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Morningstar | Noble Energy Reiterates Full-Year Guidance After Strong First-Quarter Output

Noble Energy’s first-quarter oil production was within guidance, with U.S. onshore and firmwide volumes coming in at 113,000 barrels per day and 127 mbbls/d, respectively. But total output, including natural gas production, was above the high end of guidance.

Noble Energy‘s first-quarter production exceeded the high end of guidance, with firmwide volumes coming in at 337,000 barrels of oil equivalent per day (beating our forecast of 327 mboe/d). The positive surprise was mainly driven by U.S. onshore volumes, which also topped guidance. However, the upside was primarily natural gas--firmwide and U.S. onshore oil volumes were both consistent with management expectations. Nevertheless, this suggests strong execution, especially as the firm’s capital spending in the period was below the guidance range. There was no change to the 2019 outlook for capital or production.

Basis differentials also improved for both oil and natural gas in the U.S. onshore region, although the benefit was offset by a steep dip in realized NGL prices. Firmwide production expenses also improved sequentially but not enough to reach the guided range for the full year. So the firm’s financial results were slightly weaker than expected, with adjusted EBITDA and adjusted earnings per share coming in at $562 million and negative $0.09, respectively (consensus estimates were $592 million and negative $0.06). However, due to ongoing efficiency and productivity gains management now expects even lower average production expenses in 2019, suggesting that further progress is likely over the balance of the year (guidance was lowered by $0.15/boe). But these improvements were already captured in our previous estimates, so the impact on our fair value estimate is modest. After factoring in these results our fair value estimate is increasing to $22 per share (from $20).