Houston super independent Noble Energy Inc. is bringing costs down and production up in the Lower 48, with output from its main basins, the Permian Delaware and Denver-Julesburg (DJ), each hitting record output during the second quarter.

The global producer, whose portfolio encompasses the U.S. onshore, deepwater Gulf of Mexico, offshore Israel and Equatorial Guinea, credited more efficiencies with bringing overall costs down, particularly in Lower 48 plays. Full-year capital spending of $2.4-2.6 billion has been reduced by $100 million as a result.

The U.S. onshore has reached an “inflection point,” CEO Dave Stover said during a second quarter conference call. Well cost reductions are exceeding 2019 guidance targets of up to $1 million/well in the DJ and $1.5 million/well in the Delaware.

Completion stages performed per day are on average 50% higher than in late 2018, contributing to reduced well costs and accelerating first production for new wells. On another metric, spud-to-rig-release drilling days continue to improve, with the DJ’s long laterals now below five drilling days per well. In the Delaware, the company has recently drilled a 10,000-foot lateral in under 17 days.

“As a result of these efficiency gains, the company was able to bring online an additional 17 wells in the first half of the year,” Stover said.

Total sales volumes from the onshore assets averaged a record 263,000 boe/d, with liquids volumes of 181,000 b/d. Oil production climbed to 117,000 b/d, also a record, while Lower 48 natural gas production increased slightly to 495 MMcf/d from 465 MMcf/d.

As with its peers, commodity prices weren’t quite as cooperative in the quarter, but Noble managed to rise above them.

For its domestic onshore natural gas, Noble received on average $1.61/Mcf, compared with $2.29/Mcf in 2Q2018, “reflecting increased differentials in the DJ and Delaware.” Basis hedges for Delaware gas generated nearly $5 million in additional cash flow or about 80 cents/Mcf.

U.S. onshore oil realizations averaged $58.13/bbl in the second quarter, versus $64.62/bbl a year earlier, while Lower 48 natural gas liquids fetched $14.54/bbl, down from $24.39/bbl. Noble is planning around a long-term West Texas Intermediate price averaging $50-55/bbl, a range at which it expects to deliver 5-10% long-term annual growth.

“During the quarter we actively managed our commodity price exposure through market diversification and hedging,” Stover noted.

Noble has hedged 70-75% of its Waha gas price exposure through 2020. About two-thirds of the oil is covered for 2019 and 40%-plus for 2020 “with a floor of at least $58/bbl,” he said.

“As the market continues to experience volatility, we remain intensely focused on generating free cash flow, improving corporate returns, protecting the balance sheet and returning significant amounts of capital to investors.”

Noble during the quarter operated six rigs in the onshore, with four in the Delaware and two in the DJ. It also drilled 42 wells (26 DJ and 16 Delaware) and completed 59 wells overall. In addition, production ramped up on 77 wells, including 36 in the DJ, 25 in the Delaware and 16 in the Eagle Ford Shale. In the DJ, company performance “continues to deliver to the upside, led by development of the Mustang asset,” Stover said.

Noble has submitted an application for an additional comprehensive drilling plan (CDP) for the North Wells Ranch area of the DJ, “where we can build upon the accomplishment seen at our Mustang position,” Stover said.

Colorado regulators approved the first Mustang CDP for Weld County, which serves as a blueprint for master-planned energy development to reduce emissions through designs that eliminate tanks, use electricity rather than diesel, and take out older vertical wells. It also minimizes Noble’s footprint by reducing land usage and eliminating truck trips. The first CDP included plans to install electric power lines to further reduce emissions by eliminating the need for diesel generators.

The DJ averaged 145,000 boe/d, up by 20% year/year with more than half of the activity focused in the Mustang, where 55% of the wells were tied to sales.

Sales volumes from the Delaware totaled 64,000 boe/d, up more than 35% from 2Q2018. The company brought online a full section row development of 10 wells in the Calamity Jane lease in late June.

Meanwhile, Eagle Ford Shale sales volumes totaled 54,000 boe/d, benefiting from accelerated production as 16 wells were tied to sales beginning in June from the North Gates Ranch area.

Internationally, 3Q2019 sales volumes are expected to benefit from the timing of liquids liftings in West Africa and seasonal demand in Israel. The company anticipates volumes to average 370,000-385,000 boe/d.

Delivery of the Leviathan natural gas project offshore Israel “remains on budget and on schedule for first production by the end of 2019,” the company noted. Second quarter sales volumes from the assets in Israel totaled 210 MMcfe/d, above guidance on high seasonal gas demand and lower than expected maintenance.

In West Africa, sales volumes averaged 51,000 boe/d in the quarter. “Unit production expenses continue to trend favorably with full-year guidance lowered 15 cents/boe,” management noted.

For the fourth quarter in a row, total capital came in below expectations, with expenditures and operating cash costs/bbl more than 10% below plan, even with oil volumes toward the high end of guidance.

“Our operational performance and efficiencies accelerated a number of wells to first production through faster drilling and completion timing, and our onshore activity in the second quarter will drive a pronounced third quarter volume increase while onshore capital spending trends lower in the back half of the year,” Stover said.

“Along with the high demand season in Israel and strong performance in West Africa, the entire company is undergoing a material uplift this quarter. Our third quarter volume guidance reflects 8% total company sequential growth at the midpoint of our range with oil up over 10%.”

In July, the U.S. onshore assets overall had produced 285,000 boe/d, including oil volumes estimated to be 125,000 b/d.

Second quarter net losses totaled $10 million (minus 2 cents/share) from a year-ago net loss of $23 million (minus 5 cents). Revenue fell to about $1.1 billion from $1.2 billion in 2Q2018.