This Stock Will Fuel Your Energy Portfolio Growth This Year

Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Noble Energy (NYSE: NBL) reported impressive results for the fourth quarter, and this gives us an opportunity to examine whether an investment in the stock should be considered. In this article, I will focus on these results and see how they match up against analysts' consensus estimates.

Financials

Noble reported net income for the fourth quarter of 2012 of $251 million and EPS of $1.39 per share diluted; net income from continuing operations was $277 million, EPS of $1.54 per share diluted.  If you exclude the effects of an unrealized commodity derivatives gain and an asset impairment charge, fourth quarter adjusted net income from continuing operations was $296 million, an EPS of $1.65 per share diluted. 

During the same quarter of the previous year, the company had reported a net loss from continuing operations of $314 million ($1.77 per share diluted) and adjusted net income from continuing operations of $277 million, or an EPS of $1.55 per share diluted. The discretionary cash flow generated by continuing operations for the quarter was a record $824 million compared to $710 million year on year. Net cash generated by operating activities was $762 million and capital expenditure was $1.1 billion.

For the full year 2012, Noble reported net income of $1 billion, or an EPS of $5.71 per share diluted, compared to net income of $453 million, or an EPS of $2.54 per share diluted in the previous year.  Adjusted net income from continuing operations for 2012 was $889 million, EPS of $4.95 per share diluted, compared to $904 million, or $5.06 per share diluted for 2011. Discretionary cash flow generated by continuing operations was $2.9 billion for the year, a growth of 21% from the previous year, and net cash generated by operating activities for the year was $2.9 billion, a growth of 32% over the previous year. Total capital expenditure for the year was $3.6 billion.

Operations

In the DJ Basin, average production was 86 MBoe/d for the fourth quarter, representing a 15% increase over the preceding quarter.  The horizontal program at 39 MBoe/d of production was 45% of the total.  Crude oil and other liquid sales grew to 51,000 barrels of oil per day (MBbl/d) rise of 59%. During the quarter, 53 wells were drilled and 63 were completed, and the full year total was 200 wells drilled and 193 completed. All 15 wells in the 40-acre pilot program for spacing were completed and are in the initial stages of flowback operations. The company operated a total of 16 rigs with eight rigs in the DJ Basin, two in Northern Colorado and six in the Greater Wattenberg Area. 

To support the operations in Northern Colorado, the company approved the development of the Keota Gas Plant with a processing capacity of 30 million cubic feet per day (MMcf/d). The plant is scheduled to go into operations in the second quarter of 2014. Marcellus Shale net production was an average of 121 MMcfe/d, up 19% from the preceding quarter. 

Production of wet gas was 14 MMcfe/d net for the quarter while dry gas averaged 107 MMcf/d net; in the Eastern Mediterranean, the output from the Noa and Pinnacles fields resulted in production of 118 MMcf/d net, unchanged from the preceding quarter.

Estimated reserves at year-end 2012 were approximately 1.2 billion barrels of oil equivalent (BBoe) divided almost evenly between the United States and the international assets.  Reserves are 30% global liquids, 42% international natural gas, and 28% U.S. natural gas. Noble Energy added proved reserves of 121 million barrels of oil equivalent (MMBoe) during the year, replacing 136% of 2012 production. The full year volume guidance range for 2013 remains at 270 to 282 MBoe/d, and volumes for the first quarter of 2013 are expected to average 238 to 242 MBoe/d.

Fourth Quarter Analyst Estimates

For the fourth quarter, Noble Energy was ahead of analysts’ expectations on revenues and comfortably surpassed expectations on earnings per share. The company posted revenue of $1.17 billion while the 14 analysts polled by S&P Capital IQ had forecast a top line of $1.13 billion.

GAAP reported sales were 25% higher than the $936.0 million in the same quarter of the previous year. EPS was $1.65 a share, which was well ahead of the 26 earnings estimates compiled by S&P Capital IQ, which predicted $1.13 per share.

GAAP EPS were $1.40 for this quarter versus -$1.67 per share year on year. For the quarter, gross margin was 84.0%, an improvement of 2.1% year on year. Operating margin was 32.0%, an 8.3% improvement, while the net margin at 21.5% showed an improvement of 5.3%. Next quarter's average estimate for revenue is $1.13 billion, producing an average EPS estimate of $1.32. For the full year 2013, the average revenue estimate is $5.11 billion with an average EPS estimate of $6.51 a share.

Other Energy Players

Patterson-UTI Energy (NASDAQ: PTEN) is a provider of onshore contract drilling services for oil and natural gas exploration in Canada and the United States. The company reported an EPS of 40 cents a share, exceeding consensus estimates by 12 cents a share while revenues also came in at around 9% above consensus. The stock is undervalued with a multiple of less than 10 times trailing earnings and a market price only 10% above book.

EOG Resources (NYSE: EOG) reported net income of $570.3 million, or an EPS of $2.11 per share for the full year 2012, compared to $1.09 billion, or an EPS of $4.10 per share, for the previous full year. EOG showed a net loss of $505.0 million, or $1.88 per share for the fourth quarter in comparison to net income of $120.7 million, or $0.45 per share for the same quarter of the preceding year. The company showed $849.4 million, net of tax ($3.13 per share) in impairment charges to Canadian natural gas assets. Migrating on the company is a Hold because it is still weighted towards natural gas.

Anadarko Petroleum (NYSE: APC) has an exciting international portfolio with three major natural gas fields off the coast of Mozambique. This could make the country one of the largest producers of liquefied natural gas in the world in addition to Qatar and Australia. The company also has quality assets in the Gulf of Mexico, the Rocky Mountains and the Appalachian basin. Macquarie has said that Anadarko's large potential reserves could, in the event of it being acquired, command a price of $102 per share, which is a considerable premium on the current stock price.

Conclusion

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Noble Energy is outperform, with an average price target of $120.75 against the current price of around $112. If you are looking for energy exposure, I would recommend that you look at buying the stock.


jordobivona has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure