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Aug. 3, 2020, 8:22 a.m. EDT

10-Q: NOBLE ENERGY INC

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a narrative about our business from the perspective of management. We use common industry terms, such as thousand barrels of oil equivalent per day (MBoe/d) and million cubic feet equivalent per day (MMcfe/d), to discuss production and sales volumes. Our MD&A is presented in the following sections: Executive Overview & Operating Outlook ;

Results of Operations - Exploration and Production ;

Results of Operations - Midstream ;

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Results of Operations - Corporate ; and

Liquidity and Capital Resources .

The preceding consolidated financial statements, including the notes thereto, contain detailed information that should be read in conjunction with our MD&A. See also Item 1A. Risk Factors and Disclosure Regarding Forward-Looking Statements.

EXECUTIVE OVERVIEW AND OPERATING OUTLOOK

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Exploration Program Update In June 2020, we were awarded concessions on two exploration blocks offshore Egypt, which encompass 800,000 square acres. We will hold a 27% non-operated working interest in the position and we, along with our partners, have a three-year initial phase of exploration during which we plan to conduct a seismic program targeting deepwater oil and natural gas prospects. Additionally, during the quarter we made the decision not to pursue lease renewal of our undeveloped acreage in Gabon. Commodity Prices

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Our average realized sales prices, which exclude the impacts of hedges settled in the respective periods, are as follows:

Voluntary production curtailments - In our US onshore business, we voluntarily curtailed an average of 30 MBoe/d, 11 MBbl/d of which was crude oil production. With improvements to operating costs and commodity pricing, the majority of these curtailed volumes were brought back online in July 2020. Our reduced production levels did not impact our ability to deliver volumes under our firm sales or processing commitments during second quarter 2020.

Reduced our quarterly dividend - We reduced our quarterly cash dividend to $0.02, down from $0.12 per Noble Energy common share in first quarter 2020, which is expected to preserve approximately $195 million in annualized cash flow. See Liquidity and Capital Resources below.

Assessed long-lived assets for impairment - We performed impairment assessments in light of the current commodity price environment, concluding our Felicita discovery, offshore Equatorial Guinea, was fully impaired. See Item 1. Financial Statements - Note 4. Impairments.

Reduced employee headcount - In response to the current environment, we have also reduced our employee workforce and, as a result, in second quarter 2020 recorded $30 million of corporate restructuring expense associated with severance, termination benefits and accelerated stock-based compensation. We also reduced our contractor workforce to align with operational activities. Additionally, certain employees are still participating in the furlough and part-time work programs implemented in first quarter 2020. We expect these actions will reduce future G&A and operational spend.

Lowered executive leadership salaries and director cash retainers - Salaries for the Chief Executive Officer, Senior Officers and Vice Presidents were lowered by 20%, 15% and 10%, respectively. In addition, cash retainers for members of the Board of Directors were lowered by 25%. These reductions continued throughout second quarter 2020 and are expected to extend through the end of 2020.

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COVID-19

Mobilized our Crisis Management Team (CMT) - Our corporate CMT is responsible for ensuring the organization implements our corporate Employee Health and Wellness plan elements pertaining to pandemic response. This plan follows Center for Disease Control and Prevention (CDC), national, state and local guidance in preparing and responding to COVID-19. The CMT implemented communication protocols should an employee become sick, and we continue to follow CDC guidance, which is subject to change in the future. To date, we have not experienced significant business or operational interruption due to workforce health or safety concerns pertaining to COVID-19.

Regarding our supply chain, the structure of the global oilfield material and services supply chain provides us flexibility in sourcing equipment and services for our international development projects. However, the global nature of our supply chains, particularly in relation to our major international construction projects, exposes us to the risk of dispersed supply chain disruptions. We have experienced some delays in deliveries, as well as international travel restrictions impacting service providers, and are monitoring the situation to mitigate impacts on development projects. In the US, while certain of our oilfield service providers and suppliers have become financially distressed and/or experienced bankruptcies, we have been able to utilize alternative suppliers without business interruptions.

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market capitalization were sustained throughout second quarter 2020, a condition that is consistent across our sector. We do not have any debt covenants or other lending arrangements that depend upon our stock price. As of June 30, 2020, we are in compliance with the financial covenant contained in our Revolving Credit Facility which provides that our total debt to capitalization ratio, as defined in the Revolving Credit Facility agreement, may not exceed 65% at any time. As of June 30, 2020, this total debt to capitalization ratio was below 40%. Our consolidated financial statements include the accounts of Noble Midstream Partners. Noble Midstream Partners is subject to financial covenants under the Noble Midstream Services Revolving Credit Facility and term loans, for which the outstanding debt is non-recourse to Noble Energy. As of June 30, 2020, Noble Midstream Partners is in compliance with these financial covenants. We receive limited partnership cash distributions from Noble Midstream Partners. Changes in Noble Midstream Partners' covenant compliance or changes in distributions to us would not have a material impact to Noble Energy. See Item 1. Financial Statements - Note 8. Debt and Liquidity and Capital Resources . As cities, states and countries continue relaxing confinement restrictions, the risk for the resurgence and recurrence of COVID-19 remains. The reinstatement of containment measures could potentially lead to an extended period of reduced demand for crude oil and natural gas commodities, as well as assert further pressure on the global economy.

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        RESULTS OF OPERATIONS - EXPLORATION AND PRODUCTION (E&P)
        US Onshore
        During second quarter 2020, our US onshore E&P activities consisted of the
        following:
                                                                                     Average
                                             Average        Wells        Wells        Sales
                                               Rigs       Completed     Brought      Volumes
        Location                             Operated        (1)         Online      (MBoe/d)
        DJ Basin                                1             4            16          144
        Delaware Basin                         0.5            2            6            63
        Eagle Ford Shale                        -             -            -            41
        Total                                  1.5            6            22          248
        


(1) Refers to the number of wells completed, regardless of when drilling was initiated.

DJ Basin During second quarter 2020, our activities were primarily focused in the Mustang area, where we ran one drilling rig. During the quarter, we set record low drilling times and costs, averaging $57 per total foot drilled, a decrease of 15% from the 2019 average.

US onshore average sales volumes of 248 MBoe/d, reflecting curtailment of 30 MBoe/d, primarily in the DJ and Delaware Basins;

total production expense per BOE, gross of intersegment eliminations, of . . .

Aug 03, 2020

COMTEX_368796503/2041/2020-08-03T08:22:07

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