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Noble poised for huge production gain As new U.S. Gulf of Mexico deepwater fields come on line independent anticipates dramatic turnaround in domestic production Ray Tyson Petroleum News Houston Correspondent
Exploration and production independent Noble Energy, helped by Gulf of Mexico deepwater production and a growing U.S. onshore presence, is anticipating a dramatic turnaround in its overall domestic production by year-end 2005.
Noble’s domestic oil production in the 2005 first quarter dropped 6.5 percent to 17,927 barrels per day from the year-ago period, while the company’s domestic natural gas output plummeted nearly 15 percent to 214.5 million cubic feet per day.
A strong 24 percent increase in Noble’s international production from a year earlier helped offset declines in the United States during the first quarter of 2005. Still, the company’s combined oil and gas production worldwide vs. the year-ago period slipped nearly 2 percent to 105,051 barrels of oil equivalent per day.
Chuck Davidson, Noble’s chief executive officer, attributed the production hit on Noble’s domestic oil and gas sales primarily to natural field declines in the relatively shallow waters of the Gulf of Mexico’s continental shelf, plus shut-in production on the shelf due to last year’s Hurricane Ivan.
“But we clearly expect domestic production at the end of the year to be well above what we started the year at,” he told industry analysts during a May 4 conference call on the company’s 2005 first-quarter earnings. Gets worse before it gets better Noble is expecting further erosion of its domestic production before things start to improve later this year, Davidson said, noting the phase in of three major deepwater developments in the U.S. Gulf — Swordfish, Ticonderoga and Lorien.
Swordfish, 60 percent owned and operated by Noble, is running about a month behind schedule due primarily to construction work on the offshore platform, Davidson said. He said first production from the field is now expected in July with initial daily output net to Noble of 10,000 barrels of oil equivalent. Production is expected to ramp up to 25,000 barrels per day net to Noble in 2006.
Lorien, also 60 percent owned by Noble, is scheduled to come on line in the second quarter of 2006 with initial daily production net to Noble of about 12,000 barrels of oil equivalent. Loren is a two-well sub-sea development.
First production from Ticonderoga, 50 percent owned by Noble and operated by partner and fellow independent Kerr-McGee with a 50 percent interest, is expected in mid-2006 with initial daily output of 10,000-12,000 barrels of oil equivalent net to Noble, Davidson said. Ticonderoga is a two-well sub-sea development with both wells tied back to Kerr-McGee’s Constitution spar platform. Little Burn first on exploration list Davison also unveiled a deepwater exploration program for the U.S. Gulf that if successful would help keep Noble’s domestic pipe full down the road. For the remainder of 2005, he said, the company intends to participate in three wells.
First on the list is the Little Burn prospect on Green Canyon Block 238, an offset to Noble’s producing Boris field. Noble holds a 40 percent stake in the BHP-operated well that is expected to be spud by the end of the current quarter.
“One of the encouraging things about the prospect is although it is one of the smaller deepwater prospects it’s basically sitting right on top of the infrastructure we put in place to produce at Boris,” Davidson said. “And as a result, if it is successful, it can start production very quickly.” Conquest drilling also on calendar Also scheduled for exploration drilling in the 2005 second quarter is the Conquest prospect on Green Canyon Block 767, Davidson said, adding that Conquest is adjacent to the company’s Ticonderoga discovery and holds potential reserves of around 40 million barrels of oil equivalent. Noble has a 50 percent interest in the prospect, which is located in about 4,600 feet of water.
“We drilled another well on that block last year and that initial well really helped us better understand (and) set up the current Conquest prospect,” Davidson said.
There are several candidates for a third deepwater exploration well in the U.S. Gulf later this year, including Slam Deep, Sable and Gemini, Davidson said. In the case of Slam Deep, which already has been approved for drilling, “we’re working on some partners that we expect to bring into that prospect,” he added. Cadillac part of plans Noble also has an active exploration program on the Gulf’s continental shelf that includes Cadillac, a closely watched “ultra-deep” well currently at around 20,000 feet headed to a target depth of 25,000 feet on Viosca Knoll block 251. There have been few exploration wells drilled to or below 25,000 feet on the shelf.
“This resource could easily reach into the several hundred billion cubic feet of gas equivalent,” Davidson said, adding that the company plans to drill several deep exploration wells below 15,000 feet in the Viosca Knoll area this year, including Voodoo and Strike Eagle. “There are a couple of more … prospects that are potential drilling candidates for later this year.” Increasing onshore activity in Rockies, Mid-continent In addition to new production and its exploration program in the Gulf of Mexico, increasing onshore activity, particularly on the Gulf Coast and in the Rocky Mountains and Mid-continent, is expected to help prop up Noble’s U.S. domestic production. Noble’s recently approved merger with Patina Oil & Gas also will strengthen the company’s domestic portfolio.
Despite Noble’s overall production increase in the 2005 first quarter, continuing strong oil and natural gas prices helped lift company profits during the quarter. Noble reported net income of $110 million or $1.86 per share, a hefty 29 percent increase compared to the $85.5 million or $1.48 per share earned during last year’s first quarter. Cash flow reached a record high of $223.5 million, a 9 percent increase over $204.9 million collected in the year-ago period.
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