Noble Energy Inc. (NBL)

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Noble Energy (NBL)

Q4 2012 Earnings Call

February 07, 2013 10:00 am ET

Executives

David R. Larson - Vice President of Investor Relations

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

David L. Stover - President and Chief Operating Officer

Analysts

Evan Calio - Morgan Stanley, Research Division

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division

David W. Kistler - Simmons & Company International, Research Division

Brian Singer - Goldman Sachs Group Inc., Research Division

Irene O. Haas - Wunderlich Securities Inc., Research Division

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

John Malone - Global Hunter Securities, LLC, Research Division

Charles A. Meade - Johnson Rice & Company, L.L.C., Research Division

Dan McSpirit - BMO Capital Markets U.S.

Amir Arif - Stifel, Nicolaus & Co., Inc., Research Division

Michael A. Hall - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good morning. Welcome to Noble Energy's Fourth Quarter 2012 Earnings Call. I would now like to turn the call over to Mr. David Larson. Please go ahead.

David R. Larson

Thanks, Camille. Good morning, everyone. Welcome to Noble Energy's Fourth Quarter and Year End 2012 Earnings Call and Webcast. On the call today, we have Chuck Davidson, Chairman and CEO; Dave Stover, President and COO; and Ken Fisher, CFO.

Earlier this morning, we issued our earnings release for the fourth quarter and hopefully, you all have had a chance to review our results. A few supplemental slides were also posted on our website. You'll want to download the slides, if you have not already done so, as we will be referencing them in today's discussion. Later today, we expect to be filing our 10-K with the SEC, and it will also be available on our website.

The agenda for today will begin with Chuck discussing the final quarter of 2012 and make some comments on '13. Dave will then give you a detailed overview of our operations programs, including a summary of our 2012 reserves and a breakdown of our activity levels for the upcoming year. We'll leave 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 questions that we don't get to this morning, please don't hesitate to call, and we'll do our best to answer them.

I want to remind everyone that this webcast and conference call does contain projections and forward-looking statements based on our current views 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. You should read our full disclosures on forward-looking statements in our latest news releases and SEC filings for a discussion of the risk factors that influence our business.

We'll reference certain non-GAAP financial measures such as adjusted net income or discretionary cash flow in the call today. When we refer to these items, it's because we believe they are good metrics to use in evaluating our performance. Be sure to see the reconciliations in our earnings release tables.

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

Charles D. Davidson

Thanks, David. Good morning, everyone. We appreciate you joining us today. I'm going to start out with a quick review of 2012, including the fourth quarter results and make some comments on our plans for 2013 and how I see things shaping up. Dave is going to finish with a walk-through of our global operations.

We completed a great quarter, and we're really excited about 2013. Some of you listening to this call attended our analyst conference back in December, where we presented a comprehensive review of our business and our growth expectations going over the next 5 years. The presentation material and the webcast recordings of the conference were made available on our website for those who want to review it.

We also released at that time our 2013 capital program outlining our spending and guidance for the year. I believe we presented a very exciting future for our company, a future that includes very strong value-creating growth.

The story of our future really starts with the great accomplishments we had in 2012. And as just a few examples over the course of the past year, we've dramatically grown the scale of our onshore resource plays in the Niobrara and the Marcellus. We've accelerated the pace of the Niobrara to a level that we could not have envisioned just a year ago, with production from our horizontal wells at the end of the year far exceeding our original targets.

But 2012 was not just about our unconventional plays. Our major projects in the Gulf and in international hit major milestones with the startup of Galapagos in the Gulf, Tamar on track for startup in April and Alen on pace for an earlier-than-expected startup in the third quarter of this year.

We also announced a strategic partnership in Israel, discoveries in Israel, in the Gulf and new exploration opportunities in Nevada, the Falklands and Sierra Leone and a successful divestiture of non-core assets with proceeds totaling over $1 billion.

Our sales volumes grew 11% over 2011. We project an even higher rate of growth of 20% this year after adjusting for divestitures. And finally, we issued our first Sustainability Report, an area that's becoming increasingly important to investors. At Noble, we're not only proud of our financial and operational results but also we're proud of how we carry out our business. These strong results have us well positioned to extend our success into 2013 and beyond.

So let's go to the fourth quarter. As I said, it was a strong quarter, so let me get to the numbers. Adjusted net income from continuing operations for the fourth quarter was $296 million, or $1.65 per share diluted. Excluded from the adjusted net income were unrealized gains from commodity hedges and an asset impairment associated with Mari-B offshore Israel. Mari-B has been an outstanding field that is rapidly approaching the end of its production life, although it could have an important role going forward as a gas storage reservoir. Our focus right now is to squeeze as much gas as we can out of these depleting existing reservoirs to bridge the gap until Tamar comes online in just a few months.

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