Noble Energy Inc. (NBL)

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Noble Energy Inc. (NBL)

Q3 2010 Earnings Call Transcript

October 28, 2010 10:00 Am ET

Executives

David Larson – VP, IR

Chuck Davidson – Chairman & CEO

Dave Stover – President & COO

Analysts

Brian Singer – Goldman Sachs

Dave Kistler – Simmons and Company

Dan McSpirit – BMO Capital Markets

Michael Hall – Wells Fargo

Leo Mariani – RBC

David Heikkinen – Tudor, Pickering, Holt

John Selser – Iberia Capital Partners

Presentation

Operator

Good morning. Welcome to the Noble Energy’s Third Quarter 2010 Earnings Conference Call. I would now like to turn the conference over to Mr. David Larson. Please go ahead, sir.

David Larson

Thanks, Allie. Good morning, everyone. Welcome to Noble Energy’s third quarter 2010 earnings call and webcast. On the call today we have Chuck Davidson, Chairman and CEO; Dave Stover, President and COO; and Ken Fisher, CFO.

In a minute, Chuck will review our results for the quarter as well as talk about some of our plans for 2011. Dave will then review our global operations focused on third quarter highlights and our ongoing activity levels.

Today, we plan on leaving plenty of time for Q&A at the end of our prepared remarks and wrap up the call in less than an hour. In an effort to ensure that everyone has an opportunity to ask their questions on the call, we would ask that all the participants limit themselves to one primary question and one follow-up. And should you have any questions that we don’t get to, we’ll be more than happy to respond to those after the call.

We hope everyone has found the earnings release that we issued this morning. Later today, we do expect to be filing our 10-Q with the SEC and we will also have that available on our Web site.

I want to remind everyone that this webcast and conference call contains projections and 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 risk factors that influence our business.

We’ll reference today certain non-GAAP financial measures such as adjusted net income or discretionary cash flow on the call. When we refer to these items, it’s 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 tables.

With that, I’m going to turn the call over to Chuck now.

Chuck Davidson

Thanks, David, and good morning everyone. In my opening comments I plan to review our quarterly results and then also walk through some early thoughts for 2011. No question, we had a great third quarter. Record volumes combined with good cost management delivered GAAP net income of $232 million or $1.31 per diluted share.

Adjusted net income was $225 million or $1.27 per diluted share after removing the impact of unrealized commodity derivative gain, also removing the gain on the sale of assets as well as an asset impairment charge.

While the sales numbers are certainly well above expectations, from my perspective it was really the list of key accomplishments regarding our long-term growth agenda that really made the quarter stand out.

Now, these included the sanction of the Tamar project in Israel, significant progress with the horizontal Niobrara play in the DJ Basin and continuing Galapagos in the deepwater Gulf of Mexico despite the moratorium that we had there. These accomplishments are what will really bring great results to our company in the future.

Sales volumes for the third quarter were 230,000 barrels of oil equivalent per day. Actual production was 2,000 barrels per day above sales to the timing of some international oil liftings. Good product diversification continues to be beneficial for us as we had 38% of our sales being global liquids, 33% international gas and remaining 29% was U.S. gas.

Versus the second quarter this year, our international gas percentage was up 4 points, primarily driven by continued market growth and strong seasonal demand we experienced in Israel, which led to record sales volumes there.

Liquid volumes in the U.S. averaged 54,000 barrels per day in the third quarter, up over 2,000 per day from the second quarter. Oil volumes in the Central DJ Basin and deepwater Gulf of Mexico were up a combined 5,000 barrels per day, partially offset by nearly a 3,000 barrel a day reduction which was due to our onshore asset sale that closed during the quarter.

Our DJ Basin volumes continued to reflect growth from both the vertical and the horizontal development programs. Deepwater was higher as some of our volumes were restricted in the second quarter.

We also had increased North Sea volumes, primarily from Dumbarton and Lochranza. In Equatorial Guinea, our liquid volumes were down sequentially due to the timing of liftings during the quarter.

On U.S. natural gas, our volumes declined from the second quarter, primarily resulting from reallocating capital away from dry gas drilling which of course we began some time ago. Even in Wattenberg our gas production has declined as we focused on growing liquids in the field, and we’ll continue with the same domestic natural gas strategy until the U.S. market is ready for more supply.

Read the rest of this transcript for free on seekingalpha.com