Noble Energy Inc.: Profit Gushes to the Top

April 9, 2008
Year-end profit sets record while exploration efforts continue.

As long as oil and gas producer Noble Energy Inc. keeps finding new sources of energy, the Houston-based company should continue to achieve strong profit margins. The 2007 IW 50 Best Manufacturer set a record for net income in 2007 and the fiscal year-end quarter. Driven by increased sales from new oil sources and higher prices, Noble Energy posted a profit of $944 million, or $5.45 per share in 2007, up from $678 million, or $3.79 per share the previous year.

For the fourth quarter, net income was $300 million, or $1.73 per share, compared with $165 million, or 94 cents per share during the year-earlier period. The company benefited from its increased exploration activity during the quarter, said Charles Davidson, president and CEO.

"The momentum we have generated with our exploration programs continued with two additional successful tests in Equatorial Guinea during the quarter," said Davidson in a Feb. 27 statement.

Overall, the company successfully drilled six exploration and appraisal wells in West Africa with only one dry hole, Davidson said. The company also boosted sales with development projects in the Gulf of Mexico.

"The 2007 investment program allowed us to substantially grow our volumes, grow our reserves, carry out what was likely the company's best exploration year in its history, and at the same time still generate significant free cash flow," Davidson said.

Other accomplishments during fourth-quarter 2007 included:

  • Daily sales volume increase of 8% over the year-earlier period
  • Record production in the Rocky Mountains
  • New production from the Gulf of Mexico Swordfish development, resulting in an increase of 27 million cubic feet equivalent per day in net sales at the field
  • Reserve replacement of 166%
    Noble Energy Inc.
    At A Glance

    Noble Energy Inc.
    Houston, Texas
    Primary Industry: Petroleum & Coal Products
    Number of Employees: 1,398
    2006 In Review
    Revenue: $3.3 billion
    Profit Margin: 24.22%
    Sales Turnover: 0.29
    Inventory Turnover: 13.19
    Revenue Growth: 33.63%
    Return On Assets: 7.64%
    Return On Equity: 21.95%

Most recently, the company said it was the highest bidder on 15 deepwater drilling areas in the Gulf of Mexico. The company was the only bidder on 10 of the lease blocks and joined with partners on the remaining five with an average working interest of 43%.

The company said its potential revenue from its share of the bids is about $167 million. The 15 bid blocks cover more than 70,000 net acres in water depths ranging from 1,000 feet to 7,740 feet. Currently, Noble Energy holds interest in 88 deepwater Gulf of Mexico leases, representing approximately 265,000 net acres.

The bid falls in line with its investment plans for 2008. Noble Energy plans to invest about $1.6 billion in development and exploration activities, with nearly three-quarters designated for development and the remainder allocated for exploration, corporate expenditures and other items.

Development spending will be used on the company's Rocky Mountain region, deepwater Gulf of Mexico discoveries and production expansion in the North Sea and China. The exploration budget will target resource potential in the Gulf of Mexico, West Africa, Israel and Suriname.

The company expects the capital program will enable it to deliver sales volumes of 205,000 to 216,000 barrels of oil equivalent per day in 2008, representing a 7% increase over 2007.

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About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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