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Noble Energy Acquires Acreage, Issues Long-Term Outlook

Zacks

Noble Energy, Inc. NBL completed the acquisition of 7,200 net acres in the Southern Delaware Basin in Reeves County, TX. The acquisition price of $300 million was funded with available cash on hand.

The properties are located within and directly adjacent to Noble Energy’s existing assets in the Delaware Basin and produce nearly 2,400 barrels of oil equivalent per day (“BOE/d”). The acquisition has expanded Noble Energy’s acreage position and production in the Delaware Basin by nearly 20% to 47,200 net acres and 12,000 Boe/d, respectively.

Long-Term Outlook

Noble Energy recently provided an outlook through 2020 and an update on its U.S. onshore operations. Oil volumes from Noble Energy’s U.S. onshore assets are projected to grow at a rate of 23–29%, compounded annually over 2016–2020. Total production is projected to average between 540 and 625 thousand BOE/d in 2020, after adjusting for divestitures.


Noble Energy is allocating nearly 75% of capital for the development of the DJ Basin, Delaware and Eastern Mediterranean assets over the 2016–2020 time frame.

Noble Energy expects net free cash flow of $2.1–$2.7 billion over the 2016–2020 period.

Price Movement

Shares of Noble Energy have gained 4.6% over the last three months, outperforming the Zacks categorized Oil and Gas – Exploration and Production – United States industry’s gain of 1.8%.

The outperformance can be attributed to the decision undertaken by the Organization of Petroleum Exporting Countries (OPEC) in late Nov 2016 to cap the production of crude oil in a bid to tackle the supply glut that had been wrecking havoc on the oil industry for the last two years. The OPEC deal led to an immediate surge in oil prices, benefitting companies like Noble Energy.

Industry Outlook for 2017

As per an Energy Information Administration report, U.S. crude oil production is projected to average 8.8 million barrels per day in 2017. Brent crude oil prices are expected to average $52 per barrel, which reflects an upward correction of nearly 21% from the 2016 levels, while West Texas Intermediate (WTI) crude oil prices are predicted to be an average $51 per barrel.

Expectations of tighter crude demand and supply imbalances, production cuts announced by the OPEC, and moderate but steady demand growth in U.S., and globally robust oil demand bode well for the industry in 2017. However, these factors may be offset to a considerably extent if Iran brings in more production on line. In such a case, the U.S. will ramp up production following the increased rig count, leading to yet another supply glut.

Zacks Rank & Key Picks

Noble Energy carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the same space include Sundance Energy Australia Limited SNDE, Comstock Resources, Inc. CRK and Abraxas Petroleum Corporation AXAS.

Sundance Energy’s 2016 estimates narrowed from a loss of $3.88 to $3.31 over the last 60 days. Shares of Sundance Energy have gained 26.7% over the last three months, outperforming the industry’s gain of 1.8% .The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comstock Resources carries a Zacks Rank #2. The company’s 2016 estimates narrowed from a loss of $13.59 to $13.58 over the last 60 days. Shares of Comstock Resources have gained 20.6% over the last three months, outperforming the industry’s gain of 1.8%.

Abraxas Petroleum carries a Zacks Rank #2 too. The company’s 2016 estimates narrowed from a loss of 12 cents to 10 cents over the last 60 days. Shares of Abraxas Petroleum have gained 54.6% over the last three months, outperforming the industry’s gain of 1.8% .

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