Noble Energy Inc. (NBL)

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Noble Energy (NBL)

Q1 2011 Earnings Call

April 28, 2011 10:00 am ET


David Larson - Vice President of Investor Relations

David Stover - President and Chief Operating Officer

Charles Davidson - Chairman, Chief Executive Officer and Member of Environment, Health & Safety Committee

Kenneth Fisher - Chief Financial Officer and Senior Vice President


Gray Peckham - Susquehanna Financial Group, LLLP

Brian Singer - Goldman Sachs Group Inc.

Dan McSpirit - BMO Capital Markets U.S.

David Kistler - Simmons & Company International

Patrick Rigamer

Kenneth Carroll - Johnson Rice & Company

Leo Mariani - RBC Capital Markets, LLC

John Herrlin - Societe Generale Cross Asset Research

Irene Haas - Wunderlich Securities Inc.

Rehan Rashid - FBR Capital Markets & Co.



Good day, everyone, and welcome to Noble Energy's First Quarter 2011 Earnings Call. Now, I'd like to turn the conference over to Mr. David Larson. Please go ahead, sir.

David Larson

Thanks, Jennifer. Good morning, everyone. Welcome to Noble Energy's First Quarter 2011 Earnings Call and Webcast. On the call today, we have Chuck Davidson, Chairman and CEO; Dave Stover, President and COO; and Ken Fisher, CFO.

This morning, we issued our earnings release for the first quarter and it is available on our website. Later today, we expect to be filing our 10-Q with the SEC and it will also be on our website then. The agenda for today's call will begin with Chuck discussing the quarter, and he will highlight our ongoing major projects. Dave will then give a detailed review of our operational programs and the plans for the remainder of the year. We'll leave plenty of time for Q&A at the end and plan to wrap up the call in less than an hour. We would ask that participants limit themselves to one primary question and one follow-up. Should you have any questions that we don't get to during the call this morning, please call us and we'll do our best to answer you later.

I want to remind everyone that this webcast and conference call does contain projections, forward-looking statements based on our current view and most reasonable expectations. We provide no assurances on these statements as a number of factors and uncertainties could cause actual results in future periods to differ materially from what we discuss here today.

You should read our full disclosures on forward-looking statements in our latest news release and SEC filings for a discussion of the risk factors and the influences that they have on our business. We'll reference certain non-GAAP financial measures today such as adjusted net income and/or discretionary cash flow. When we refer to these items, it is because we believe they are good metrics to use and evaluate the company's performance. Be sure to see the reconciliations in our earnings release tables.

With that, let me turn the call over to Chuck.

Charles Davidson

Thanks, David, and good morning, everyone. I'm going to begin this morning with a high level review of our strong first quarter results and then have some opening comments on the operations side. Dave will then follow with a deeper look at our major projects and our exploration programs across the globe.

Adjusted net income for the first quarter was $240 million or $1.35 per share after adjusting for primarily a large unrealized commodity derivative loss, particularly on the oil side as prices strengthened from year end. Versus the first quarter of last year, our adjusted net income was up 74%.

Our GAAP net income was $14 million or $0.08 per share diluted. Strong sales volumes, price realizations and good cost control all contributed to our outperformance versus most analyst expectations. Our quarterly revenues were almost $900 million, up 23% from the first quarter last year, with half of the increase related to volume and the other half from liquid prices. During the first quarter, the WTI benchmark traded significantly lower than oil price on both the Gulf Coast as well as international oil price at Brent. This worked strongly to our advantage as about 60% of our oil is tied to the premium oil markets.

Total sales volume for the first quarter averaged 215,000 barrels of oil equivalent per day, which is about the quarterly guidance range we've provided earlier in the year. The outperformance was driven by our international portfolio, which contributed 101,000 barrels of oil equivalent per day or 47% of our total volume. We had strong liquid sales in Equatorial Guinea in the North Sea, which delivered very high cash flow from over 30,000 barrels of liquids per day between the 2.

In Israel, we sold 140 million cubic feet per day on average, a 60% increase over our gas sales in the first quarter of last year. Israel's natural gas imports from Egypt were interrupted in early February as a portion of the export system from Egypt was damaged, resulting in no sales to Israel for about 5 weeks. This, of course, increased demand for our in-country production. Natural gas pricing in Israel strengthened in the first quarter, with blended prices moving above $4 as a result of being partially linked to global liquids markets.

Earlier this week, the pipeline export system from Egypt was again damaged, resulting in suspension of natural gas sales to Israel. As a result, we expect demand from Mari-B Gas to increase above seasonal norms for a while and have attempted to account for this in our second quarter guidance. But information on when imports may resume is quite limited at this point.

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