Annual Reports

 
Quarterly Reports

  • 10-Q (Oct 31, 2017)
  • 10-Q (Aug 3, 2017)
  • 10-Q (May 2, 2017)
  • 10-Q (Nov 2, 2016)
  • 10-Q (Aug 3, 2016)
  • 10-Q (May 4, 2016)

 
8-K

 
Other

Noble Energy 10-Q 2013
NBL-2013.06.30-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission file number: 001-07964
  
NOBLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
73-0785597
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. employer identification number)
100 Glenborough Drive, Suite 100
 
 
Houston, Texas
 
77067
(Address of principal executive offices)
 
(Zip Code)
(281) 872-3100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý    No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý
 
As of July 8, 2013, there were 358,971,637 shares of the registrant’s common stock,
par value $0.01 per share, outstanding.




Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II. Other Information  
 
 
Item 1.  Legal Proceedings 
 
 
Item 1A.  Risk Factors 
 
 
 
 
 
 
 
 
 
 
Item 6.  Exhibits 
 
 
 
 


2


Part I. Financial Information
Item 1. Financial Statements
Noble Energy, Inc.
Consolidated Statements of Operations
(millions, except per share amounts)
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Oil, Gas and NGL Sales
$
1,112

 
$
934

 
$
2,196

 
$
1,970

Income from Equity Method Investees
37

 
31

 
96

 
83

Total
1,149

 
965

 
2,292

 
2,053

Costs and Expenses
 

 
 

 
 
 
 
Production Expense
210

 
168

 
398

 
331

Exploration Expense
90

 
167

 
151

 
227

Depreciation, Depletion and Amortization
368

 
325

 
734

 
619

General and Administrative
104

 
96

 
216

 
193

Other Operating Expense, Net
16

 
71

 
8

 
83

Total
788

 
827

 
1,507

 
1,453

Operating Income
361

 
138

 
785

 
600

Other (Income) Expense
 

 
 

 
 
 
 
Gain on Commodity Derivative Instruments
(161
)
 
(276
)
 
(89
)
 
(180
)
Interest, Net of Amount Capitalized
33

 
27

 
58

 
59

Other Non-Operating (Income) Expense, Net
3

 
(3
)
 
12

 
(3
)
Total
(125
)
 
(252
)
 
(19
)
 
(124
)
Income from Continuing Operations Before Income Taxes
486

 
390

 
804

 
724

Income Tax Provision
128

 
115

 
214

 
200

Income from Continuing Operations
358

 
275

 
590

 
524

Discontinued Operations, Net of Tax
19

 
17

 
49

 
32

Net Income
$
377

 
$
292

 
$
639

 
$
556

 
 
 
 
 
 
 
 
Earnings Per Share, Basic


 


 


 


Income from Continuing Operations
$
1.00

 
$
0.77

 
$
1.64

 
$
1.47

Discontinued Operations, Net of Tax
0.05

 
0.05

 
0.14

 
0.09

Net Income
$
1.05

 
$
0.82

 
$
1.78

 
$
1.56

Earnings Per Share, Diluted
 
 
 
 
 
 
 
Income from Continuing Operations
$
0.99

 
$
0.74

 
$
1.63

 
$
1.44

Discontinued Operations, Net of Tax
0.05

 
0.05

 
0.13

 
0.09

Net Income
$
1.04

 
$
0.79

 
$
1.76

 
$
1.53

 
 
 
 
 
 
 
 
Weighted Average Number of Shares Outstanding
 
 
 
 
 
 
 
   Basic
359

 
356

 
358

 
355

   Diluted
363

 
361

 
362

 
360


The accompanying notes are an integral part of these financial statements.

3


Noble Energy, Inc.
Consolidated Statements of Comprehensive Income
(millions)
(unaudited)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Net Income
$
377

 
$
292

 
$
639

 
$
556

Other Items of Comprehensive Income
 
 
 
 
 
 
 
Net Change in Pension and Other
5

 
2

 
11

 
5

      Less Tax Benefit
(2
)
 
(1
)
 
(4
)
 
(2
)
Other Comprehensive Income
3

 
1

 
7

 
3

Comprehensive Income
$
380

 
$
293

 
$
646

 
$
559


The accompanying notes are an integral part of these financial statements.


4


Noble Energy, Inc.
Consolidated Balance Sheets
(millions)
(unaudited)

 
June 30,
2013
 
December 31,
2012
ASSETS
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
706

 
$
1,387

Accounts Receivable, Net
847

 
964

Other Current Assets
358

 
420

Total Current Assets
1,911

 
2,771

Property, Plant and Equipment
 

 
 

Oil and Gas Properties (Successful Efforts Method of Accounting)
21,023

 
19,496

Property, Plant and Equipment, Other
460

 
344

Total Property, Plant and Equipment, Gross
21,483

 
19,840

Accumulated Depreciation, Depletion and Amortization
(6,730
)
 
(6,289
)
Total Property, Plant and Equipment, Net
14,753

 
13,551

Goodwill
631

 
635

Other Noncurrent Assets
703

 
597

Total Assets
$
17,998

 
$
17,554

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 

 
 

Accounts Payable - Trade
$
1,370

 
$
1,508

Other Current Liabilities
1,123

 
1,024

Total Current Liabilities
2,493

 
2,532

Long-Term Debt
3,547

 
3,736

Deferred Income Taxes, Noncurrent
2,269

 
2,218

Other Noncurrent Liabilities
814

 
810

Total Liabilities
9,123

 
9,296

Commitments and Contingencies

 


Shareholders’ Equity
 

 
 

Preferred Stock - Par Value $1.00 per share; 4 Million Shares Authorized, None Issued

 

Common Stock - Par Value $0.01 per share; 500 Million Shares Authorized; 399 Million and 397 Million Shares Issued, respectively
4

 
4

Additional Paid in Capital
3,383

 
3,302

Accumulated Other Comprehensive Loss
(106
)
 
(113
)
Treasury Stock, at Cost; 38 Million Shares
(662
)
 
(648
)
Retained Earnings
6,256

 
5,713

Total Shareholders’ Equity
8,875

 
8,258

Total Liabilities and Shareholders’ Equity
$
17,998

 
$
17,554


The accompanying notes are an integral part of these financial statements.


5


Noble Energy, Inc.
Consolidated Statements of Cash Flows
(millions)
(unaudited)

 
Six Months Ended
June 30,
 
2013
 
2012
Cash Flows From Operating Activities
 
 
 
Net Income
$
639

 
$
556

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
 

 
 

Depreciation, Depletion and Amortization
736

 
651

Asset Impairments

 
73

Dry Hole Cost
23

 
118

Deferred Income Taxes
108

 
92

Dividends (Income) from Equity Method Investees, Net
(18
)
 
(7
)
Unrealized Gain on Commodity Derivative Instruments
(80
)
 
(204
)
Gain on Divestitures
(67
)
 
(9
)
Stock Based Compensation
38

 
33

Other Adjustments for Noncash Items Included in Income
33

 
8

Changes in Operating Assets and Liabilities
 
 
 

Increase in Accounts Receivable
(193
)
 
(58
)
Decrease (Increase) in Other Current Assets
4

 
(49
)
Increase in Accounts Payable
131

 
84

Decrease in Current Income Taxes Payable
(81
)
 
(13
)
Increase (Decrease) in Other Current Liabilities
(37
)
 
14

Decrease (Increase) in Other Operating Assets and Liabilities, Net
8

 
(42
)
Net Cash Provided by Operating Activities
1,244

 
1,247

Cash Flows From Investing Activities
 

 
 

Additions to Property, Plant and Equipment
(1,929
)
 
(1,900
)
Additions to Equity Method Investments
(23
)
 
(35
)
Proceeds from Divestitures
114

 
10

Other
3

 

Net Cash Used in Investing Activities
(1,835
)
 
(1,925
)
Cash Flows From Financing Activities
 

 
 

Exercise of Stock Options
31

 
26

Excess Tax Benefits from Stock-Based Awards
12

 
13

Dividends Paid, Common Stock
(96
)
 
(79
)
Purchase of Treasury Stock
(14
)
 
(13
)
Repayment of Capital Lease Obligation
(23
)
 
(22
)
Net Cash Used In Financing Activities
(90
)
 
(75
)
Decrease in Cash and Cash Equivalents
(681
)
 
(753
)
Cash and Cash Equivalents at Beginning of Period
1,387

 
1,455

Cash and Cash Equivalents at End of Period
$
706

 
$
702

 
The accompanying notes are an integral part of these financial statements.


6


Noble Energy, Inc.
Consolidated Statements of Shareholders' Equity
(millions)
(unaudited)

 
Common
Stock (1)
 
Additional
Paid in
Capital (1)
 
Accumulated Other
Comprehensive
Loss
 
Treasury
Stock at
Cost
 
Retained
Earnings
 
Total
Shareholders'
Equity
December 31, 2012
$
4

 
$
3,302

 
$
(113
)
 
$
(648
)
 
$
5,713

 
$
8,258

Net Income

 

 

 

 
639

 
639

Stock-based Compensation

 
38

 

 

 

 
38

Exercise of Stock Options

 
31

 

 

 

 
31

Tax Benefits Related to Exercise of Stock Options

 
12

 

 

 

 
12

Dividends (27 cents per share)

 

 

 

 
(96
)
 
(96
)
Changes in Treasury Stock, Net

 

 

 
(14
)
 

 
(14
)
Net Change in Pension and Other

 

 
7

 

 

 
7

June 30, 2013
$
4

 
$
3,383

 
$
(106
)
 
$
(662
)
 
$
6,256

 
$
8,875

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
$
1,312

 
$
1,841

 
$
(100
)
 
$
(638
)
 
$
4,850

 
$
7,265

Net Income

 

 

 

 
556

 
556

Stock-based Compensation

 
34

 

 

 

 
34

Exercise of Stock Options

 
26

 

 

 

 
26

Tax Benefits Related to Exercise of Stock Options

 
13

 

 

 

 
13

Dividends (22 cents per share)

 

 

 

 
(79
)
 
(79
)
Changes in Treasury Stock, Net

 

 

 
(13
)
 


 
(13
)
Change in Par Value
(1,308
)
 
1,308

 

 

 

 

Net Change in Pension and Other

 

 
3

 

 

 
3

June 30, 2012
$
4

 
$
3,222

 
$
(97
)
 
$
(651
)
 
$
5,327

 
$
7,805


(1) 
Amounts restated to reflect impact of stock split.

The accompanying notes are an integral part of these financial statements.

7

Noble Energy, Inc.
Notes to Consolidated Financial Statements


Note 1.  Organization and Nature of Operations
Noble Energy, Inc. (Noble Energy, we or us) is a leading independent energy company engaged in worldwide crude oil and natural gas exploration and production. Our core operating areas are onshore US, primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa.
 
Note 2.  Basis of Presentation
Presentation   The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (US GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. The accompanying consolidated financial statements at June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and shareholders’ equity for such periods. Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Certain reclassifications of amounts previously reported have been made to reflect the operations of our North Sea geographical segment as discontinued, as well as to conform to current year presentations. See Note 3. Divestitures.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.
Consolidation   Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries.  In addition, we use the equity method of accounting for investments in entities that we do not control but over which we exert significant influence. All significant intercompany balances and transactions have been eliminated upon consolidation.
Common Stock Split   On April 22, 2013, Noble Energy’s Board of Directors approved a 2-for-1 split of its common stock to be effected in the form of a stock dividend. The stock dividend was distributed on May 28, 2013 to shareholders of record as of May 14, 2013. Earnings per share and common shares outstanding are reported giving retrospective effect to the common stock split.
Estimates   The preparation of consolidated financial statements in conformity with US GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.
 

8

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Statements of Operations Information   Other statements of operations information is as follows: 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
(millions)
 
 
 
 
 
 
 
Production Expense
 

 
 

 
 
 
 
Lease Operating Expense
$
140

 
$
100

 
$
257

 
$
205

Production and Ad Valorem Taxes
43

 
44

 
86

 
81

Transportation and Gathering Expense
27

 
24

 
55

 
45

Total
$
210

 
$
168

 
$
398

 
$
331

Other Operating (Income) Expense, Net
 

 
 

 
 
 
 
Gain on Divestitures (1)
$

 
$
(9
)
 
$
(12
)
 
$
(9
)
Asset Impairments (2)

 
73

 

 
73

Other, Net
16

 
7

 
20

 
19

Total
$
16

 
$
71

 
$
8

 
$
83

Other Non-Operating (Income) Expense, Net
 

 
 

 
 
 
 
Deferred Compensation (Income) Expense (3)
$
3

 
$
(11
)
 
$
14

 
$
(8
)
Other (Income) Expense, Net

 
8

 
(2
)
 
5

Total
$
3

 
$
(3
)
 
$
12

 
$
(3
)
 
(1) 
See Note 3. Divestitures
(2) 
Amounts for 2012 related primarily to our South Raton development in the deepwater Gulf of Mexico and our Piceance development, onshore US. The assets were written down to their estimated fair values, which were determined using discounted cash flow models.
(3) 
Amounts represent increases (decreases) in the fair value of shares of our common stock held in a rabbi trust.

 

9

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Balance Sheet Information   Other balance sheet information is as follows:
 
June 30,
2013
 
December 31,
2012
(millions)
 
 
 
Accounts Receivable, Net
 
 
 
Commodity Sales
$
383

 
$
349

Joint Interest Billings
406

 
486

Other
68

 
139

Allowance for Doubtful Accounts
(10
)
 
(10
)
Total
$
847

 
$
964

Other Current Assets
 

 
 

Inventories, Current
$
109

 
$
90

Commodity Derivative Assets
72

 
63

Deferred Income Taxes, Net
45

 
106

Probable Insurance Claims (1)

 
45

Assets Held for Sale (2)
37

 
45

Prepaid Expenses and Other Current Assets
95

 
71

Total
$
358

 
$
420

Other Noncurrent Assets
 

 
 

Equity Method Investments
$
410

 
$
367

Mutual Fund Investments
110

 
103

Commodity Derivative Assets
95

 
21

Other Assets
88

 
106

Total
$
703

 
$
597

Other Current Liabilities
 

 
 

Production and Ad Valorem Taxes
$
100

 
$
113

Commodity Derivative Liabilities
13

 
7

Income Taxes Payable
123

 
203

Asset Retirement Obligations
69

 
69

Interest Payable
57

 
55

Current Portion of Long Term Debt (3)
527

 
324

Current Portion of FPSO and Other Capital Lease Obligations
50

 
48

Liabilities Associated with Assets Held for Sale (2)
42

 
12

Other
142

 
193

Total
$
1,123

 
$
1,024

Other Noncurrent Liabilities
 

 
 

Deferred Compensation Liabilities
$
252

 
$
229

Asset Retirement Obligations
346

 
333

Accrued Benefit Costs
119

 
116

Other
97

 
132

Total
$
814

 
$
810

 
(1) 
Amounts represent the costs incurred to date of the Leviathan-2 appraisal well and expected well abandonment costs in excess of the insurance deductible less insurance proceeds received to date.
(2) 
Assets held for sale consist primarily of North Sea oil and gas properties. Liabilities associated with assets held for sale consist primarily of asset retirement obligations related to these assets. See Note 3. Divestitures.
(3) 
See Note 5. Debt.


10

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 3. Divestitures  
North Sea Properties During the first six months of 2013, we closed two sales of non-operated working interest properties located in the UK and Netherlands sectors of the North Sea. The sales resulted in a $55 million gain based on net sales proceeds of $54 million for the fields. We continue to market our remaining North Sea properties.
As of June 30, 2013, all the properties remaining in our North Sea geographical segment are included in assets held for sale in our consolidated balance sheet. Our consolidated statements of operations have been reclassified for all periods presented to reflect the operations of our North Sea geographical segment as discontinued. Upon reclassification as held for sale, depreciation, depletion, and amortization (DD&A) ceased. Our long-term debt is recorded at the consolidated level; therefore no interest expense has been allocated to discontinued operations.
Summarized results of discontinued operations are as follows:
 
Three Months Ended June 30,
Six Months Ended
June 30,
 
2013
 
2012
2013
 
2012
(millions)
 
 
 
 
 
 
Oil and Gas Sales
$
12

 
$
65

$
21

 
$
140

Income Before Income Taxes
5

 
39

4

 
79

Income Tax Expense
3

 
22

10

 
47

Operating Income (Loss), Net of Tax
2

 
17

(6
)
 
32

Gain on Sale, Net of Tax
17

 

55

 

Discontinued Operations, Net of Tax
$
19

 
$
17

$
49

 
$
32

Onshore US Properties During the first six months of 2013, we closed the sales of certain crude oil and natural gas properties in Kansas, Oklahoma and the Gulf Coast areas. The information regarding the assets sold is as follows:
 
Six Months Ended
June 30,
 
2013
(millions)
 
Sales Proceeds
$
60

Less
 
     Net Book Value of Assets Sold
(53
)
     Goodwill Allocated to Assets Sold
(4
)
     Asset Retirement Obligations Associated with Assets Sold
5

     Other Closing Adjustments
4

Gain on Divestitures
$
12


Note 4.  Derivative Instruments and Hedging Activities
Objective and Strategies for Using Derivative Instruments   We are exposed to fluctuations in crude oil and natural gas prices on the majority of our production. In order to mitigate the effect of commodity price volatility and enhance the predictability of cash flows relating to the marketing of our global crude oil and domestic natural gas, we enter into crude oil and natural gas price hedging arrangements with respect to a portion of our expected production. The derivative instruments we use include variable to fixed price commodity swaps, two-way and three-way collars and put options.
During the first quarter of 2013, we restructured our hedge portfolio to better align hedge benchmark prices with our realized crude oil sales prices. We terminated certain of our crude oil swaps and three way collars while entering into new hedging instruments including crude oil swaps and put options. As a result of this restructuring, we recognized a de minimis gain on hedge terminations.
We also may enter into forward contracts to hedge anticipated exposure to interest rate risk associated with public debt financing.

11

Noble Energy, Inc.
Notes to Consolidated Financial Statements

While these instruments mitigate the cash flow risk of future reductions in commodity prices or increases in interest rates, they may also curtail benefits from future increases in commodity prices or decreases in interest rates. See Note 6. Fair Value Measurements and Disclosures for a discussion of methods and assumptions used to estimate the fair values of our derivative instruments.
Unsettled Derivative Instruments   As of June 30, 2013, we had entered into the following crude oil derivative instruments: 
 
 
 
 
Swaps
 
Options
 
Collars
Settlement
Period
Type of Contract
Index
Bbls Per
Day
Weighted
Average
Fixed
Price
 
Put Option Premium
 
Weighted
Average
 Short Put
 Price
Weighted
Average
Floor
Price
Weighted
Average
 Ceiling
Price
Instruments Entered Into as of June 30, 2013
 
 
 
 
 
 
 
 
2013
Swaps
NYMEX WTI  (1)
9,000
$
90.16

 
$

 
$

$

$

2013
Swaps
Dated Brent
3,000
98.03

 

 



2013
Two-Way Collars
NYMEX WTI
5,000

 

 

95.00

115.00

2013
Three-Way Collars
NYMEX WTI
7,000

 

 
63.57

83.57

109.04

2013
Three-Way Collars
Dated Brent
13,000

 

 
81.15

100.75

124.68

2013
Put Options (2)
NYMEX WTI
11,000

 
5.97

 

97.60


2014
Swaps
NYMEX WTI
37,000
92.67

 

 



2014
Swaps
Dated Brent
10,000
103.33

 

 



2014
Three-Way Collars
NYMEX WTI
9,000

 

 
75.89

90.89

100.44

2014
Three-Way Collars
Dated Brent
8,000

 

 
84.38

98.25

121.56

2015
Swaps
NYMEX WTI
10,000
87.01

 

 



2015
Swaps
Dated Brent
5,000
99.04

 

 



2015
Three-Way Collars
NYMEX WTI
10,000

 

 
68.50

88.50

92.87

2015
Three-Way Collars
Dated Brent
5,000

 

 
75.00

95.00

112.53

(1) 
West Texas Intermediate
(2) 
For put options, we typically pay a premium to the counterparty in exchange for the sale of the instrument. If the index price is below the floor price of the put option, we receive the difference between the floor price and the index price multiplied by the contract volumes less the option premium. If the index price settles at or above the floor price of the put option, we pay only the put option premium.
As of June 30, 2013, we had entered into the following natural gas derivative instruments:
 
 
 
 
Swaps
 
Collars
Settlement
Period
Type of Contract
Index
MMBtu
Per Day
Weighted
Average
Fixed
Price
 
Weighted
Average
Short Put
 Price
Weighted
Average
Floor
Price
Weighted
Average
Ceiling
Price
Instruments Entered Into as of June 30, 2013
 
 
 
 
 
 
2013
Swaps
  NYMEX HH (1)
60,000
$
4.58

 
$

$

$

2013
Two-Way Collars
NYMEX HH
40,000

 

3.25

5.14

2013
Three-Way Collars
NYMEX HH
100,000

 
3.88

4.75

5.63

2014
Swaps
NYMEX HH
60,000
4.24

 



2014
Three-Way Collars
NYMEX HH
230,000

 
2.83

3.75

4.98

2015
Swaps
NYMEX HH
80,000
4.32

 



2015
Three-Way Collars
NYMEX HH
120,000

 
3.54

4.25

5.06

(1) 
Henry Hub

12

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Fair Value Amounts and Gains and Losses on Derivative Instruments   The fair values of derivative instruments in our consolidated balance sheets were as follows: 
Fair Value of Derivative Instruments
 
Asset Derivative Instruments
 
Liability Derivative Instruments
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
December 31,
2012
 
Balance
Sheet
Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
 Value
 
Balance Sheet Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
Value
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity Derivative Instruments
Current
Assets
 
$
72

 
Current Assets
 
$
63

 
Current Liabilities (1)
 
$
13

 
Current Liabilities
 
$
7

 
Noncurrent Assets
 
95

 
Noncurrent Assets
 
21

 
Noncurrent Liabilities
 

 
Noncurrent Liabilities
 
3

Total
 
 
$
167

 
 
 
$
84

 
 
 
$
13

 
 
 
$
10

 (1) Includes $12 million of deferred put option premium.
The effect of derivative instruments on our consolidated statements of operations was as follows: 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
(millions)
 
 
 
 
 
 
 
Realized Mark-to-Market (Gain) Loss
 
 
 
 
 
 
 
  Crude Oil
$
6

 
$
17

 
$
14

 
$
51

  Natural Gas
(8
)
 
(16
)
 
(23
)
 
(27
)
Total Realized Mark-to-Market (Gain) Loss
(2
)
 
1

 
(9
)
 
24

Unrealized Mark-to-Market (Gain) Loss
 
 
 
 
 
 
 
  Crude Oil
(124
)
 
(300
)
 
(83
)
 
(208
)
  Natural Gas
(35
)
 
23

 
3

 
4

Total Unrealized Mark-to-Market Gain
(159
)
 
(277
)
 
(80
)
 
(204
)
Total Gain on Commodity Derivative Instruments
$
(161
)
 
$
(276
)
 
$
(89
)
 
$
(180
)
 Accumulated other comprehensive loss (AOCL) at June 30, 2013 included deferred losses of $25 million, net of tax, related to interest rate derivative instruments. This amount will be reclassified to earnings as an adjustment to interest expense over the terms of our senior notes due April 2014 and March 2041.  Approximately $2 million of deferred losses (net of tax) will be reclassified to earnings during the next 12 months and will be recorded as an increase in interest expense.

13

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Note 5. Debt
Our debt consists of the following:
 
June 30,
2013
 
 
December 31,
2012
 
 
Debt
 
Interest Rate
 
 
Debt
 
Interest Rate
 
(millions, except percentages)
 
 
 
 
 
 
 
 
 
Credit Facility, due October 14, 2016 (1)
$

 

 
 
$

 

 
CONSOL Installment Payment, due September 30, 2013
328

 
1.79
%
(2) 
 
328

 
1.79
%
(2) 
FPSO and Other Capital Lease Obligations
324

 

 
 
311

 

 
5¼% Senior Notes, due April 15, 2014
200

 
5.25
%
 
 
200

 
5.25
%
 
8¼% Senior Notes, due March 1, 2019
1,000

 
8.25
%
 
 
1,000

 
8.25
%
 
4.15% Senior Notes, due December 15, 2021
1,000

 
4.15
%
 
 
1,000

 
4.15
%
 
7¼% Senior Notes, due October 15, 2023
100

 
7.25
%
 
 
100

 
7.25
%
 
8% Senior Notes, due April 1, 2027
250

 
8.00
%
 
 
250

 
8.00
%
 
6% Senior Notes, due March 1, 2041
850

 
6.00
%
 
 
850

 
6.00
%
 
7¼% Senior Debentures, due August 1, 2097
84

 
7.25
%
 
 
84

 
7.25
%
 
Total
4,136

 
 
 
 
4,123

 
 

 
Unamortized Discount
(12
)
 
 

 
 
(15
)
 
 

 
Total Debt, Net of Discount
4,124

 
 

 
 
4,108

 
 

 
Less Amounts Due Within One Year
 

 
 

 
 
 

 
 

 
Current portion of CONSOL Installment Payment, net of discount
(327
)
 
 

 
 
(324
)
 
 

 
5¼% Senior Notes, due April 15, 2014, net of discount
(200
)
 
 
 
 

 
 
 
FPSO and Other Capital Lease Obligations
(50
)
 
 

 
 
(48
)
 
 

 
Long-Term Debt Due After One Year
$
3,547

 
 

 
 
$
3,736

 
 

 
(1) 
Our Credit Agreement provides for a $4.0 billion unsecured revolving Credit Facility. The Credit Facility is available for general corporate purposes.
(2) 
Imputed rate based on the prevailing market rates for similar debt instruments at the date of assessment. 
See Note 6. Fair Value Measurements and Disclosures for a discussion of methods and assumptions used to estimate the fair values of debt.

Note 6.  Fair Value Measurements and Disclosures  
Assets and Liabilities Measured at Fair Value on a Recurring Basis 
Certain assets and liabilities are measured at fair value on a recurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values: 
Cash, Cash Equivalents, Accounts Receivable and Accounts Payable   The carrying amounts approximate fair value due to the short-term nature or maturity of the instruments. 
Mutual Fund Investments   Our mutual fund investments, which primarily include assets held in a rabbi trust, consist of various publicly-traded mutual funds that include investments ranging from equities to money market instruments. The fair values are based on quoted market prices for identical assets. 
Commodity Derivative Instruments   Our commodity derivative instruments consist of variable to fixed price commodity swaps, two-way and three-way collars, and put options. We estimate the fair values of these instruments based on published forward commodity price curves as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published LIBOR rates, Eurodollar futures rates and interest swap rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and the fair values of commodity derivative instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. In addition, for collars, we estimate the option values of the put options sold (for three-way

14

Noble Energy, Inc.
Notes to Consolidated Financial Statements

collars) and the contract floors and ceilings (for two-way and three-way collars) using an option pricing model which takes into account market volatility, market prices and contract terms. See Note 4. Derivative Instruments and Hedging Activities
Deferred Compensation Liability   The value is dependent upon the fair values of mutual fund investments and shares of our common stock held in a rabbi trust. See Mutual Fund Investments above. 
Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows: 
 
Fair Value Measurements Using
 
 
 
 
 
Quoted Prices in 
Active Markets
(Level 1) (1)
 
Significant Other
Observable Inputs
(Level 2) (2)
 
Significant
Unobservable
Inputs (Level 3) (3)
 
Adjustment (4)
 
Fair Value Measurement
(millions)
 
 
 
 
 
 
 
 
 
June 30, 2013
 
 
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
 
 
Mutual Fund Investments
$
110

 
$

 
$

 
$

 
$
110

Commodity Derivative Instruments

 
173

 

 
(6
)
 
167

Financial Liabilities
 

 
 

 
 

 
 

 
 

Commodity Derivative Instruments

 
(19
)
 

 
6

 
(13
)
Portion of Deferred Compensation Liability Measured at Fair Value
(178
)
 

 

 

 
(178
)
December 31, 2012
 
 
 
 
 
 
 

 
 

Financial Assets
 

 
 

 
 

 
 

 
 

Mutual Fund Investments
$
103

 
$

 
$

 
$

 
$
103

Commodity Derivative Instruments

 
113

 

 
(29
)
 
84

Financial Liabilities
 

 
 

 
 

 
 

 
 

Commodity Derivative Instruments

 
(39
)
 

 
29

 
(10
)
Portion of Deferred Compensation Liability Measured at Fair Value
(160
)
 

 

 

 
(160
)
 
(1) 
Level 1 measurements are fair value measurements which use quoted market prices (unadjusted) in active markets for identical assets or liabilities. We use Level 1 inputs when available as Level 1 inputs generally provide the most reliable evidence of fair value.
(2) 
Level 2 measurements are fair value measurements which use inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.
(3) 
Level 3 measurements are fair value measurements which use unobservable inputs.
(4) 
Amount represents the impact of netting clauses within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

15

Noble Energy, Inc.
Notes to Consolidated Financial Statements

Asset Impairments We determined that the carrying amounts of certain assets were not recoverable from future cash flows and, therefore, were impaired. The assets were reduced to their estimated fair values. Information about the impaired assets is as follows:
 
Fair Value Measurements Using
 
 
 
 
Description
Quoted Prices in Active Markets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Net Book Value (1)
 
Total Pre-tax (Non-cash) Impairment Loss
millions