Noble Energy Inc. ( NBL ) reported adjusted earnings per share of 77 cents for the second quarter of 2012, which lagged the Zacks Consensus Estimate of 98 cents. The quarterly results were way below the year-ago earnings of $1.44 per share reported by the company.
The year-over-year plunge in earnings was mainly due to a decline in the average realized price of the products sold and an increase in total costs during the reported quarter.
GAAP earnings during the quarter were $1.58 per share versus $1.61 per share in the year-ago quarter.
The difference between GAAP and operating earnings in the quarter under review was due to an unrealized gain of $1.54 from commodity derivative instruments and a gain of 5 cents from assets divestures partly offset by a charge of 41 cents from asset impairments and 37 cents from income tax adjustments.
Noble Energy's net revenue of $966 million in the second quarter was lower than the Zacks Consensus Estimate of $1,018 million. However, revenue was 14.7% higher than $842 million reported in the second quarter of 2011.
The year-over-year growth in revenue during the quarter was driven by higher contribution from crude oil and condensate, while the results were partly dragged down by lower-priced natural gas and natural gas liquids.("NGL")
Total second quarter sales volumes for Noble expanded 10.0% from the year-ago quarter to 224 thousand barrels of oil equivalent per day (MBoe/d), comprising 47% liquids, 21% international natural gas, and 32% domestic natural gas. Net volumes produced in the quarter totaled 223 MBoe/d. The difference in production and sales volume during the quarter was due to the timing of crude oil and condensate liftings in Equatorial Guinea.
Realized oil prices in the quarter decreased by $5.56 per barrel, or 5.3%, year over year to $99.67 per barrel. Realized prices for NGL in the U.S. was down 34% year over year to $33.06 per barrel from $50.03 per barrel in the year-ago quarter. Realized natural gas prices also moved down 42.8% year over year to $1.82 per thousand cubic feet (Mcf) from $3.18 per Mcf a year ago, primarily due to a 50.1% fall in the U.S. natural gas prices.
Production costs including lease operating expenses, production and ad valorem taxes, and transportation were up by 12% to $8.29 per barrel of oil equivalent (Boe) from the second quarter of 2011. The increase in the production cost was due to high value crude oil production from Aseng, the deepwater Gulf of Mexico and the DJ Basin.
Cash and cash equivalents of Noble Energy as of June 30, 2012 were $0.7 billion versus $1.45 billion as of December 31, 2011.
Long-term debts as of June 30, 2012 were $4.07 billion versus $4.1 billion as of December 31, 2011.
Capital expenditure for the second quarter 2012 was $859 million versus $719 million at the end of the second quarter 2011.
Cash flow from operating activities during the quarter was $506 million versus $745 million in the prior-year quarter.
The company expects third quarter 2012 sales volumes to average 242-250 MBoe/d, which does not include volumes from discontinued operations. The company expects its sales volumes to improve from the second quarter due to higher contribution from Galapagos, continuation of the drilling programs in DJ Basin and Marcellus Shale, and increased sales in Israel.
The company expects exploration expenses for 2012 to be in the range of $450 million to $500 million.
The company also raised its 2012 volume guidance at the midpoint by 2 MBoe/d on a pro forma basis. The new 2012 volume range is at 236 Mboe/d to 244 Mboe/d.
Anadarko Petroleum Corporation ( APC ), which competes with Noble Energy, is expected to report its second quarter 2012 earnings on July 30, 2012.
The Zacks Consensus Estimates, for revenue and earnings per share, for second quarter 2012, are presently pegged at $3,423 million and 77 cents per share, respectively.
Despite registering growth in sales volume, the results came in lower than expected, hit by declining realized prices for all products sold. U.S. natural gas prices have languished for some time now, but the major surprise came from a downward move in crude oil and condensate prices.
The company is making good progress in its DJ Basin, Marcellus Shale and its West Africa operations, and expects its sales volume in the third quarter to exceed second quarter levels.
Despite potential sales gain, we remain skeptical given the decline in realized prices and increase in the cost of crude oil production in the deepwater Gulf of Mexico and West Africa.
Based in Houston, Texas, Noble Energy operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids. Noble Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.