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Noble Energy Announces Solid First Quarter 2016 Results

  • Quarterly capital expenditures totaled $374 million, below the low end of guidance. Full-year 2016 capital expected to be less than the original $1.5 billion estimate.
  • Delivered substantial cost reductions versus guidance and the prior year. On a BOE basis, LOE averaged $3.63 (excluding the Isabela workover in the Gulf of Mexico), down 34 percent from the first quarter of last year.
  • Maintained robust financial position, including $5 billion in liquidity, comprised of cash and a $4 billion undrawn credit facility. The Company's investment grade credit ratings were affirmed by all three credit rating agencies.
  • Reported quarterly sales volumes of 416 MBoe/d, substantially higher than the Company's guidance and an increase of eight percent compared to the first quarter of last year (proforma for the Rosetta Resources Inc. merger) as a result of strong underlying asset performance. Raised full-year 2016 volume guidance by four percent from 390 MBoe/d to 405 MBoe/d.
  • Commenced production on the Company's first two Delaware Basin wells in Reeves County, Texas. The IP-30 rates were 382 Boe/d and 261 Boe/d per thousand lateral feet, above the Tier 1 Wolfcamp A type curve and confirming the quality and extent of Noble Energy's acreage position.
  • Sold a first quarter record 266 MMcf/d, net, of natural gas in Israel, reflecting enhanced dispatch of natural gas over coal to fuel power generation.
  • Received $238 million in total asset sale proceeds during the quarter, including for the sale of the undeveloped Tanin and Karish fields in Israel, the farm-down of interest in Block 12 offshore Cyprus, and certain non-core asset sales in the U.S. unconventional business.

Noble Energy, Inc. NBL, -3.38% ("Noble Energy" or "the Company") today announced results for the first quarter of 2016, including an adjusted net loss(1) of $228 million, or $0.53 per diluted share, excluding the impact of certain items not typically considered by analysts in published estimates. The reported net loss for the quarter was $287 million or $0.67 per diluted share. EBITDAX(1) (earnings before interest expense, income taxes, depreciation, depletion, and amortization, and exploration expenses) and Adjusted EBITDAX(1) were $406 million and $518 million, respectively. Capital expenditures for the quarter were $374 million.

Total Company volumes for the first quarter of 2016 increased to 416 thousand barrels of oil equivalent per day (MBoe/d), up 31 percent from the first quarter of 2015. Liquids comprised 45 percent (31 percent crude oil and condensate and 14 percent natural gas liquids) of first quarter 2016 volumes, with natural gas accounting for 55 percent. Compared to the first quarter of 2015, total liquids volumes were higher by 50 thousand barrels per day (MBbl/d), split evenly between crude oil and natural gas liquids. U.S. sales volumes for the quarter totaled 306 MBoe/d, while International sales volumes were 110 MBoe/d. Total sales volumes were lower than produced volumes by approximately two thousand barrels per day (MBbl/d) due to the timing of liquids liftings in Equatorial Guinea.

A portion of the increase in total Company volumes for the first quarter of 2016 over 2015 was a result of the merger with Rosetta Resources Inc. ("Rosetta") in July of 2015. The associated assets, including Eagle Ford and Permian Basin properties, contributed volumes totaling more than 60 MBoe/d in the first quarter of 2016. Excluding these assets, total Company sales volumes were up 12 percent compared to the initial quarter of 2015. This increase was driven by onshore U.S. horizontal completions and production optimization, as well as the startup of the Big Bend and Dantzler oil fields in the deepwater Gulf of Mexico. Higher Israel natural gas sales to satisfy growing demand for power generation also contributed to the increase. Sales volumes in West Africa, while lower than the first quarter of last year, were better than anticipated as a result of reduced downtime at Alba in Equatorial Guinea for the B-3 compression platform installation and turnaround activities.

David L. Stover, Noble Energy's Chairman, President and CEO, commented, "We are off to a solid start this year and have made substantial progress on our goals for 2016. Our high-quality and diverse portfolio is delivering strong results, giving us the confidence to lower our full year capital and cost outlook while raising volumes substantially. We have aligned our business within cash flows and are continuing to protect our investment-grade balance sheet. Significant capital efficiency gains and outstanding operating performance, combined with robust liquidity, position us well in any price scenario."

Total lease operating expense (LOE) and general and administrative (G&A) costs were essentially flat to first quarter 2015 levels, even with an approximate 100 MBoe/d increase in volume period over period. On a barrel of oil equivalent (BOE) basis, first quarter 2016 LOE averaged $4.25, down 22 percent from the same period in 2015, despite the impact of the Isabela workover in the Gulf of Mexico during the first quarter of 2016. Excluding this item, LOE per BOE was $3.63, down 34 percent period over period. G&A cost synergies from the Rosetta transaction are already exceeding the $40 million annual expectation.

Production taxes for the first quarter of 2016 included a $28 million accrual for the future refund of prior year severance taxes related to U.S. onshore assets. Transportation and gathering expense totaled $2.83 per BOE and reflected a change in accounting classification as all gas-processing costs are now reflected in transportation and gathering expense. Depreciation, depletion and amortization expenses for the quarter reflected higher Israel and West Africa volumes versus expectation. Exploration expense for the 2016 quarter included the majority of costs associated with the Silvergate well and various seismic and other geoscience costs. The Company's income tax rate for the first quarter of 2016 was 37 percent, with essentially all of the total income tax provision being deferred.

Adjustments to the Company's net loss for the first quarter of 2016 included unrealized commodity derivative losses, primarily related to existing crude oil hedging positions, as well as a gain on the extinguishment of debt resulting from the successful tender offer for prior Rosetta notes. Also included in adjustments for the quarter was the write-off of certain capitalized costs associated with a rig contract termination offshore the Falkland Islands.

OPERATIONS UPDATE
DJ BASIN
Sales volumes averaged 118 MBoe/d in the first quarter of 2016, up two percent from the first quarter of 2015. Liquids represented 66 percent of DJ Basin volumes (49 percent crude oil and condensate and 17 percent natural gas liquids) and 34 percent was natural gas. In the Company's primary areas of activity, Wells Ranch and East Pony, combined volumes averaged nearly 65 MBoe/d during the quarter, up 34 percent compared to the first quarter of 2015. Production volumes for the first quarter of 2016 were impacted by certain third-party facility downtime as a result of winter storms in late March.

Highlights include:

  • Reduced well costs for normalized extended-reach laterals, including allocated facilities, to $2.7 million in Wells Ranch. Total well costs are down more than 35 percent compared to early 2015. The Company continues to shift its well designs to focus on extended-reach laterals with monobore drilling, slickwater completion fluid, and enhanced proppant loading. Normalized extended-reach lateral well costs for historical completion designs have been reduced to $2.4 million.
  • Drilled 24 wells at an average lateral length of over 7,300 feet. Approximately 60 percent of wells spud were extended-reach lateral wells.
  • Average drilling time for a standard lateral length well (4,500 feet) remained under six days, while medium (6,000 feet) and long (9,000 feet) lateral wells are being drilled in seven and eight days on average, respectively. A long lateral well was drilled in a record time of under six days (spud to rig release).
  • Commenced production on 36 wells (equivalent to 43 standard lateral length wells). Initial production rates from enhanced completion designs (slickwater with higher proppant concentrations) continue to materially exceed legacy completions. The initial production rate for wells that achieved 30 days of production (IP-30) in the quarter (22 wells) was an average of 836 Boe/d. These wells had an average lateral length of 5,860 feet, and more than half utilized proppant loading of 1,000 pounds or more per lateral foot. On a per lateral foot basis, well productivity is up more than 30 percent versus first quarter 2015 wells.
  • The Company exited the quarter with 46 wells drilled but uncompleted.

TEXAS (EAGLE FORD AND PERMIAN)
Production volumes for the Eagle Ford and Permian assets averaged more than 60 MBoe/d in the first quarter of 2016. Liquids represented 64 percent of the total (28 percent crude oil and condensate and 36 percent NGLs), while natural gas accounted for the remainder. Eagle Ford production comprised 84 percent of the volumes and the Permian 16 percent.

Highlights include:

  • Drilled four operated wells to total depth, including two Lower Eagle Ford wells in South Texas and two Wolfcamp A wells in the Permian's Delaware Basin.
  • Initiated production on the Company's first two Delaware completions in Reeves County. The Calamity Jane 2001H, with a lateral length of 4,190 feet, was completed with nearly 1,700 pounds of proppant per lateral foot. The well's IP-30 rate was 1,599 Boe/d (or 382 Boe/d per thousand lateral feet), which is substantially above the 700 thousand barrel of oil equivalent (MBoe) type curve. The Soapy Smith 36 1H, a western extension test, was completed with 1,800 pounds of proppant per lateral foot, utilized slickwater as completion fluid, and had a lateral length of 2,790 feet. The well's IP-30 rate was 728 Boe/d (or 261 Boe/d per thousand lateral feet), slightly exceeding the 700 MBoe type curve.
  • Commenced production on eight Lower Eagle Ford wells, including six wells in Gates Ranch (northern Webb County), which came on late in the quarter, and two wells located in Briscoe Ranch (southern Dimmitt County). The Briscoe Ranch 36 and 32 wells were the Company's first Eagle Ford wells outside of Gates Ranch. Both wells, which had lateral lengths averaging 4,912 feet, were completed with nearly 2,000 pounds of proppant per lateral foot and were testing different cluster spacing patterns. The IP-30 rates of these wells were 3,525 Boe/d (20-foot clusters) and 2,236 Boe/d...

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