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Noble Energy Hits Record Sales Volumes, Raises Guidance by 6.7%

Noble Energy Inc. hit record quarterly sales volumes of 427,000 boe/d in the second quarter, but it also reported a net loss of $315 million (minus 73 cents/share) after low commodity prices and higher operating expenses weighed on the bottom line.

However, the Houston-based super independent raised its full-year sales volume guidance to 415,000 boe/d. After accounting for 3,000 boe/d in asset sales, Noble said the increase amounted to an additional 28,000 boe/d, or a total of 10 million boe. The new guidance is a 6.7% increase from a projection of 390,000 boe/d the company released in January (see Shale DailyJan. 28).

The company also said it plans to spend $400-450 million on capital expenditures (capex) in 3Q2016, about 80% directed to the U.S. onshore to expand exploration and development in the Permian Basin’s Delaware sub-basin, Colorado’s Denver-Julesburg (DJ) Basin and the Eagle Ford Shale in Texas.

"As we look forward, our capital will be prioritized on accelerating our Delaware Basin position, developing our DJ and Eagle Ford positions," CEO David Stover said in an earnings call Wednesday to discuss 2Q2016. "With an improved liquidity profile following our asset sale proceeds, we're positioned to begin paying down debt by the end of the year, which will continue to lower Noble's underlying cost structure and further strengthen our balance sheet...

"We have executed as well as anyone during the volatility over the last two years. I'm confident that our focus and disciplined strategy is the right approach in this environment."

Noble's record production mark beat its guidance of 405,000-415,000 boe/d for the quarter. The product mix was 56% natural gas, 29% oil and 15% natural gas liquids (NGLs).

In Texas, Noble achieved record quarterly sales volumes of 74,000 boe/d in 2Q2016, 90% of which came from the Eagle Ford and the remaining 10% from the Permian. The total production figure marked a 17% increase from 2Q2015 on a pro forma basis and a 23% increase from 1Q2016. Liquids accounted for 62% of the latest total, including 25% crude oil and condensate, 37% natural gas liquids (NGL), while natural gas accounted for the remaining 38%.

Noble brought online one well -- the Calamity Jane 2101H -- in the Wolfcamp A interval of the Delaware in 2Q2016 (see Shale Daily, May 6). The well, which was drilled with 4,859-foot lateral, achieved a maximum 30-day initial production (IP) rate of 2,541 boe/d with 57% weighted to oil. The company said on a normalized basis for a 5,000-foot lateral well, the Calamity Jane is outperforming the 700,000 boe type curve by more than 75%.

"To say this is an exciting well is an understatement, especially when you consider it's only our third completion in the basin," operations chief Gary Willingham said during the conference call.  "From recent industry M&A [merger and acquisition] activity it's clear that the value of the Delaware Basin acreage continues to increase."

In the DJ Basin, sales volumes averaged 113,000 boe/d, a 5% increase from 2Q2015. Liquids accounted for 66% of production (46% oil and condensate, 20% NGL) and natural gas the remaining 34%. The company said combined production from its East Pony and Wells Ranch areas averaged 57 million boe/d in 2Q2016 -- a 23% increase from the previous second quarter -- but conceded that volumes were impacted by a planned turnaround at the Wells Ranch central processing facility, as well as from unplanned third-party facility downtime.

Marcellus Shale sales volumes averaged 546 MMcfe/d in 2Q2016, a 28% increase from a year ago. Natural gas accounted for nearly all (91%) of the volumes sold, with most of the remainder NGLs. Noble commenced production on 16 non-operated wells with joint venture (JV) partner Consol Energy Inc., during the quarter.

Noble only spent $262 million on capex in 2Q2016, far below the $350-400 million it had planned to spend and 67.2% below the $799 million it spent on capex in 2Q2015, pro forma to last year's merger with Rosetta Resources Inc. (see Shale DailyMay 11, 2015). Noble devoted about 65% of its most recent capex budget to the U.S. onshore, with the remainder going to the offshore, including the Gulf of Mexico (GOM).

Total revenue was $847 million in 2Q2016, a 14.7% increase over 2Q2015 ($738 million). But total operating expenses climbed 23.3%, from $899 million in 2Q2015 to $1.1 billion in 2Q2016. That led to the quarterly loss in 2Q2016. By comparison, Noble recorded a net loss of $109 million (minus 28 cents/share) in 2Q2015.

Noble reported that it had 31 drilled but uncompleted (DUC) wells in the Eagle Ford at the end of 2Q2016. It also had 15 DUCs in the Delaware, 36 in the DJ and 79 wells in its JV area in the Marcellus. NGI recently completed an in-depth special report about how onshore producers around the country are managing DUC inventories and how the drawdown may impact future production levels.

The company holds more than 360,000 net acres in the DJ, about 350,000 net acres in the Marcellus and more than 100,000 net acres in the Delaware Basin and the Eagle Ford.

Stay up to date on 2Q16 earnings and projections for the remainder of the year with NGI'sEarnings Call and Coverage sheet.

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