West Africa and flat production from Israel, the analyst said. 

Noble Energy expects to grow production by 15-20 percent in 2020, alongside a 15-20-percent decline in spending and free cash flow generation of $500 million.

Imperial Capital raised its 2019 EBITDA and CFPS estimates for Noble Energy from $2.802 billion to $2.831.9 billion and from $4.99 to $5.22, respectively.

Price Action

Shares of Noble Energy rose slightly to close trading at $23.70 on Tuesday.

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