• Achieved record quarterly sales volumes of 427 MBoe/d, an increase of 43 percent over the second quarter of 2015, or an 18 percent increase pro-forma. Also set records for quarterly volumes in the U.S. onshore assets and for a second quarter period in Israel.
  • Reported second quarter capital expenditures of $262 million, significantly below expectations and down approximately 70 percent from the second quarter of 2015 pro-forma.
  • Initiated production on the Company’s third operated well within the Delaware Basin, achieving an IP-30 rate of 2,541 Boe/d (523 Boe/d per thousand lateral feet). On a normalized basis, the well is outperforming a 700 MBoe type curve by more than 75 percent.
  • Continued to deliver strong results from wells in the Lower Eagle Ford. Normalized for lateral length, the wells on average are significantly outperforming a 3 MMBoe type curve.
  • Enhanced completions in the DJ Basin continued to outperform historical type curves.
  • Realized significant progress towards sanctioning Leviathan, including the approval of the development plan, implementation of the regulatory framework and the execution of approximately 100 MMcf/d of Israel domestic gas sales agreements.
  • Reduced LOE on a BOE basis to $3.07, a decrease of 30 percent from the second quarter of last year pro-forma.
  • Increased liquidity at the end of the quarter to $5.3 billion, comprised of $1.3 billion of cash and a $4.0 billion undrawn credit facility.

Noble Energy, Inc. (NYSE:NBL) (‘Noble Energy’ or ‘the Company’) today announced results for the second quarter of 2016, including a reported net loss of $315 million, or $0.73 per diluted share. The adjusted net loss(1) for the quarter was $103 million, or $0.24 per diluted share, which excludes the impact of certain items typically not considered by analysts in formulating estimates. EBITDAX(1) (earnings before interest expense, income taxes, depreciation, depletion, and amortization, and exploration expenses) and Adjusted EBITDAX(1) were $291 million and $597 million, respectively.Capital expenditures for the quarter were $262 million, down approximately 70 percent from the second quarter of last year pro-forma for the Rosetta Resources Inc. merger. For the second quarter of 2016, approximately 65 percent of the capital was allocated to U.S. onshore and approximately 35 percent to global offshore (including Gulf of Mexico and International).

The Company sold record quarterly volumes of 427 thousand barrels of oil equivalent per day (MBoe/d) during the second quarter of 2016, with crude oil, natural gas and natural gas liquids (NGLs) all above original expectations. Total sales volumes were higher by 43 percent compared to the second quarter of 2015, or 18 percent on a pro-forma basis. Each core area was higher period over period, with U.S. oil volumes up 31 thousand barrels per day. U.S. onshore sales volumes for the quarter were a record 282 MBoe/d, up 15 percent compared to the second quarter of 2015 pro-forma. Global offshore sales volumes were 145 MBoe/d, an increase of 25 percent compared to the second quarter of 2015. Liquids comprised 44 percent of second quarter 2016 volumes, with 29 percent being crude oil and condensate and 15 percent NGLs. Natural gas accounted for the remaining 56 percent.

David L. Stover, Noble Energy’s Chairman, President and CEO, commented, ‘Our strong asset base and operational execution set a number of records in the second quarter. These results were supported by additional capital efficiencies generated across our business, both onshore in the U.S., through enhanced completions, and offshore, with the delivery of new major projects. Recent performance of the Texas assets has been particularly encouraging and continues to demonstrate the high-quality of our positions in both the Eagle Ford and the Delaware. We are delivering ahead of our original expectations for the year, having enhanced both our operating capabilities and our financial strength through the first half of the year. Our performance sets us up for a strong finish this year leading into 2017.’

All cost items for the quarter were in line with or below the Company’s expectations. Lease operating expenses (LOE) in the quarter were significantly lower at $3.07 per barrel of oil equivalent (BOE), a reduction of 30 percent compared to the second quarter of 2015 pro-forma. LOE per BOE benefited from record sales volumes and lower than normal workover activity. Transportation and gathering expenses totaled $2.97 per BOE while depreciation, depletion and amortization expenses for the quarter were $15.99 per BOE. General and Administrative costs for the quarter were $107 million, down $25 million from the second quarter of last year pro-forma. The Company’s income tax rate for the quarter was 37 percent.

Adjustments to the Company’s net loss for the second quarter of 2016 included unrealized commodity derivative losses, primarily related to existing crude oil hedging positions, as well as a loss on sale from the divestiture of non-core properties in Montana. Also included was a tax adjustment related to the purchase price allocation for the Rosetta Resources Inc. merger completed in the third quarter of 2015, as well as well costs associated with the 2011 drilling of the Dolphin well offshore Israel due to the expiration of the associated exploration license.

OPERATIONS UPDATE

TEXAS (EAGLE FORD AND PERMIAN)

Record quarterly sales volumes of 74 MBoe/d were achieved in the second quarter of 2016, an increase of 17 percent from the second quarter of 2015 on a pro-forma basis and up 23 percent from the first quarter of 2016. Liquids represented 62 percent of the total (25 percent crude oil and condensate and 37 percent NGLs), while natural gas accounted for the remaining 38 percent. Eagle Ford production made up 90 percent of the volumes with the Permian delivering the remaining 10 percent.

Highlights include:

  • The Company brought one well online in the Wolfcamp A interval in the Permian’s Delaware Basin. The Calamity Jane 2101H well, with a lateral length of 4,859 feet, was completed using slickwater and 3,000 pounds of proppant per lateral foot. To date, the well has achieved a maximum IP-30 rate of 2,541 Boe/d (or 523 Boe/d per thousand lateral feet) with 57 percent oil. On a normalized basis (5,000 foot lateral well), the well is outperforming the 700 MBoe type curve by more than 75 percent.
  • In the second quarter, Noble Energy commenced production on seven Lower Eagle Ford wells in the Gates Ranch area. Six of the wells were located in South Gates Ranch and had a lateral spacing of approximately 500 feet, an average lateral length of 7,240 feet, and an average IP-30 of 3,954 Boe/d (or 547 Boe/d per thousand lateral feet). The wells had proppant concentrations of approximately 2,000 pounds per lateral foot and cluster spacing of 40 feet. On average and normalized for lateral length, the IP-30 rates have outperformed a 3 MMBoe type curve (for a 5,000 foot lateral) over their first 30 days of production.
  • In late March, the Company brought on production six additional Lower Eagle Ford wells in the Gates Ranch area. Five of the wells were located in South Gates Ranch and tested lateral spacing of 1,000 feet or more, had an average lateral length of 4,570 feet, and resulted in an average IP-30 rate of 3,993 Boe/d (or 878 Boe/d per thousand lateral feet). On average, the wells had proppant concentrations of over 2,000 pounds per lateral foot and cluster spacing of 20 feet. Normalized for lateral length, these wells have outperformed a 3 MMBoe type curve (for a 5,000 foot lateral) by approximately 60 percent over the first 90 days.
  • There were 46 wells drilled but uncompleted (including 31 in the Eagle Ford and 15 in the Delaware) at the end of the quarter.

DJ BASIN

Sales volumes averaged 113 MBoe/d in the second quarter of 2016, an increase of nearly 5 percent from the second quarter of 2015. Liquids represented 66 percent of DJ Basin volumes (46 percent crude oil and condensate and 20 percent NGLs) and 34 percent was natural gas. Combined volumes for Wells Ranch and East Pony averaged 57 MBoe/d during the quarter, up 23 percent compared to the second quarter of 2015. Volumes in the second quarter were impacted by a planned turn-around at the Wells Ranch central processing facility as well as unplanned third-party processing facility downtime.

Highlights include:

  • Average well costs for normalized long laterals with enhanced completions were reduced to $2.6 million in Wells Ranch.
  • Drilled 26 wells at an average lateral length of over 8,100 feet, with all of the wells drilled in the second quarter located in Wells Ranch (88 percent) and East Pony (12 percent). Nearly all of the wells drilled used the monobore technique. Delivered average spud to rig release drilling days of five, seven and eight for standard (4,500 feet), medium (6,000 feet) and long (9,000 feet) length lateral wells, respectively.
  • Commenced production on 25 wells, with an average lateral length of 8,270 feet. Approximately half of the wells that commenced production in the quarter were brought on line in May, with the remainder in June. More than two-thirds of the wells put into production in the quarter utilized slickwater fluid with proppant concentrations of 1,000 pounds or more per lateral foot.
  • Ten wells brought online in the quarter within the Company’s Mustang IDP, seven of which utilized enhanced completions, have significantly outperformed expectations. These are the Company’s first enhanced completions within the DJ Basin outside of the Wells Ranch and East Pony areas.
  • Added approximately 11,700 net acres in Wells Ranch, a 20 percent increase, in exchange for approximately 13,500 net acres primarily out of the Company’s Bronco area. The improved contiguous acreage position in Wells Ranch enhances the IDP’s value by increasing long lateral locations and optimizing the use of existing infrastructure.
  • Completed the initial close for the Greeley Crescent acreage sale, receiving $486 million proceeds within the second quarter. The Company expects to receive the remaining $19 million in a final closing around the end of the year.
  • The Company exited the quarter with 36 wells drilled but uncompleted.

MARCELLUS SHALE

Sales volumes in the Marcellus Shale averaged 546 million cubic feet of natural gas equivalent per day (MMcfe/d) in the second quarter of 2016, an increase of 28 percent over the same quarter of last year and down approximately 5 percent versus the first quarter of 2016. Natural gas represented 91 percent of the volumes sold, with the majority of the remainder composed of NGLs.

Highlights include:

  • Commenced production on 16 non-operated wells within the Joint Venture.
  • Solid well performance continues at the operated Rich Hill 23 pad in Greene County, Pennsylvania. The combined production of the eight wells was approximately 95 MMcf/d, essentially flat after six months of production.
  • The non-operated Green Hill 53 pad, also located in Greene County, Pennsylvania, has averaged 80 MMcf/d over the first 60 days of production from nine wells.
  • Exited the quarter with 79 wells drilled but uncompleted in the Joint Venture.
  • CONE Midstream Partners gathered gross volumes averaging approximately 1.2 billion cubic feet per day during the quarter, an increase of nearly 32 percent from the same quarter in the previous year.

GULF OF MEXICO

Sales volumes in the Gulf of Mexico averaged nearly 27 MBoe/d, an increase of 125 percent compared to the same quarter of last year. Crude oil and condensate represented 84 percent of second quarter 2016 volumes, with 5 percent NGLs and 11 percent natural gas.

Highlights include:

  • Combined production from Big Bend and Dantzler, which commenced production late in 2015, contributed 16 MBoe/d, net to Noble Energy.
  • The Company was named the successor operator of the Thunder Hawk production facility, expected to become effective within the third quarter, subject to regulatory approval.
  • The Gunflint oil development commenced production in mid-July. The two-well field is ramping up and is anticipated to reach a minimum gross production of 20 MBoe/d. The net amount to Noble Energy is expected to be at least 5 MBoe/d, with potential for additional volumes dependent upon available capacity at the third-party host facility.
  • Drilling operations at the Katmai 2 appraisal well, located in Green Canyon 39, have been temporarily abandoned as a result of encountering high pressure in the untested fault block. Plans to appraise the discovery at a future date are being assessed.

EASTERN MEDITERRANEAN

Israel natural gas sales volumes averaged 276 MMcf/d, a second quarter record for the Company and an increase of 28 percent versus the second quarter of last year. The higher volumes were primarily driven by greater displacement of coal for natural gas in the power generation sector and growth from industrial customers, as well as warmer weather in the quarter.

Highlights include:

  • Continued strong operations and reservoir performance at Tamar, combined with uninterrupted production for the second consecutive quarter.
  • Executed agreement to sell 3 percent working interest in Tamar in early July for $369 million pre-tax (implied $12.3 billion gross valuation).
  • Continued progress in marketing gas from the Leviathan field. Executed domestic gas sales contracts for Leviathan now totaling approximately 100 MMcf/d.
  • Received approval from the Israeli Government for the Leviathan Plan of Development, authorizing Leviathan to be developed as a subsea tie-back to a shallow water platform in northern Israel.
  • Commenced front-end engineering and design for the Leviathan production platform.

WEST AFRICA

Sales volumes in West Africa averaged 72 MBoe/d, containing 40 percent crude oil and condensate, six percent NGLs, and 54 percent natural gas.

Highlights include:

  • Aseng reached a milestone 75 million barrels of cumulative oil production. Strong safety performance at both Aseng and Alen was demonstrated by reaching over two years of operations without a lost-time incident.
  • Commenced production in July from the non-operated B3 compression platform at the Alba field. The project, which will enhance full-field recovery, is expected to support field production plateau of approximately 200 MBoe/d gross, 55 MBoe/d net to Noble Energy (including recoveries at the Alba LPG Plant). The compression project was executed on time and on budget.
  • A 3D multi-client seismic survey was completed in Block F15 offshore Gabon. The Company is currently processing the data and evaluating the prospectivity of the block.

UPDATED GUIDANCE

Driven by continued performance improvement and capital efficiency momentum achieved within the first half of 2016, Noble Energy has raised its full-year sales volume guidance while maintaining its existing capital expenditure outlook. The Company anticipates full-year 2016 capital expenditures to be less than $1.5 billion while full-year 2016 sales volumes have been increased to an average of 415 MBoe/d. On a divestment adjusted basis, (accounting for 3 MBoe/d in asset sales), the increase represents 28 MBoe/d, or a total of 10 million barrels of oil equivalent. This equates to more than a 7 percent raise from the Company’s original full-year expectation.

Noble Energy expects third quarter capital expenditures between $400 million and $450 million, with approximately 80 percent of the amount targeted to the U.S. onshore assets. For the majority of the third quarter and the remainder of the year, the Company will be operating a total of four rigs onshore in the U.S., including two within the DJ Basin, and one in each of the Eagle Ford and the Delaware.

Sales volumes for the third quarter are anticipated to be between 405 MBoe/d and 415 MBoe/d, with the difference in volumes compared to the second quarter driven primarily by the timing of wells commencing production in the Eagle Ford. Volumes in the Marcellus business unit are estimated to increase versus the second quarter. In the DJ Basin, vertical production is expected to be lower, while horizontal production is anticipated to hold relatively flat. In addition, the sale of the Company’s Montana assets and Greeley Crescent areas will lower volumes by approximately two MBoe/d compared to the second quarter of this year. Volumes in the Gulf of Mexico are anticipated to be equivalent with second quarter levels, while West Africa volumes will be lower as sales liftings are expected to be less than production. Israel volumes are expected to be higher than the second quarter due to seasonal and underlying demand.

Additional detailed guidance for the remainder of the year is provided in the Company’s supplemental slides for the quarterly webcast. The slides are available on the Company’s website.



This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
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