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Noble Energy 8-K 2008

Documents found in this filing:

  1. 8-K
  2. Graphic
  3. Graphic
nbl8k10-08hedge.htm
 




 
UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 16, 2008

GRAPHIC
 
NOBLE ENERGY, INC.
(Exact name of Registrant as specified in its charter)
         
Delaware
 
001-07964
 
73-0785597
(State or other jurisdiction of
 incorporation or organization)
 
Commission
 File Number
 
(I.R.S. Employer
 Identification No.)
         
100 Glenborough, Suite 100
       
Houston, Texas
     
77067
(Address of principal executive offices)
     
(Zip Code)
 
Registrant’s telephone number, including area code (281) 872-3100
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

 

 
 
 
 


 

 

 
Item 7.01 Regulation FD Disclosure>.

I. Price Risk Management

(a) With the objective of enhancing the certainty of future revenues, from time to time Noble Energy, Inc. (“we” or the “Company”) enters into commodity derivative instruments. Through December 31, 2007, we elected to designate the majority of these derivative instruments as cash flow hedges for financial accounting purposes. Effective January 1, 2008 forward, we voluntarily elected to account for these derivative instruments using the mark-to-market (MTM) accounting method and from that date will recognize all future gains and losses on derivative instruments in earnings in the period in which they occur.

(b) For the quarter ended September 30, 2008, we anticipate pre-tax MTM derivative gains of $875 million from our crude oil and natural gas derivative instruments described separately below, of which $943 million was unrealized gain and $68 million was realized loss.  The unrealized MTM gain will be recognized in net income, but will be excluded in determining adjusted net income reported in our quarterly news release of earnings.  From time to time, the Company may consider other items in determining adjusted net income.  Although adjusted net income is a non-GAAP measure, we believe it is useful information for investors because the unrealized gain relates to derivative instruments that hedge our production in future months. The realized MTM loss that is associated with derivative instruments that hedge current production will be recognized in both net income and adjusted net income. The adjustment better matches derivative gains and losses with the period when the underlying hedged production occurs. During the quarter, net cash outflow related to settled crude oil and natural gas derivative instruments was $204 million.

(c) Unrealized derivative losses and gains that occurred through December 31, 2007 under our previous cash flow hedge accounting method were deferred in Accumulated other Comprehensive Loss (AOCL) as of that date.  These losses and gains are expected to be reclassified to future earnings as they are realized upon settlement of the associated derivative instrument.  A pre-tax net deferred loss of $93 million ($89 million loss related to crude oil and a $4 million loss related to natural gas) was associated with instruments that settled in the third quarter and was reclassified from AOCL to net income as a decrease to crude oil and natural gas revenues.  This decrease in revenues will also be recognized in adjusted net income.

II. Crude Oil Derivative Instruments

(a) Included in the third quarter pre-tax mark-to-market gains mentioned in I (b) above, $498 million relates to crude oil derivative instruments, of which $559 million was unrealized gain and $61 million was realized loss. During the quarter, net cash outflows related to settled crude oil derivative instruments were $157 million.

(b) Presented below is a summary of our crude oil derivative instruments as of September 30, 2008, with notional volumes expressed in barrels (Bbls) per day and prices in dollars per Bbl.  

(c) From July 1, 2008 to September 30, 2008, we did not enter into any additional crude oil derivative instruments.
 

Crude Oil Derivative Instruments


   
Variable to Fixed Price Swaps
 
Costless Collars
 
             
Weighted
           
Weighted
   
Weighted
 
Production
     
Bbls
   
Average
     
Bbls
   
Average
   
Average
 
Period
 
Index
 
Per Day
   
Fixed Price
 
Index
 
Per Day
   
Floor Price
   
Ceiling Price
 
4th Qtr 2008
 
NYMEX WTI
    16,500     $ 37.92  
NYMEX WTI
    3,100     $ 60.00     $ 72.40  
4th Qtr 2008
 
Dated Brent
    2,000       88.18  
Dated Brent
    3,587       45.00       65.90  
4th Qtr 2008 Average
        18,500       43.35         6,687       51.95       68.91  
                                               
2009
 
NYMEX WTI
    9,000       88.43  
NYMEX WTI
    6,700       79.70       90.60  
2009
 
Dated Brent
    2,000       87.98  
Dated Brent
    5,074       70.62       87.93  
2009 Average
        11,000       88.35         11,774       75.79       89.45  
                                               
2010
        -       -  
NYMEX WTI
    5,500       69.00       85.65  

 
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III. Natural Gas Derivative Instruments

(a) Included in the third quarter mark-to-market gains mentioned in I (b) above, $377 million relates to natural gas derivative instruments, of which $384 million was unrealized gain and $7 million was realized loss. During the quarter, net cash outflows related to settled natural gas derivative instruments were $47 million.

(b) Presented below is a summary of our natural gas derivative instruments as of September 30, 2008, with notional volumes expressed in millions of British thermal units (MMBtu) per day and prices in dollars per MMBtu.

(c) From July 1, 2008 to September 30, 2008, we entered into additional basis swaps covering 110,000 MMBtu per day for calendar year 2009.

Natural Gas Derivative Instruments


 
   
Variable to Fixed Price Swaps
   
Costless Collars
 
             
Weighted
             
Weighted
   
Weighted
 
Production
     
MMBtu
   
Average
       
MMBtu
   
Average
   
Average
 
Period
 
Index
 
Per Day
   
Fixed Price
   
Index
 
Per Day
   
Floor Price
   
Ceiling Price
 
4th Qtr 2008
 
NYMEX HH
    170,000     $ 5.63    
 IFERC CIG
    14,000     $ 6.75     $ 8.70  
                                                 
2009
        -       -    
NYMEX HH
    170,000       9.15       10.81  
2009
        -       -    
 IFERC CIG
    15,000       6.00       9.90  
2009 Average
        -       -           185,000       8.90       10.73  
                                                 
2010
        -       -    
 IFERC CIG
    15,000       6.25       8.10  

   
Basis Swaps
 
                     
Weighted
 
Production
       
Index Less
   
MMBtu
   
Average
 
Period
 
Index
   
Differential
   
Per Day
   
Differential
 
4th Qtr 2008
 
IFERC CIG
   
 NYMEX HH
      100,000     $ 1.66  
4th Qtr 2008
 
IFERC ANR-OK
   
 NYMEX HH
      40,000       1.01  
4th Qtr 2008
 
IFERC PEPL
   
 NYMEX HH
      10,000       0.98  
4th Qtr 2008 Average
                150,000       1.44  
                             
2009
 
IFERC CIG
   
 NYMEX HH
      110,000       2.56  
 

 
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IV. Forward-Looking Statements

This report on Form 8-K contains projections and other “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by use of terms such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions or variations on these expressions, and are made based on our current plans, expectations, estimates, assumptions and beliefs concerning future events. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Important factors that could cause the actual results to differ materially from those projected include, without limitation:

 
·
the timing and extent of changes in commodity prices for crude oil, natural gas and related products, foreign currency exchange rates, interest rates and financial market conditions;
 
·
the extent and effect of any hedging activities engaged in by us;
       
 
·
our liquidity and ability to finance our acquisition, exploration and development activities;
 
 
·
the supply and demand for oil, natural gas and other products or services;
   
 
·
the presence or recoverability of estimated reserves;
         
 
·
our ability to replace reserves;
               
 
·
drilling and operating risks;
                 
 
·
environmental risks;
                   
 
·
exploration and development risks;
             
 
·
government regulation or other action; and
           
 
·
the ability of management to execute its plans to meet its goals.
     
 
We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.


 
 

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
         
 
NOBLE ENERGY, INC.
  
 
Date: October 16, 2008 
By:  
/s/ Chris Tong  
 
   
Chris Tong 
 
   
Senior Vice President and Chief Financial Officer
 
 


 
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