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Noble Energy Sets DJ, Eagle Ford Production Records

Houston-based super independent Noble Energy Inc. delivered a 7% sequential gain for volumes during the second quarter, driven in part by record output from the Eagle Ford Shale and Denver-Julesburg (DJ) Basin.

Quarterly sales volumes totaled 408,000 boe/d in 2Q2017, with the U.S. onshore arm alone reporting a 21% gain of 26,000 b/d, a 21% jump from 1Q2017.

Eagle Ford volumes climbed 60% sequentially to 69,000 boe/d, lifted by the prolific South Gates Ranch area. In the DJ, Wells Ranch and East Pony volumes increased to 70,000 boe/d, a quarterly record and up 13% from 1Q2017. Noble also established record output offshore Israel, with natural gas-weighted volumes of 962 MMcfe/d.

"During the second quarter, we again delivered industry-leading well results across our onshore basins, demonstrated continued strong performance at our high-quality offshore operations and reported volumes and costs that were in-line with or better than our expectations,” said CEO Dave Stover.

Several “transformative portfolio actions” during the quarter “reflect our continued focus on enhancing margins and corporate returns.”

Noble during the second quarter sold off the Marcellus Shale portfolio, completed the first dropdown to Noble Midstream Partners LP and completed its takeover of Clayton Williams Energy Inc. to expand its Permian Basin position in the Delaware.

Adjusting for the Marcellus closing in late June, which reduced volumes on average by 3,000 boe/d, Noble during 2Q2017 produced 134,000 b/d of oil/condensate, 67,000 b/d of natural gas liquids (NGL) and 1.2 Bcf/d of natural gas.

Noble Still Natural Gas-Weighted

U.S. onshore sales volumes averaged 269,000 boe/d, weighted 44% to natural gas, 33% to oil and 23% to NGLs. Domestic onshore oil volumes increased 16% sequentially to 88,000 b/d, while NGL volumes jumped 30% to 61,000 b/d.

During the period, DJ volumes averaged 107,000 boe/d, with the Eagle Ford averaging 69,000 boe/d and the Permian Delaware at 23,000 boe/d. Through late June, the Marcellus contributed on average 393 MMcfe/d, while other U.S. onshore assets added 4,000 boe/d. Offshore volumes, including from the Gulf of Mexico, totaled 139,000 boe/d.

Production ramped up on six operated wells in the legacy Delaware acreage, including five Wolfcamp A wells and one Wolfcamp B well. Included in the wells was the company's first 10,000-foot lateral well in the Wolfcamp A Upper zone with 3,000 pounds/foot of proppant. Using managed flowback, the well averaged 1,500 boe/d in the first 60 days of production and “is exhibiting flatter than expected decline,” Noble said. 

The remaining four Wolfcamp A wells, which also used 3,000 pounds/foot of proppant, had average initial production rates over 30 days of 330 boe/d per 1,000 lateral feet, above Noble’s 1.2 million boe type curve, normalized to a 7,500 foot lateral). The average oil mix is nearly 75%.

The first Delaware central gathering facility operated by Noble Midstream began operation at the end of July. In conjunction with the start-up, Noble has begun producing from the three-well Monroe pad with 10,000-foot laterals.

DJ Volumes Increase 7%

In the DJ Basin, horizontal volumes climbed 7% sequentially to 96,000 boe/d, with the oil mix at a record 53%. Vertical well production was 11,000 boe/d, lower than projected and down 6,000 boe/d sequentially as Noble deferred workovers and higher line pressure impacts on older wells.  

During the second quarter, 33 wells were turned online in the DJ, including 11 in Wells Ranch and 22 in East Pony.

In the Eagle Ford, 14 wells in South Gates Ranch in South Texas ramped up and are performing “at expectations,” Noble said.

The company maintained an average of eight operated rigs onshore during the quarter, with 4.5 in the Delaware, two in the DJ and 1.5 in the Eagle Ford. Noble currently has seven rigs working, with five in the Delaware and two in the DJ.

Noble’s U.S. onshore crude oil differentials during 2Q2017 were about $2.00/bbl less than West Texas Intermediate (WTI), while NGL pricing represented nearly 40% of WTI. U.S. onshore natural gas pricing averaged equivalent to Henry Hub. 

Noble also managed to sharply reduce operating expenses in the three-month period, which fell 14% sequentially to $7.63/boe. A “major contributor” was the reduction in workovers in the DJ.

Meanwhile, Gulf of Mexico (GOM) volumes met expectations at 27,000 boe/d, reflecting continued strong performance from the Big Bend, Dantzler and Gunflint fields. Noble also received approval from the U.S. Coast Guard for the Neptune facility life extension, the first GOM extension granted in the industry. Neptune hosts production for Noble’s Swordfish field.

Nearly three-quarters of total organic capital expenditure (capex) during 2Q2017 was allocated to U.S. onshore plays, with 22% directed to the gassy Leviathan project in Israel.

First gas from Leviathan is expected by the end of 2019; a second well was completed in July. Noble has booked initial proved reserves associated with the first phase of development at 550 million boe net, a 35% increase over year-end 2016 total company reserves.

For the year, Noble now expects organic capex to be at the upper end of guidance of $2.3-2.6 billion as it accelerates spending for Leviathan and central gathering facilities in the Delaware sub-basin.

Total volumes for 3Q2017 are forecast at 350,000 boe/d, with 4Q2017 volumes estimated at 380,000-390,000 boe/d. Excluding 75,000 boe/d of 2017 volumes related to the Marcellus and other asset divestments, the original guidance was 340,000-350,000 boe/d.

Driven by the Marcellus exit and closing costs related to the Clayton Williams purchase, Noble reported a quarterly net loss of $1.5 billion (minus $3.20/share), versus a year-ago loss of $315 million (minus 73 cents). Adjusted net income for 2Q2017 was $24 million (5 cents/share).

Operating losses in 2Q2017 totaled $2.3 billion, compared with year-ago losses of $262 million. Revenue climbed to $1.06 billion from $847 million. 

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