HOUSTON, Feb. 18 /PRNewswire-FirstCall/ -- Noble Energy, Inc. (NYSE: NBL) announced today its 2010 capital budget and guidance. The Company's total capital investment program is estimated at $2.5 billion, with 40 percent going toward major project developments, 20 percent for exploration and appraisal activities, and the remaining 40 percent for ongoing maintenance and near-term growth opportunities. Approximately 55 percent of the total is to be spent in the United States with the other 45 percent allocated to international activities.
Major project investments are expected to be about $1 billion, with the majority of capital directed toward the development of Galapagos in the deepwater Gulf of Mexico (GOM), Aseng offshore Equatorial Guinea, and Tamar offshore Israel. Approximately $500 million is allocated to exploration activities largely focused on plays where Noble Energy has a strong record of success. The program this year is targeting an estimated 700 million barrels of net unrisked resource potential with the drilling of seven high-impact offshore wells in the deepwater GOM, Equatorial Guinea and the Mediterranean Sea. The remainder of the capital budget is focused on liquid-rich and emerging opportunities onshore in the United States, as well as development projects in Israel, the North Sea and China.
"Our 2010 capital program is all about executing on our long-term growth projects, while maintaining our strong base of existing production. Over the last few years, we have discovered a substantial amount of resources through exploration in our three key offshore basins. The investments we are making in these discoveries will help drive significant multi-year production growth beginning in 2012. At the same time, continued investment in meaningful exploration remains a key component to our strategy, and we look forward to the 2010 program where we will be testing a number of the large prospects from our extensive worldwide exploration portfolio," said Charles D. Davidson, Noble Energy's Chairman and CEO.
Excluded from the capital budget discussed above is the $494 million purchase price for the DJ Basin asset acquisition scheduled to close late in the first quarter 2010, as well as $235 million of non-cash capital to be accrued for the Aseng FPSO capital lease.
Sales volumes for 2010 are projected to range from 211 to 224 thousand barrels of oil equivalent per day, with the midpoint of the range being up three and a half percent compared to 2009 production. United States volumes are anticipated to rise slightly due to onshore development activity and a partial year of production from the recently announced asset acquisition. This increase is somewhat offset by natural declines in the deepwater Gulf of Mexico. Despite planned facility downtime in Equatorial Guinea, the international portfolio is expected to show growth, largely due to increased natural gas demand in Israel and ongoing development projects in the North Sea and China.
"Our strong balance sheet plus current liquidity will provide support for this year's capital budget, which is anticipated to exceed 2010 cash flow from operations. As part of our strategic long-term growth plans, it is important for us to maintain a conservative balance sheet with the liquidity to fund our major project developments, future exploration success, and retain flexibility for opportunistic deals, no matter where we might find ourselves in the commodity cycle," said Kenneth M. Fisher, Senior VP and CFO for Noble Energy.
Approximately 80 percent of Noble Energy's expected 2010 natural gas production is hedged or marketed under long-term pricing arrangements. All of the natural gas hedges are applicable to United States volumes with an average floor price of $5.90 per thousand cubic feet. Crude oil hedges totaling about 35 percent of the Company's oil production have an average floor price of approximately $61.48 per barrel.
2010 GUIDANCE
Additional detailed operational and financial information representing the 2010 Guidance is included on the following pages.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with significant international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.
This news release may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Risks, uncertainties and assumptions that could cause actual results to differ materially from those projected include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are detailed in its Securities and Exchange Commission filings. Words such as "anticipates," "believes," "expects," "intends," "will," "should," "may," and similar expressions may be used to identify forward-looking statements. Noble Energy assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
This news release may also contain certain forward-looking non-GAAP measures of financial performance that management believes are good tools for internal use and the investment community in evaluating the Company's overall financial performance. These non-GAAP measures are broadly used to value and compare companies in the crude oil and natural gas industry.
The Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Beginning with year-end reserves for 2009, the SEC permits the optional disclosure of probable and possible reserves. We have elected not to disclose the Company's probable and possible reserves in our filings with the SEC. We use certain terms in this news release, such as "resource potential," that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-07964, available from Noble Energy's offices or website, http://www.nobleenergyinc.com. These forms can also be obtained from the SEC by calling 1-800-SEC-0330.
2010 Operational and Financial Guidance
Volumes and Prices
For 2010, total volumes are estimated to average between 211 to 224 thousand barrels of oil equivalent per day, which includes equity method investment volumes. The breakdown of our estimated annual average daily volumes by product and area is:
Crude Oil and Condensate (MBbl/d)
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United States 36 - 39
West Africa 11 - 14
West Africa – equity method investment 1 - 2
North Sea 9 - 14
China 4 - 6
The price differential for crude oil in the United States is expected to range from $4.00 to $5.00 per barrel below WTI. Crude oil differentials in West Africa and North Sea are based off dated Brent and should range from $0.00 to $1.00 per barrel. In China, crude oil differentials should be $6.00 to $8.00 per barrel below WTI. All price differentials exclude the impact of hedge results. Condensate recovered at the LPG plant in West Africa is reported under equity method accounting with its margin in equity method investments.
Natural Gas (MMcf/d)
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United States 390 - 420
West Africa 215 - 235
Israel 120 - 155
North Sea 6 - 9
Ecuador 20 - 25
The natural gas price differential for the United States is expected to range from $0.25 to $0.75 per Mcf below NYMEX Henry Hub and includes a Btu processing uplift where applicable. Price realizations for West Africa are estimated to be $0.27 per Mcf. Israel natural gas prices are anticipated to range from $3.70 to $4.20 per Mcf. All price differentials exclude the impact of hedge results. Ecuador natural gas revenues associated with the natural gas-to-power project are reflected in electricity margins.
Natural Gas Liquids (MBbl/d)
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United States 10 - 12
West Africa – equity method investment 5 - 6
The natural gas liquid (NGL) price realizations for the United States should average around 40 to 50 percent of WTI. NGLs recovered at the LPG plant in West Africa are reported under equity method accounting with its margin in equity method investments.
Other Revenues and Operating Margins
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Electricity margin $0 - $2 million
Equity method investments $75 - $95 million
Margins are calculated as revenues less expenses. The electricity margin is associated with the natural gas-to-power project in Ecuador. Equity method investments include income generated from the methanol operations, and the condensate and NGLs recovered at the LPG plant in West Africa, both which vary with production levels and liquid prices.
Cost and Expenses
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Lease operating $5.00 - $5.50 per Boe
Transportation $0.85 - $1.00 per Boe
Depreciation, depletion and amortization $10.80 - $11.40 per Boe
Production and ad valorem taxes 4.3 - 4.7% of oil, gas and ngl revenues
Exploration $335 - $395 million
General and administrative $265 - $285 million
Interest (net) $50 - $65 million
Included in cost and expenses is approximately $55 million of stock-based compensation. Capitalized interest is estimated to be about $75 to $95 million.
Other Items
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Effective tax rate 30 - 34%
Deferred tax ratio 20 - 30%
Outstanding shares – diluted 175 - 178 million
Tax guidance is applicable to earnings before unrealized market-to-market gain / loss on commodity derivatives and other items typically not factored in by analysts.
Commodity Hedges - 2010
As of February 2010, Noble Energy had entered into the following crude oil and natural gas derivative instruments.
Crude Oil
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Fixed Price Swaps 2-way Collars
----------------- -------------
Weighted Weighted Average
Average Price
Production Volumes Price Volumes ($ per Bbl)
Period Index (Bopd) ($ per Bbl) Index (Bopd) Floor Ceiling
------ ----- ------ ----------- ----- ------ --------------
FY 2010 WTI 1,000 $78.70 WTI 14,500 $61.48 - $75.63
2-4Q 2010 WTI 2,000 $80.05
FY 2010 Brent 1,000 $80.05 Brent 7,000 $64.00 - $73.96
Natural Gas
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Fixed Price Swaps 2-way Collars
----------------- -------------
Weighted Weighted Average
Average Price
Production Volumes Price Volumes ($ per MMBtu)
Period Index (MMBtupd) ($ per MMBtu) Index (MMBtupd) Floor Ceiling
------ ----- --------- ------------- ----- --------- --------------
FY 2010 NYMEX 20,000 $6.10 NYMEX 210,000 $5.90 - $6.73
CIG 15,000 $6.25 - $8.10
2-4Q 2010 NYMEX 20,000 $6.11
Natural Gas Differential versus NYMEX
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Basis Swaps
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Weighted
Production Volumes Average Price
Period Index (MMBtupd) ($ per MMBtu)
------ ----- --------- -------------
FY 2010 CIG 100,000 ($1.60)
2-4Q 2010 CIG 10,000 ($0.44)
SOURCE Noble Energy, Inc.
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