HOUSTON, Feb. 19 /PRNewswire-FirstCall/ -- Noble Energy, Inc. (NYSE: NBL) today announced its capital budget and guidance for 2009.
Noble Energy's capital investment program has been established at $1.6 billion and may be adjusted up or down by 10 to 15 percent, depending on commodity prices and economic conditions experienced throughout the year. This amount compares to capital spending, excluding property acquisitions, of $2.0 billion in 2008.
Approximately 40 percent of the 2009 budget is committed to longer-term projects that will provide considerable production growth several years in the future. The remainder is allocated toward maintaining and strengthening the existing property base. Development spending will focus on the company's international and deepwater Gulf of Mexico assets as well as certain higher return opportunities onshore in the United States. The exploration budget will center on significant resource potential in Israel, West Africa and the deepwater Gulf of Mexico. International expenditures are estimated to represent 30 percent of the total capital program, up from 15 percent in 2008.
"We are committed to our strategy of creating shareholder value. The budget this year is designed to invest more in longer dated growth as the near-term outlook for oil and natural gas demand appears weak. We have also built in added flexibility to allow us to alter our plans in this highly uncertain environment, while maintaining our financial discipline. A substantial amount of capital is allocated toward our international development projects and appraisal of our recent discoveries, as well as retaining a significant exploration program that is almost entirely directed toward high-impact prospects," said Charles D. Davidson, Noble Energy's Chairman, President and CEO.
The capital program should enable Noble Energy to deliver sales volumes of 212 to 220 thousand barrels of oil equivalent per day (MBoe/d) in 2009, which when using the midpoint of the range represents a slight increase over 2008. The international portfolio is expected to increase volumes about 8 percent largely due to the continued natural gas demand growth in Israel, additional development wells in the North Sea, and less facility downtime in Equatorial Guinea. United States production is anticipated to decline about 5 percent as a result of ongoing hurricane shut-ins, natural declines in the deepwater Gulf of Mexico and reduced drilling activity.
Noble Energy's ability to fund the 2009 capital budget is supported by strong cash flow aided by a beneficial hedge position and as applicable, cash balance of over $1 billion. Approximately 70 percent of the company's expected 2009 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 minimum price of $8.90 per Mcf. Crude oil hedges totaling about 35 percent of the company's oil production have an average minimum price of $81.86 per barrel.
2009 GUIDANCE
Additional detailed operational and financial information covering the 2009 Guidance is included on the following pages.
CONFERENCE CALL
Noble Energy's fourth quarter and full year 2008 conference call will be available today via live audio webcast at 9:00 a.m. Central Time. To listen, log on to www.nobleenergyinc.com and click on the Investor Relations tab. Dial in numbers are (888) 791-4321 or (913) 312-0378. The conference call replay will be available until March 21, 2009. To access the replay, go to www.nobleenergyinc.com and click on the Investor Relations tab. You can also access the replay by dialing (888) 203-1112 or (719) 457-0820. The pin code is 1689624.
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 key international operations offshore Israel, UK 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.
2009 Operational and Financial Guidance
Volumes and Prices
For 2009, total volumes are estimated to average between 212 to 220 MBoe/d, which includes equity method investment volumes - condensate and natural gas liquids (NGL). On a quarterly basis, total volumes are expected to range as follows:
Period Quarterly Range (MBoe/d)
1Q 208 - 216
2Q 212 - 220
3Q 212 - 220
4Q 216 - 224
The breakdown of our estimated 2009 annual average daily volumes by product and country is detailed below:
Crude Oil and Condensate (MBbl/d)
United States 33 - 36
West Africa 12 - 15
West Africa - equity method investment 2 - 2
North Sea 10 - 13
China 3 - 4
The price differential for crude oil in the United States is expected to range from $4.50 to $5.50 per barrel below WTI. International crude oil differentials based off dated Brent are premiums that should range from $1.25 to $2.25 per barrel for West Africa and $2.25 to $3.25 per barrel for the North Sea. Crude oil differentials for China should be $6.00 to $8.00 per barrel below WTI. All price differentials exclude the impact of hedge positions. Condensate recovered at the LPG plant in Equatorial Guinea is reported under equity method accounting and included in total volumes with its related income benefits in equity method investments.
Natural Gas (MMcf/d)
United States 385 - 410
West Africa 220 - 240
Israel 145 - 165
North Sea 9 - 11
Ecuador 20 - 25
The natural gas price differential for the United States is expected to range from $1.00 to $2.00 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 and for Israel are anticipated to range from $3.00 to $3.50 per Mcf. Ecuador natural gas revenues associated with the natural gas-to-power project are reflected in electricity margins. All price differentials exclude the impact of hedge positions.
Natural Gas Liquids (MBbl/d)
United States 8 - 9
West Africa - equity method investment 6 - 7
The NGL price realizations for United States should average around 40 to 50 percent of WTI. NGLs recovered at the LPG plant in Equatorial Guinea are reported under equity method accounting and included in total volumes with its related income benefit in equity investments.
Other Revenues and Operating Margins
Electricity margin $ 0 - $ 5 million
Gathering, processing and marketing margin $ 0 - $ 5 million
Equity method investments $75 - $105 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 Equatorial Guinea, both which vary with production levels and crude oil prices.
Cost and Expenses
Oil and gas lease operating $ 5.00 - $ 5.50 per Boe
Transportation $ 0.65 - $ 0.80 per Boe
Depreciation, depletion and amortization $10.35 - $10.95 per Boe
Production and ad valorem
taxes 4.0 - 4.5% of oil, gas and ngl revenues
Exploration $240 - $280 million
General and administrative $235 - $255 million
Interest (net) $ 55 - $ 85 million
Included in cost and expenses is approximately $50 million of stock-based compensation. Capitalized interest is estimated to be about $40 to $50 million.
Other Items
Effective tax rate 30 - 34%
Deferred tax ratio 35 - 45%
Outstanding shares - diluted 175 - 177 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
Effective January 1, 2008, the company voluntarily discontinued cash flow hedge accounting on all existing commodity derivative instruments. The existing hedges were valued as of December 31, 2007 resulting in deferred derivative losses that will be reclassified to earnings in future periods as the original hedge dictated. For 2009, a $57 million decrease will be recorded to oil and natural gas sales as shown in the accompanying schedule. All other hedge gains and losses will be recognized in the period they occur and reported through gain / loss on commodity derivatives line item on the income statement.
Accumulated Other Comprehensive Loss Roll Off Schedule
Increase (Decrease) to Oil and Gas Sales
As of December 31, 2008
(Dollars in Thousands)
Crude Oil Natural Gas Total
1Q 2009 (16,543) (323) (16,866)
2Q 2009 (15,065) 395 (14,670)
3Q 2009 (13,681) 283 (13,398)
4Q 2009 (12,371) (101) (12,472)
Total 2009 (57,660) 254 (57,406)
1Q 2010 (4,725) (867) (5,592)
2Q 2010 (4,697) 142 (4,555)
3Q 2010 (4,683) (16) (4,699)
4Q 2010 (4,650) (565) (5,215)
Total 2010 (18,755) (1,306) (20,061)
Total Remaining $(76,415) $(1,052) $(77,467)
As of February 2009, Noble Energy had entered into following crude oil and natural gas derivative instruments.
Crude Oil
------------------------------------------------------------------------
Fixed Price Swaps 2-way Collars
------------------------ ----------------------------------
Weighted
Average Weighted Average
Production Volumes Price Volumes Price ($per Bbl)
Period Index (Bopd) ($per Bbl) Index (Bopd) Floor Ceiling
------ ----- ------- --------- ----- ------ -------------------
FY 2009 WTI 9,000 $88.43 WTI 6,700 $79.70 - $90.60
FY 2009 Brent 2,000 $87.98 Brent 5,074 $70.62 - $87.93
FY 2010 WTI 7,500 $63.93 - $80.68
Natural Gas
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Fixed Price Swaps 2-way Collars
------------------------ ----------------------------------
Weighted
Average Weighted
Price Average Price
Production Volumes ($per Volumes ($per MMBtu)
Period Index (MMBtupd) MMBtu) Index (MMBtupd) Floor Ceiling
------ ----- ------- ----- ----- ------- ------------------
FY 2009 NYMEX 170,000 $9.15 - $10.81
CIG 15,000 $6.00 - $9.90
FY 2010 CIG 15,000 $6.25 - $8.10
Natural Gas Differential versus NYMEX
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Basis Swaps
-----------------------
Weighted
Average
Price
Production Volumes ($per
Period Index (MMBtupd) MMBtu)
------ ----- ------- -----
FY 2009 CIG 140,000 ($2.49)
FY 2010 CIG 50,000 ($1.92)
SOURCE Noble Energy, Inc.
