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Noble Energy Announces Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Organic capital expenditures of $664 million, below the low end of guidance. Full year 2015 capital is now estimated at slightly below $3 billion, a reduction of approximately $100 million from prior estimates.

Discretionary cash flow

was $708 million for the quarter.

Production costs, including lease operating expense, production taxes, and transportation & gathering averaged $6.74 per BOE, a 14 percent reduction from the second quarter of 2015.

Record quarterly sales volumes of 379 MBoe/d and increased volume guidance for the fourth quarter.

Closed the merger with Rosetta Reso urces Inc. on July 20, 2015.

Exited the third quarter of 2015 with $5 billion in liquidity, including cash on hand and unused capacity on the credit facility.

Recently commenced production from the Big Bend and Dantzler fields in the Gulf of Mexico.

Recently announced filing of a registration statement on Form S-1 by a wholly owned subsidiary in connection with a proposed initial public offering of common units of Noble Midstream Partners LP

HOUSTON

) (“Noble Energy” or “the Company”)

announced today a

quarter 2015 net loss of

$283 million

per diluted share. Excluding the impact of certain items which would typically not be considered by analysts in published earnings estimates,

quarter 2015 adjusted loss

$90 million

per diluted share. Included in the Company’s third quarter adjusted loss

was tax expense of $8 million, with a current tax benefit offset by a deferred tax expense. Results from the Company’s value change in commodity positions, exploration results, and forecasts for full year tax projections, amongst other factors, affected tax expense for the quarter

Total sales volumes for the quarter averaged 379 thousand barrels of oil equivalent per day (MBoe/d), with liquids comprising 44 percent (30 percent crude oil and condensate and 14 percent natural gas liquids) and natural gas the remaining 56 percent. Included in sales volumes for the third quarter of 2015 were the Eagle Ford Shale and Permian assets following the July 20

closing of the Rosetta Resources transaction. Legacy Noble Energy volumes totaled 337 MBoe/d for the quarter, an increase of 12 percent versus the comparable third quarter 2014 amount. Higher legacy volumes were driven by record sales from the Company’s DJ Basin, Marcellus Shale and Israel assets. Total sales volumes for the third quarter of 2015 were less than production by four thousand barrels per day (MBbl/d) due to the timing of liquid liftings in Equatorial Guinea.

David L. Stover, Noble Energy’s Chairman, President and CEO, commented, “Noble Energy delivered tremendous performance in the third quarter. This was highlighted by material reductions in our quarterly capital and controllable unit costs, which were driven by continued operational efficiency gains throughout the business. Production outperformed expectations once again, setting us up to operate within cash flow. Integration of the new Eagle Ford and Delaware assets is proceeding very well, and we have already experienced improved results by leveraging our expertise in other premier U.S. onshore basins. Offshore, our major project execution capabilities are once again delivering significant value, as we recently commenced production on both Big Bend and Dantzler in the Gulf of Mexico, ahead of schedule and on budget. Given our exceptional portfolio, we have substantial investment flexibility, and we are exiting the year with great operational momentum and strong financial liquidity.”

Third quarter 2015 total production costs, including lease operating expense (LOE), production taxes, and transportation and gathering declined to $6.74 per barrel of oil equivalent (BOE), a reduction of 14 percent versus the second quarter of 2015 and the third quarter of 2014. LOE was reduced to $3.81 per BOE in the third quarter of 2015, a decline of approximately 20 percent from the second quarter of this year and the third quarter of last year. Quarterly LOE per BOE is the lowest it has been over the last five years. The lower LOE rate has resulted from focused cost reduction and efficiency initiatives, supplier pricing negotiations, as well as the portfolio mix of production. General and administrative costs were $109 million, a reduction of more than $20 million versus the same quarter of last year. Realized gains on commodity derivatives, including crude oil, natural gas and natural gas liquids (NGL) hedges, were $284 million for the quarter.

Adjustments to the net loss for the third quarter of 2015 included non-cash commodity derivative losses of $17 million, as a result of the value change of the Company’s existing hedge positions as of the end of the quarter. The Company also adjusted from earnings certain costs associated with the termination of the Company’s defined benefit pension program ($67 million), costs incurred as part of the merger with Rosetta Resources ($71 million), and various other items ($22 million).

OPERATIONS UPDATE

DJ BASIN

In the DJ Basin, sales volumes averaged a record 116 MBoe/d in the third quarter of 2015, up 13 percent versus the third quarter of last year. Liquids made up 67 percent of total DJ Basin volumes (50 percent crude oil and condensate and 17 percent NGLs) and 33 percent was natural gas. Total liquid volumes of 78 MBbl/d for the quarter was a record for Noble Energy.

Highlights include:

Natural gas processing capacity on the DCP system, following the start-up of the Lucerne-2 gas processing plant, increased to more than 800 million cubic feet of natural gas per day. Accordingly, line pressures in the northern part of the field, particularly in and around the Company’s Wells Ranch area, have been reduced by up to 100 psi. Construction of a third-party low-pressure line-loop system (DCP Grand Parkway) in the northern part of the field continues and is expected to be complete by the end of 2015 / early 2016.

As a result of the reduction in field line pressures, the Company’s legacy vertical well production averaged nearly 25 MBoe/d in the third quarter, which is a high point over the last year and an increase of more than five MBoe/d versus pre-Lucerne-2 rates. Horizontal sales volumes totaled 91 MBoe/d, above expectations and an increase of 23 percent from the same quarter of last year.

Operated four drilling rigs in the Basin for the majority of the third quarter of 2015. Accelerated cycle times are resulting in higher than originally planned 2015 well counts (spud, total depth, and wells on production). Noble Energy is currently operating three drilling rigs and two full time completion crews in the DJ Basin.

Drilled 39 wells at an average lateral length of over 7,300 feet. The average spud to rig release time for a standard lateral length well (4,500 lateral feet) decreased to 5.7 days

Standard lateral length well costs, including allocated facility costs, are on track to be below second half 2015 targets of $3.5 million in Wells Ranch and $3.9 million in East Pony.

Commenced production on 58 wells (equivalent to 70 standard lateral length wells). Well performance in both Wells Ranch and East Pony continues in-line with or above expectations. Wells Ranch volumes in the third quarter were up more than 15 percent and East Pony volumes were up more than 20 percent versus the second quarter of 2015.

Refined completion techniques continue to enhance overall productivity. Included in the wells brought online during the quarter was a development area with 13 wells in Wells Ranch, including nine wells completed with slickwater fluid and four wells completed with hybrid gel systems. Cumulative production from the slickwater completions is outperforming the hybrid gel wells by more than 20 percent on average after 30 days. For a standard lateral length well, those designed with slickwater are approximately 10 percent lower total well cost versus hybrid gel wells.

Based on the current drilling and completion activity plans, the Company estimates exiting 2015 with approximately 40 wells drilled but uncompleted.

TEXAS (EAGLE FORD AND PERMIAN)

Production volumes for the Eagle Ford and Permian assets averaged 54 MBoe/d from July 21 to the end of the third quarter of 2015 (which is equivalent to 42 MBoe/d on average for the full quarter). Approximately 84 percent of the volumes were from the Eagle Ford assets and 16 percent were contributed from the Permian. Liquids represented 63 percent of total volumes (crude oil and condensate represented 29 percent and NGLs were 34 percent), while natural gas accounted for 37 percent.

Highlights since closing the merger include:

Drilled eight operated wells to total depth, including seven Lower Eagle Ford wells and one Wolfcamp A well in the Delaware Basin (Permian).

Realized a substantial reduction in the spud to rig release timing in both areas as a result of various operational enhancements. In the Eagle Ford, spud to rig release times have been reduced to approximately eight days for a 5,000 foot lateral, down approximately 30 percent from prior 2015...


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