Noble Energy, Inc. has reported its fourth quarter and full year 2007 results.
Fourth quarter 2007 net income was a record $300 million, or $1.73 per share diluted, which compares to fourth quarter 2006 net income of $165 million, or 94 cents per share diluted. Discretionary cash flow for the fourth quarter 2007 was $625 million, compared to $487 million for the same period in 2006. Net cash provided by operating activities was $696 million.
Noble Energy reported record full year net income of $944 million, or $5.45 per share diluted. Discretionary cash flow for the year was $2.1 billion and net cash provided by operating activities for 2007 was $2 billion. Capital expenditures for the year totaled $1.74 billion.
Key accomplishments for the fourth quarter 2007 include:
• Daily sales volume increase of eight percent versus fourth quarter 2006
• Record volumes in the Rocky Mountains
• Swordfish sidetrack in the deepwater Gulf of Mexico came online resulting in an increase of the field's net sales of 27 million cubic feet equivalent per day (Mmcfepd)
• Exploration success at the Yolanda prospect on Block "I" offshore Equatorial Guinea (EG)
• Successful 'I-4' well on trend with the Belinda discovery on Block "O" offshore EG
• Reserve replacement of 166 percent
• Agreement reached to divest Argentina assets
"Noble Energy's record fourth quarter 2007 closed out an outstanding year for the company. The momentum we have generated with our exploration programs continued with two additional successful tests in Equatorial Guinea during the quarter. In total, we drilled six successful exploration and appraisal wells in West Africa during the year with only one dry hole. Our deepwater Gulf of Mexico development projects are now adding incremental sales, which will help maintain this important producing area in 2008, as we continue with our exploration. The 2007 investment program allowed us to substantially grow our volumes, grow our reserves, carry out what was likely the company's best exploration year in its history, and at the same time still generate significant free cash flow," said Noble Energy's Chairman, President and CEO, Charles D. Davidson.
Total sales volumes for the fourth quarter 2007 averaged 200 thousand barrels of oil equivalent per day (MBoepd) compared to 185 MBoepd for the same period in 2006. For the year, total sales volumes were approximately 199 MBoepd, 13 percent greater than the full year 2006 after adjusting for the Gulf of Mexico shelf assets sold in 2006.
UNITED STATES FOURTH QUARTER OPERATIONS
United States operating income was $222 million, an increase of 42 percent from the fourth quarter 2006. Total United States sales volumes were 109 MBoepd in the fourth quarter 2007, as compared to 116 MBoepd for the same period in 2006. In the deepwater Gulf of Mexico, well performance and third-party facility restrictions lowered volumes by 9 MBoepd from the prior year period. An increase of 6 MBoepd in the Rocky Mountains, attributable to ongoing drilling programs, more than offset a decrease of 4 MBoepd in our remaining domestic properties.
Higher commodity prices versus the prior year period, crude oil up 25 percent and natural gas up 15 percent, more than offset the decline in volumes.
United States costs for the quarter were down approximately $17 million from the fourth quarter 2006. Exploration expense was relatively flat despite unsuccessful tests at Robusto and Lost Ark South in the deepwater Gulf of Mexico. Lease operating costs were reduced primarily due to lower processing fees and insurance costs related to deepwater Gulf of Mexico operations, as well as hurricane costs incurred in the fourth quarter 2006.
INTERNATIONAL FOURTH QUARTER OPERATIONS
International operating income increased 82 percent to a record $300 million for the fourth quarter 2007. Higher commodity prices combined with volume increases in the major international operations, led to the improvement in operating income. Total international sales volumes were 91 MBoepd, up 32 percent from the prior year period. In West Africa, natural gas volumes increased with the startup of sales to the liquefied natural gas (LNG) plant in the second quarter 2007. The LNG plant, which was down for approximately one month in the fourth quarter 2007 for maintenance, is currently operating at full capacity. The volume increase in the North Sea was primarily attributable to Dumbarton, which commenced sales in early 2007. In Israel, continued strength of natural gas demand also contributed to the volume growth.
Equity method investments in unconsolidated subsidiaries generated strong earnings in the quarter, up 133 percent from the fourth quarter 2006. Methanol operations had record prices accompanied by an increase in volumes. Fourth quarter 2006 methanol volumes were impacted by compressor maintenance and repairs. Strong natural gas liquid prices benefited the Alba LPG Plant.
International costs were up $21 million from the fourth quarter 2006. The increase was largely a result of higher operating costs and DD&A related to the start-up of Dumbarton.
PROVED RESERVES
Year-end 2007 estimated reserves were a record 880 million barrels of oil equivalent (MMBoe), up over five percent from year-end 2006. Total proved developed reserves increased 11 percent to 655 MMBoe. Reserve additions from all sources before sales totaled 120 MMBoe, or 166 percent of 2007 volumes.
Reserve additions in the United States totaled 96 MMBoe and were primarily driven by the execution of low-risk development projects in the Wattenberg and Piceance areas and deepwater Gulf of Mexico exploration and development success. International reserve additions totaled 24 MMBoe with the majority contributed from the North Sea due to the sanctioning of phase two of the Dumbarton development and from West Africa.
United States reserves represented 58 percent of total proved reserves, while International reserves comprised the other 42 percent. Liquids, including crude oil, condensate, and natural gas liquids, made up approximately 37 percent of total proved reserves, with natural gas being the remaining 63 percent.
Total costs incurred in 2007 for oil and gas activities, including acquisition, exploration and development costs were $1.77 billion. The average worldwide reserve replacement cost is estimated at $14.71 per barrel of oil equivalent (Boe), or $2.45 per thousand cubic feet equivalent (Mcfe). Included in costs incurred was approximately $180 million for West Africa exploration that discovered substantial resources that have not yet been booked as proven.