USA: Noble Energy Positioned to Deliver on Full Year Expectations

Noble Energy, Inc. announced first quarter 2013 net income of $261 million, or $1.45 per share diluted, and net income from continuing operations of $232 million, or $1.28 per share diluted. Excluding the impact of unrealized commodity derivatives losses and certain other items, first quarter 2013 adjusted net income from continuing operations was $269 million, or $1.48 per share diluted.

During the first quarter 2012, the Company had net income from continuing operations of $249 million, or $1.39 per share diluted, and adjusted net income from continuing operations of $297 million, or $1.65 per share diluted.

Discretionary cash flow from continuing operations(2) for the first quarter 2013 was $761 million compared to $690 million for the same quarter in 2012. Net cash provided by operating activities was $705 million and capital expenditures for the quarter were $910 million. Revenue for the quarter was $1.1 billion.

Key highlights for the first quarter of 2013 include:

– Established first production from the Tamar natural gas field and raised the gross mean resource estimate to 10 trillion cubic feet (Tcf), 1 Tcf over the previous estimate

– Achieved record sales volume of 92 thousand barrels of oil equivalent per day (MBoe/d) from the DJ Basin with 45 MBoe/d from the horizontal program

– Drilled the longest extended-reach lateral well in Colorado history of 9,978 feet in the DJ Basin

– Increased the gross mean resource estimate of Leviathan to 18 Tcf, 1 Tcf over the previous estimate

– Signed sale agreements on three non-core divestment packages with expected proceeds exceeding $105 million

Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “The strong first quarter was an excellent start to 2013 and positions us to deliver on full year expectations. The Tamar project in Israel has begun production and is experiencing significant market demand with our primary customer already exercising an option for increased supply. Our second major project for this year, Alen in Equatorial Guinea, is on track for first production in the third quarter. Domestically, the DJ Basin continues to set production records driven by our horizontal drilling program. In addition, we continue with our exploration program and have several significant opportunities before us.”

VOLUMES AND PRICES

First quarter 2013 sales volumes from continuing operations averaged 245 MBoe/d, an increase of 9 percent compared to the first quarter 2012, after adjusting for assets divested in 2012. Production volumes were 249 MBoe/d with the difference attributable to the timing of crude oil liftings in Equatorial Guinea. The sales volume split for the quarter was 48 percent liquids, 24 percent international natural gas, and 28 percent U.S. natural gas.

U.S. volumes totaled 146 MBoe/d for the first quarter 2013, an increase of 23 percent compared to the same quarter last year excluding volumes from divested assets. The increase was attributed to growth from the horizontal plays in the DJ Basin and Marcellus Shale, and from the Gulf of Mexico largely due to the addition of Galapagos. Natural production declines affected the remaining non-core U.S. assets.

Sales volumes from international assets were 99 MBoe/d for the first quarter of 2013, a decrease of 6 percent compared to the first quarter of 2012, excluding volumes from discontinued operations in the UK. The decrease was due to reduced sales volumes offshore Equatorial Guinea resulting from the scheduled underliftings of crude oil.

Crude oil prices in the U.S. and international averaged $95.70 and $111.42 per barrel respectively, each down approximately five percent versus the first quarter 2012. Natural gas realizations in the U.S. averaged $3.31 per thousand cubic feet (Mcf), up 26 percent from the first quarter of 2012, and averaged $5.15 per Mcf in Israel. Natural gas liquid pricing in the U.S. averaged $39.19 per barrel for the quarter and represented 41 percent of the Company’s average U.S. crude oil realization.

OPERATING EXPENSES

Total production costs per barrel of oil equivalent (Boe), including lease operating expense (LOE), production and ad valorem taxes, and transportation were $8.45 per Boe, up 4 percent from the first quarter of 2012. LOE and depreciation, depletion, and amortization (DD&A) per Boe were $5.28 and $16.53, respectively. The DD&A rates were influenced primarily by increased liquids production from the DJ Basin and Gulf of Mexico, and the continued natural gas production from the Noa and Pinnacles fields offshore Israel. General and administrative expenses increased during the first quarter due to increased staffing for major development and exploration activities. The adjusted effective tax rate for the first quarter 2013 was 28 percent with 69 percent deferred.

OPERATIONS UPDATE

In the DJ Basin, production averaged 92 MBoe/d for the first quarter, a 7 percent increase over last quarter. The horizontal program accounted for 45 MBoe/d of production compared to 39 MBoe/d last quarter. Crude oil and other liquid sales rose to 63 percent of total production. Adding a rig in the first quarter, the Company now operates three rigs in Northern Colorado and six in the greater Wattenberg area. During the quarter, 56 wells were drilled and 44 wells were completed. Ten of the wells drilled during the quarter were extended-reach lateral wells. The extended-reach lateral program continues to deliver superior results and returns. Currently, 13 wells are on line with lateral lengths ranging from 6,500 to over 9,000 feet. Early production from the 15 wells in our 40-acre spacing pilot program indicates that production from the B bench performs as expected and does not appear to be impacted by tightly spaced A bench and Codell wells. This result confirmed that a minimum of 16 wells per section is required throughout the Company’s acreage in the oil window. Wells in the A bench, C bench, and Codell indicate recoveries that are economic and will be required to adequately drain the entire 300 foot vertical section.

In the Marcellus Shale, the Company operated three rigs in the wet gas area and anticipates adding a fourth rig during the second quarter. Two of the rigs were located in the Majorsville area and the final rig was in Normantown. Drilling was concluded on the 11-well Web 4 pad and is expected to be in production by the end of the second quarter. Other wells drilled include seven on the 11-well SHL 8 pad and four on the 7-well WFN 1 pad. In Normantown, drilling operations were initiated on a 6-well pad. Consol, the joint venture partner, operated two rigs in the dry gas area. Production for the quarter averaged 104 MMcfe/d net.

In the Eastern Mediterranean, natural gas sales were initiated from the Tamar field in just over four years from discovery with a peak capacity of 1 Bcf/d. Each of the five subsea wells was tested to its maximum deliverability of 250 MMcf/d. Gross sales reached an hourly rate equivalent to 950 MMcf/d during testing. The gross mean resource estimates were raised to 10 Tcf at Tamar and 18 Tcf at Leviathan resulting in 37 Tcf of total gross resources discovered in the Levant Basin.

UPDATED GUIDANCE

The full year volume guidance range for 2013 remains unchanged at 270 to 282 MBoe/d. Second quarter 2013 volumes are expected to average 254 to 260 MBoe/d. The increase in the second quarter volume forecast is largely attributable to a full quarter of production from Tamar. Also impacting the quarter are planned facility downtimes in the Gulf of Mexico and Equatorial Guinea, adverse weather conditions in Colorado, and the sale of certain non-core assets, which in aggregate total approximately 12 MBoe/d. Volumes for the second half of the year are anticipated to average around 300 MBoe/d with initial production at Alen, additional sales from Tamar and the continued acceleration of activity in the DJ Basin and the Marcellus Shale wet gas area.

All other annual guidance ranges remain unchanged.

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Press Release, April 26, 2013