QUOTE AND NEWS
Motley Fool  Jul 15  Comment 
Noble Energy is extending the length of its laterals in the DJ Basin to improve the economics of the play and wants to copy this move in other locations.
Benzinga  Jul 14  Comment 
White Cliffs Pipeline, L.L.C. ("WCPL"), owned by subsidiaries of Rose Rock Midstream, L.P. (NYSE: RRMS), Plains All American Pipeline, L.P. (NYSE: PAA), Western Gas Partners, LP (NYSE: WES) and Noble Energy, Inc. (NYSE: NBL), plans to begin the...
SeekingAlpha  Jul 8  Comment 
By Stephen Simpson, CFA: Noble Energy (NBL) has delivered below-average adjusted production growth over the last five years and likely will need to take on additional debt to fund its capex plans over the next couple of years. I believe those...
TheStreet.com  Jul 3  Comment 
NEW YORK (TheStreet) -- I was talking to Stephanie Link today about some interesting moves in the oil patch and where we might still find some value in some exploration and production names. One interesting move comes in the swap of assets...
Motley Fool  Jul 2  Comment 
BG Group has signed a letter of intent seeking a major purchase of natural gas from Israel's offshore Leviathan reservoir. Here we examine what this could mean for the primary companies involved in the project.
Motley Fool  Jul 2  Comment 
Noble’s recent agreements to supply gas from its Leviathan field offshore Israel make it all the more likely that the project will come to fruition as planned.
OilVoice  Jun 30  Comment 
Noble Energy Inc. NYSE NBL announced the execution of a nonbinding Letter of Intent LOI between the Leviathan field partners and BG International Limited BG for the supply of natural gas from
Market Intelligence Center  Jun 26  Comment 
The patented option trade-picking algorithms behind MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered call trade on Noble Energy Inc (NBL) that includes 3.82% downside protection. Sell one contract of the Aug....
Motley Fool  Jun 23  Comment 
Noble Energy Inc. bought some of BP plc's assets to expand its offshore operations in the Gulf of Mexico.
Motley Fool  Jun 17  Comment 
Noble’s acquisition of deepwater Gulf of Mexico exploration leases offers significant long-term upside, augmenting growth from its core assets in the U.S. and Israel.




 

Noble Energy Inc. is an internationally diverse player in the oil and natural gas industry. With operations throughout major basins in North America, West Africa, the Mediterranean Sea, Ecuador, the North Sea, China, Argentina, and Suriname, Noble Energy is geographically more diversified than many of its competitors. In addition to Noble Energy's vast geographical presence, their operations are also more broadly focused. The projects they take on range from low-risk onshore drilling sites to higher risk deepwater and unconventional natural gas deposits.

In January 2010, NBL announced that it would acquire US Rocky Mountain assets of Petro-Canada Resources (USA) Inc. and Suncor Energy (Natural Gas) America Inc. for $494 million.[1]

Company Overview

Simply put, Noble Energy's acquisition and drilling strategy is aggressive. Over the past several years, their strategy has enabled them to build a portfolio that is diversified in nearly every sense of the word. Their portfolio is geographically vast, strategically dynamic, and takes on a broad spectrum of risk.

In the past, Noble Energy operated almost exclusively on onshore North America. Today, as a result of depleting domestic reserves, they have ventured overseas and into more risky offshore plays such as the Gulf of Mexico. Although the mature holdings, such as continental North America, have historically provided reliable production, reserves are diminishing and the company is shifting their focus towards new deepwater initiatives.

Overseas, the majority of the companies production comes from Equatorial Guinea and Israel.

Financial and Operating Metrics

NBL has a geographically diversified portfolio. With nearly a one-to-one domestic to international proved-reserve ratio, they have recently been tackling more risky projects overseas in order to make up for depleting domestic reserves.

In 2009, NBL earned a total of $2.3 billion in total revenues.[2] This was a significant decline from its 2008 total revenues of $3.9 billion.[2] This had a substantial negative impact on NBL's net income. Between 2008 and 2009, NBL's net income declined from a net profit of $1.35 billion in 2008 to a net loss of $131 million in 2009.[2]

Trends and Forces

Rising Oil and Gas prices

The company is highly dependent on favorable market prices for oil & gas, which tend to fluctuate significantly over time. Recently, rapidly increasing demand for energy coupled with constrained supply has led to high oil and gas prices, lifting the stock prices of oil & gas companies across the board. Countries like China, for instance, have (no pun intended) fueled much of this energy demand. The company's bottom line and margins generally benefit from increases in the prices of these commodities as operating expenses remain more or less fixed. Increases in the prices of oil and gas are not, however, without negative side effects. Because drilling for oil and gas becomes much more profitable when prices are on the rise, the company faces stiffer competition for the acquisition of land or mineral rights to oil- and gas-rich properties. These properties' market values rise in virtually direct proportion to the rise in the value of the commodities under them, which cuts into the company's possible return on investment. A similar phenomenon can occur in buying or leasing drilling equipment, as prices are driven by eager competitors bidding them up in order to drill for the commodities. Furthermore, the company usually hedges the prices at which it can sell oil & gas. By use of derivatives, the company attempts to lock in a price or a range of prices, which limits downside but also presents an opportunity cost if oil prices rise significantly over the lives of contracts.

Hybrid and Alternative Energy Technology

Rising oil prices have led both consumers and companies to seek out alternative sources of energy and to invest in renewable energy such as nuclear, solar, wind, biofuels, and ethanol technologies. As global consumer demand shifts toward renewable energy sources and incentives to develop long-term solutions to the world's dependence on oil and gas become stronger due to recent environmental concerns over climate change, consumer consciousness and the entrepreneurial profit motive may adversely affect the oil and gas industry. With the advent of hybrid and fuel cell vehicles and the cost of gasoline becoming quite high, consumers have become less inclined to purchase gas guzzling SUVs as opposed to more fuel-efficient cars. As a result, the company stands to face long-term materially adverse effects if the oil and gas industry encounters a decrease in demand.

Deepwater Oil Exploration

Traditional oil producing basins have matured, particularly on land, and oil exploration and production companies have started to look for new reserves in more challenging, deep-water environments. The recent increases of oil and gas costs have enabled offshore drillers to engage in deepwater oil exploration that was once too expensive to pursue. Moreover, as oil and gas prices continue to rise, the economic incentive to develop new technologies increases as well. The prospect of oil exploration and production is more economically feasible than ever due to substantial returns companies are enjoying because of higher energy costs. Off-coast drilling also involves much more physical risk. Noble Energy's strategy has clearly been affected by this trend as many of their recent overseas acquisitions involve higher than usual risks. Although this can help ease the blow from depleting domestic reserves, Noble Energy is a relatively small player in the international arena. As a result, they have a greater emphasis on their resources and must be able to effectively and economically allocate administrative responsibilities and expertise across the variety of operating segments.

OPEC

The Organization of the Petroleum Exporting Countries, (OPEC) plays a key role in promoting profits for the oil industry. The countries in OPEC limit oil production, artificially creating shortages and raising prices. Artificially high oil and gas prices are important to the company's profitability because these resources are commodity goods, making their markets subject to volatile price cycles and harsh price competition. With artificially low production, prices remain volatile but also high, thus creating larger profit margins for all oil and gas companies.

Competition

As a seller of a commodity product, the company operates in a highly competitive environment in which all firms are price-takers, selling their oil and gas production at given market prices. Firms generally compete on their ability to drill efficiently and earn high returns on investment through intelligent property acquisition and operational prowess. Scale does matter some, as companies with greater production levels and revenue can generally cover many administrative expenses over a wider base of properties, which again, is becoming more of a challenge as Noble Energy expands through acquiring new sites and exploring new technologies.

Some of NBL's top competitors include Quicksilver Resources (KWK), Forest Oil (FST), Denbury Resources, Inc. (Holding Company) (DNR), EOG Resources (EOG).

Footnotes

  1. NBL 10-K 2009 Item 1 Pg. 3
  2. 2.0 2.1 2.2 NBL 10-K 2009 Item 6 Pg. 33
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