Noble Energy Inc. (NBL)

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Noble Energy, Inc. (NBL)

Q1 2010 Earnings Call Transcript

April 29, 2010 10:00 am ET

Executives

David Larson – VP, IR

Chuck Davidson – Chairman and CEO

Dave Stover – President and COO

Analysts

Michael Jacobs – Tudor, Pickering, Holt

Dave Kistler – Simmons & Company

Bob Morris – Citigroup

Leo Mariani – RBC Capital Markets

Irene Haas – Canaccord

Stephen Richardson – Morgan Stanley

Dan McSpirit – BMO Capital Markets

Michael Hall – Wells Fargo

David Wheeler – AllianceBernstein

Presentation

Operator

Good morning and welcome to Noble Energy's first quarter 2010 earnings call. I would now like to turn the call over to David Larson. Please go ahead, sir.

David Larson

Thanks, Lisa. Good morning, everyone. Welcome to Noble Energy's first quarter 2010 earnings call and webcast. I'd like to start out with a few introductions. On the call today with me we have Chuck Davidson, Chairman, CEO, Dave Stover, President and COO and Ken Fisher, CFO. Chuck will be making some opening comments here in a few minutes and then we'll discuss the results for the quarter. Dave will then go into our global operations focusing on our first quarter highlights and the second quarter activity plans. And as usual, we'll leave time for Q&A and wrap up the call in less than an hour. Should you have any questions that we don't get to this morning, please don't hesitate to call and we'll do the best we can answer you.

We hope everyone has the earnings release in front of them that we issued this morning. It does include some new guidance updates for the second quarter. Later today, we do expect to be filing our 10-Q with the SEC and it will be available on our website.

I want to remind everyone today that the webcast and conference call contains projections and forward-looking statements based on our current views and our most reasonable expectations. We provide no assurances on these statements as a number of factors and uncertainties could cause actual results in the 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 that influence our business. We'll reference certain non-GAAP financial measures here today, such as adjusted net income, or discretionary cash flow. When we refer to these items, it is because we believe they are good metrics to use in evaluating the company's performance. Be sure to see the reconciliations in our earnings release for these items.

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

Chuck Davidson

Thanks, David, and good morning, everyone. Looking back versus the same time last year, the overall economic outlook has clearly improved and we've seen dramatic moves in the energy markets. While we'll be providing an update of our operations in today's call, we plan to go into much greater depth at our Analyst Meeting coming up on June 3rd, and I hope that you will be able to join us either in person or on the webcast at that time. I think we'll have many exciting things to share with you at that point.

Starting out on the pricing side, there continues to be a wide disparity between the market value of crude and natural gas, which on the natural gas side continues to be challenged from the vast supply that the industry has uncovered and also the forecast for production growth in 2010. Perhaps last week's break in the gas rig count is an early indicator of producer discipline setting in, but I still have a lot of concerns about North America natural gas. That's exactly why we like our diversified portfolio, which includes many oil-based projects that we can and have been redeploying capital to.

Let me reiterate our overall objectives for the year, which I plan to touch on as we go through the results for the first quarter. Number one, of course, is to maintain our strong base of production such that when our major projects come on stream, they provide incremental growth.

Second is to continue with significant investments in exploration. Continued exploration will assure the growth momentum beyond the current inventory of major projects that we're developing. Next, we want to maintain our strong financial capacity throughout the year. And finally, we're focused on progressing this lineup of major projects that will clearly deliver transformational impacts on reserves and production over the next several years. I think we made solid progress during the first quarter on these goals.

Looking at our first quarter 2010 results, GAAP net income was $237 million. That was $1.34 per share diluted on revenues of $733 million. Adjusted net income was $138 million or $0.78 per share, with the only judgment item being this quarter being the unrealized commodity derivative gain.

Sales volumes for the first quarter averaged 197,000 barrels of oil equivalent per day, which is consistent with the quarterly range we provided you during last quarter's call. Production volumes averaged 201,000 barrels of oil equivalent per day, which exceeded our sales volumes with the difference due to some specific, the timing on crude oil liftings in North Sea, as well as in Equatorial Guinea.

Our U.S. operations had a very strong quarter led by our onshore programs, which had record production for the quarter and accounted for approximately 83% of our total U.S. volumes. On shore, we remain focused on liquids opportunities, led by the Wattenberg field, which continues to deliver with record organic quarterly volumes and total volumes at about 50,000 barrels of oil equivalent per day. Another record for Wattenberg was that 50% of our volumes were liquids, either crude or natural gas liquids. Total onshore production was up nearly 6,000 barrels per day equivalent from the fourth quarter with the majority of the increase coming in crude and natural gas liquids.

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