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.
Noble Energy is an independent energy company, engaged in crude oil and natural gas exploration and production. The company's operating areas include: U.S. onshore, primarily the DJ Basin, Delaware Basin and Eagle Ford Shale; U.S. offshore Gulf of Mexico; Eastern Mediterranean; and West Africa. The company's Midstream segment develops, owns, operates and acquires domestic midstream infrastructure assets, or invests in other midstream entities, with existing focus areas being the DJ and Delaware Basins. The company's activities include geophysical and geological evaluation; analysis of commercial, regulatory and political risks; and exploratory and development drilling leading to production, where appropriate.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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