Summary
- Noble Energy has struggled with losses and negative free cash flows as it continued to invest heavily in the Leviathan gas field located in offshore Israel.
- Noble Energy has completed 90% of the work at Leviathan and the project is on track for a late-2019 start-up.
- Leviathan’s completion will push Noble Energy to profits and free cash flows in 2020 while the company’s onshore assets in the US will also start delivering better results.
The last few months have been tough for oil producers as persistent weakness and volatility in oil prices have clouded their future. But Noble Energy (NBL) is a rare exploration and production company whose outlook is looking better than ever. The company is getting closer to bringing a major project located in offshore Israel online which will fuel significant production, earnings, and cash flow growth. The Houston, Texas-based company will also start generating tons of free cash flows from next year which it will use to reward investors with dividends and buybacks. Noble Energy stock has delivered a blowout performance this year and I believe it will likely continue doing well.
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Noble Energy is an independent oil and gas producer that currently operates primarily in three US shale oil plays – the DJ Basin in Colorado and the Eagle Ford and Permian Basin in Texas. Noble Energy also has international operations but a vast majority of its production (75.4% in Q2-2019) comes from the three US onshore shale oil plays. In the second quarter, Noble Energy’s US onshore volumes clocked in at 263,000 boe per day, of which 55% came from the DJ Basin, 24% from the Delaware Basin which is located within the Permian Basin and 21% from Eagle Ford.
Noble Energy, however, has been struggling with losses and weak levels of cash flows. The company has reported an adjusted loss of $0.19 per share for the first six months of 2019, down from a profit of $0.52 per share a year earlier. Noble also delivered weak levels of operating cash flows of $972 million in the first half of the year. The company spent $1.4 billion as cash capital expenditure. The total capital expenditure for the exploration and production business on an accrual basis was $1.3 billion. The operating cash flows couldn’t cover the capital expenditures on cash as well as accrual basis. As a result, the company faced a cash flow deficit.
