Morningstar | Noble Squeezes the 2019 Budget in Response to Lower Prices
Noble Energy delivered production of 350 mboe/d in the fourth quarter. This compares with our forecast of 343 mboe/d and was above the high end of previous guidance (which was 337-349 mboe/d). The U.S. onshore segment also topped guidance and drove the upside, with output growing 2% sequentially. Firmwide volumes were also 2% higher sequentially but 8% lower year over year, reflecting the divestiture of Noble’s Gulf of Mexico assets during 2018. The firm’s financial results were more or less in line with Street expectations, with adjusted EBITDA and adjusted earnings per share coming in at $733 million and $0.12, respectively (consensus estimates were $713 million and $0.14).Looking to 2019, the firm is currently planning to dial back on growth in response to the recent decline in crude prices. The budget was set at $2.4 billion to $2.6 billion, which is well below our previous estimate of $3.3 billion and reflects a year-on-year reduction of about 17%. The goal is to accelerate free cash flows, expected later this year from the U.S. onshore segment and at the corporate level in 2020 following the startup of Leviathan (which is 75% complete and remains on schedule for late 2019). Over $500 million is earmarked to be returned to shareholders next year. And in the long run, Noble believes it can grow at 5%-10% annually while generating free cash flows and keeping its leverage under 1.5 turns (assuming a $50-$55 WTI environment, which is consistent with our $55 midcycle forecast).
We plan to incorporate these operating and financial results in our model shortly, but after this first look our fair value estimate and no-moat rating remain unchanged.
Anadarko Petroleum is an independent exploration and production company. The company also participates in the hard-minerals business through royalty arrangements. The company's reporting segments are as follows: Exploration and Production, which is engaged in the exploration, development, production, and sale of oil, natural gas, and natural-gas liquids (NGLs) and in advancing its Mozambique liquefied natural gas project toward final investment decision; and WES Midstream and Other Midstream, in which these two segments engage in gathering, processing, treating, and transporting the company and third-party oil, natural-gas, and NGL production as well as gathering and disposal of produced water.
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