Noble Energy, Inc. (ticker: NBL) reported Q1 2017 results today, including net income attributable to Noble Energy of $36 million, or $0.08 per diluted share for the quarter.
Adjusted EBITDAX(1) was $600 million. Total organic capital expenditures for the quarter were $616 million, well within the company’s guidance range.
- Delivered quarterly sales volumes of 382 MBoe/d, with U.S. onshore, Gulf of Mexico, and Israel volumes all at or exceeding the top end of guidance. Total oil volumes of 119 MBbl/d were at the high end of guidance, led by Delaware and DJ Basin performance.
- Established a record for first quarter sales volumes in Israel at 274 MMcfe/d, even with the 3.5 percent working interest divestment in the fourth quarter of 2016.
- Continued strong well performance in the Delaware Basin. Three new Wolfcamp A wells commenced production and had an average IP-30 rate of 1,730 Boe/d (365 Boe/d per 1,000 lateral feet).
- Increased oil as a percentage of total DJ Basin production to a record 52 percent, driven by continued development focus in the low GOR areas of Wells Ranch and East Pony. Wells using higher proppant concentrations continue to outperform type curve by more than 50 percent, including initial tests of enhanced completions in East Pony.
- Solidified Noble Energy’s leading position in the Southern Delaware Basin through the acquisition of Clayton Williams Energy, increasing the company’s position to 118,000 net acres. The acquisition closed on April 24, 2017.
- Sanctioned the Leviathan project offshore Israel, with first gas targeted for the end of 2019.
- Full year sales volumes trending toward the upper half of original expectations, driven primarily from crude oil and NGLs.
David L. Stover, Noble Energy’s Chairman, President and CEO, said, “Noble Energy is off to a great start in 2017, with strong operational and financial performance and importantly, numerous recent strategic accomplishments. Our top-tier U.S. onshore assets and execution are delivering ahead of plan as a result of drilling advancements in all basins and continued industry-leading well performance. During the second quarter, we are expecting volume growth in each of our U.S. onshore liquids assets.
“This is driven by an increased completion schedule, including the impact of the Clayton Williams Energy transaction. Offshore, we are maximizing the cash flow from our existing assets, while progressing the recently-sanctioned Leviathan major project. With our continued superior execution, I am confident that we will deliver industry-leading performance throughout this year.”
Total company sales volumes for the first quarter of 2017 were 382 thousand barrels of oil equivalent per day (MBoe/d).
- Crude oil and condensate sales volumes totaled 119 thousand barrels per day (MBbl/d) and natural gas liquids (NGLs) totaled 55 MBbl/d.
- Natural gas contributed the remaining 1.2 billion cubic feet per day.
- S. onshore sales volumes were at the top of guidance for the quarter at 240 MBoe/d, driven by strong well performance in the DJ and Delaware Basins.
- Offshore sales volumes were above expectations at 142 MBoe/d, led by Gulf of Mexico and Israel production.
- Total sales volumes were lower than produced volumes by approximately 4 MBbl/d due to the timing of liquids liftings in Equatorial Guinea.
Organic capital for the quarter was $616 million, including midstream investments funded by Noble Energy. The majority of the company’s organic capital expenditures, over 75 percent, were related to U.S. onshore liquids plays with an additional 20 percent spent in Israel.
Additional capital expenditures within the first quarter included $323 million of acquisition capital related to the close of a Delaware Basin bolt-on acquisition announced in the fourth quarter of 2016. The company also consolidated $60 million of capital funded by Noble Midstream Partners LP (ticker: NBLX), representing costs associated with the build-out of the first central gathering facility in the Delaware and a third-party system in the DJ Basin.
Commodity price realizations benefited from continued transportation optimization. U.S. onshore crude oil differentials were approximately $2 per barrel less than WTI, NGL pricing represented 47 percent of WTI, and U.S. onshore natural gas averaged slightly above Henry Hub. Operating expenses for the first quarter, including lease operating expenses (LOE), production taxes, and gathering, transportation and processing expenses, were consistent with expectations at $8.83 per barrel of oil equivalent (BOE). Depreciation, depletion, and amortization was $15.38 per BOE. Compared to the first quarter of 2016, LOE per BOE was lower by five percent, primarily due to offshore work-over costs in the first quarter of 2016, and DD&A per BOE was lower by six percent, reflecting robust U.S. onshore reserve additions at year-end 2016.
First quarter 2017 adjustments to net income attributable to Noble Energy included an impairment of $18 million related to undeveloped leasehold in the Gulf of Mexico. The company also reported unrealized commodity derivative gains of $107 million, resulting from the value change of existing crude oil and natural gas hedge positions.
Noble exited the quarter with $4.8 billion in total liquidity, including an undrawn $4 billion credit facility.
Strong outperformance in U.S. onshore
Total sales volume across the company’s U.S. onshore assets came in at the top end of guidance at 240 MBoe/d (31 percent oil, 20 percent NGL, and 49 percent natural gas). The DJ Basin averaged 107 MBoe/d, the Eagle Ford averaged 43 MBoe/d, and the Delaware averaged 14 MBoe/d. Sales volumes in the Marcellus averaged 433 million cubic feet of natural gas equivalent per day (MMcfe/d), with the remaining 4 MBoe/d from other U.S. onshore areas.
Noble maintained an average of seven operated rigs onshore during the first quarter (2 in the DJ, 2 in the Eagle Ford, and 3 in the Delaware), and achieved significant drilling time reductions. In the DJ Basin, the company drilled a record long lateral well of 9,700 feet in less than 4.3 days. Compared to 2016, the average drilling cost per foot in the Delaware during the first quarter was 30 percent lower as a result of drilling time reductions and lateral length extension of 20 percent.
The company initiated production on three Wolfcamp A wells within the first quarter in the Delaware Basin. Each of the wells is materially outperforming Noble Energy’s 1.2 million barrels of oil equivalent (MMBoe) type curve (normalized to a 7,500-foot lateral). The wells had an average IP-30 rate of 1,730 Boe/d (365 Boe/d per 1,000 lateral feet). Two of the wells utilized 3,000 pounds of proppant per lateral foot and one tested 5,000. During the quarter, Noble Energy drilled 10 wells with an average lateral length of 7,600 feet and completed six wells. This includes the company’s first three-well multi-horizon pad in the Delaware Basin which contained 10,000 foot lateral length wells targeting the 3rd Bone Spring and Wolfcamp A zones. The three-well pad is expected to be online late in the second quarter.
Enhanced completions continued to deliver exceptional results in the DJ Basin. During the first quarter, 14 wells commenced production with an average proppant concentration of 2,000 pounds per lateral foot, including 10 in Wells Ranch and four in East Pony. In both areas, cumulative production on average is significantly outperforming expectations and widening over time. Late in the fourth quarter of 2016, the company’s initial four enhanced completion tests in East Pony commenced production with an average proppant concentration of 2,800 pounds per foot. The wells are outperforming the type curve by over 50 percent after 120 days of production.
Five Lower Eagle Ford wells in Gates Ranch began production late in the first quarter of 2017. Eagle Ford net production was over 50 MBoe/d exiting the first quarter, and is currently at approximately 55 MBoe/d, representing more than a 25 percent increase from first quarter average daily sales volume.
Natural gas demand driving record 1Q sales volumes in Israel
The company averaged 274 MMcfe/d in sales volumes from its Israel assets within the first quarter. Compared to the first quarter of 2016, sales volumes were higher, even with the impact of a 3.5 percent working interest sale of Tamar which closed at the end of 2016. Gross field sales of 956 MMcfe/d reflected an increase of over 12 percent from the first quarter of 2016.
The company began exporting natural gas from Israel for the first time to industrial customers in Jordan. During the first quarter, the company completed the Tamar 8 development well, further supporting long term field deliverability. To date, field reliability has been 99.98 percent since startup in late 2013. The Tamar 8 well began producing in early April and is performing as expected.
In February, the company sanctioned the initial phase of the Leviathan major project. Development activities and project spend have commenced, with drilling underway on two production wells (four production wells capable of 1.2 Bcf/d are included in the first phase of Leviathan). Initial Leviathan proved reserves are anticipated to be recorded in 2017 at approximately 3.3 trillion cubic feet (550 MMBoe) net.
Continued reliable performance from other global offshore assets
Sales volumes in the Gulf of Mexico were above the top end of guidance at 30 MBoe/d, reflecting robust production from the company’s Big Bend, Dantzler and Gunflint fields. Sales volumes for West Africa were in-line with expectations at 66 MBoe/d, lower than produced volumes as a result of underliftings primarily at the Aseng field.
In April, the company executed a unitization agreement with the partners of Block D over the Alba Production Sharing Contract in Equatorial Guinea. Noble Energy’s working interest in the Alba field has been modified slightly from 35 percent to 33 percent.
Noble Energy, Inc. will host a live audio webcast and conference call at 8:00 a.m. Central time May 2, 2017. The webcast link is accessible on the ‘Investors’ page at www.nblenergy.com. The company’s earnings release is here.
