Noble Energy, Inc.
Annual Report 2013

Plain-text annual report

Standing for the Future 2013 ANNUAL REPORT Our ability to execute, agility to navigate a changing landscape and capacity to drive positive change enables us to stand for what is in the best interest of all stakeholders – including our shareholders, our communities, our employees, our partners and our industry – now and in the future. Powered by a Unique Design PURPOSE LEADERSHIP STRATEGY 2020 & Beyond A unique strategy rooted in a common purpose provides a clear vision of future success. ASSETS EXECUTION GROWTH 01 Thinking Differently Our commitment to doing things right advances our purpose – Energizing the World, Bettering People’s Lives. The aggressive execution of our strategy in 2013 delivered strong results on all fronts – successful startups of major projects, production growth at double- digit rates, new exploration discoveries and a leading safety record. As a result, we closed the year at record levels of risked resources and proven reserves after delivering a 35 percent total return to you, our shareholders. 2013 will not stand alone as we expect to continue to deliver sustainable, material growth for many years into the future through the development of major exploration discoveries and unconven- tional U.S. resources. Our ability to execute, agility to navigate a changing landscape and capacity to drive positive change enables us to stand for what is in the best interest of all stakeholders – including our share- holders, our communities, our employees, our partners and our industry – now and in the future. This drives our vision to be the world’s energy partner of choice. Key accomplishments during the year included – initial production at Tamar offshore Israel only two-and-a-half years from sanction and first production at Alen offshore Equatorial Guinea ahead of schedule. Onshore U.S., we implemented the next generation of production systems with the startup of the first Integrated Development Plan in the DJ Basin, while continuing to expand our Marcellus operations. Our future growth was further solid- ified through four new exploration discoveries and six additional major projects sanctioned for future devel- opment. It is accomplishments such as these that contribute to our strong growth outlook for the future. Charles D. Davidson Chairman of the Board and Chief Executive Officer 02 It is clear that we are providing for tomorrow’s growth today. Proven reserves during the year grew 19 percent and, after adding discovered unbooked resources, our total discovered resources grew to 7.8 billion barrels of oil equiv- alent. Based on total 2013 produced volumes of 100 million barrels of oil equivalent, this translates to more than 75 years of production. This places us in an enviable position of having unique visibility to our five-year plan that projects we will more than double our production by 2018. Our total return to shareholders included an increased dividend, further reflecting our confidence in the future. Overall, annual cash dividends have increased 67 percent in the last five years after adjusting for our stock split. Our balance sheet and liquidity remain strong, thus helping ensure our ability to deliver the future. Our portfolio enhancement continued during the year with the divestiture of non-core assets, yielding net proceeds of $206 million. This program not only helps strengthen us financially, but also enables us to increase our focus on growth opportunities. Our intense focus on listening to the needs of the communities and con- cerns of the public are key elements in building trust where we operate. This commitment was evident in the strategic initiatives we implemented. From advancing environmental regulations to malaria control projects and after-school programs, we are committed to safe, responsible operations and bettering people’s lives in all our communities. I would encourage you to learn more about our sustainability, transparency and social responsibility initiatives which can be found in our annual Sustain- ability Report and on our website. Visible Leader >75 YEARS OF DISCOVERED RESOURCES $6B MARKET CAP INCREASE IN ONE YEAR 0.59 LEADING SAFETY RECORD Total Recordable Incident Rate (includes company and contractors) 18% ANNUAL PRODUCTION GROWTH THROUGH 2018 A BRIGHT FUTURE 03 5 Core Operating Areas I N S A B J D I O C X E M F O F L U G R E T A W P E E D E L A H S S U L L E C R A M I A C R F A T S E W I N A E N A R R E T D E M N R E T S A E C RE OPERATIONS Over 600K net acres in premier U.S. crude oil play Expanding resource and accelerating growth Over 350K net acres in leading U.S. natural gas play Growth driver while enhancing returns Four discoveries for development Impactful exploration running room 04 Large, long-life, low-cost asset base Increasing options to create value High-margin production, premium-priced oil Leveraging regional knowledge to expand position Exceptional Execution Successful delivery of major projects provides tomorrow’s growth today. First Integrated Development Plan at Wells Ranch in the DJ Basin Tamar producing 2.5 years after sanction offshore Israel Alen sanction to startup in 30 months offshore Equatorial Guinea Aseng startup 7 months ahead of schedule Our operations continue to focus on five core areas. In the U.S., they are the DJ Basin in the Rockies, Marcellus Shale in the Northeast and the deep water Gulf of Mexico. Our international core areas are in West Africa offshore Equatorial Guinea and Cameroon and in the Eastern Mediterranean offshore Israel and Cyprus. During the year, we also pursued new venture oppor- tunities in Nevada, the Falkland Islands, Nicaragua and Sierra Leone. Our new ventures program is designed to identify and secure new positions that, if successful, have the potential to develop into new core areas for the company. The DJ Basin delivered 35 percent of total sales volumes in 2013. We have exclusively focused our drilling program there on horizontal wells, primarily in the Niobrara formation. We brought on our first Integrated Development Plan (IDP) in the Wells Ranch area while sanctioning a second at East Pony. Several more are in the design phase. IDPs enable us to lower costs, accelerate development and reduce environmental impacts. As a result, efficiencies and returns increased and project perfor- mance and delivery were enhanced. During the year, we drilled a total of nearly 300 development wells, a 50 percent increase compared to 2012. Technology additions, such as field- wide automation systems, also help us operate more safely and efficiently. These systems performed well as we prepared for, responded to and recovered from the severe floods that struck Colorado in September. The focus of our employees on the protection of human health and the environment was impressive – but their efforts extended far beyond the boundaries of our operations to the very heart of the impacted communities nearby. We further enhanced the value of this premier asset with a strategic acreage exchange of approximately 50,000 acres. This exchange will help us better optimize drilling activities, increase use of extended-reach lateral wells, centralize facilities, streamline operations and reduce our land footprint. Noble Energy continues to drive positive change in Colorado through non- traditional collaboration. During 2013, we engaged with state, environmental and industry partners to develop recom- mendations for new air rules governing oil and gas operations. These rules are expected to significantly reduce hydrocarbon emissions in Colorado, thus enhancing the state’s air quality. We also made significant progress in our efforts to respond to the Colorado community’s need for information about oil and natural gas development. We worked with industry partners to establish Coloradans for Responsible Energy Development (CRED), a 501c6 organization designed to educate communities about hydraulic fracturing. In our second year of operations in the Marcellus Shale, we experienced significant growth with these opera- tions delivering 9 percent of our total sales volumes. We acquired our position in the Marcellus in 2011 through the formation of a 50/50 joint venture (JV) with CONSOL Energy. During 2013, with CONSOL, we acquired an additional 90,000 gross acres in West Virginia, thus expanding the JV’s position to a total of 700,000 gross acres. Within the JV, Noble Energy’s operations are focused in the wet gas area while our partner operates in the dry gas area. With a deep inventory of drilling opportunities, we expect our Marcellus production to grow at a compound annual growth rate of 46 percent over the next five years. 2 2 3 - 2 0 3 3 7 2 9 3 2 3 1 2 5 0 2 10 11 12 13 14 Sales Volumes from Continuing Operations (MBoe/d) 05 Transparent Growth Through a unique combination of diverse assets, innovative processes and strong leadership, Noble Energy is positioned for enduring growth. The deepwater Gulf of Mexico continues to highlight the value of our exploration program with two new discoveries at Troubadour and Dantzler. Also during the year, we drilled a successful second appraisal well at Gunflint that allowed us and our partners to move forward with the sanctioning of development. We also sanctioned our 2012 Big Bend discovery for development. These discoveries add significant value to our overall portfolio. First production from these major projects is anticipated in 2015 from Big Bend and in 2016 from Gunflint and Dantzler. Shifting to our international operations – Israel delivered 13 percent of our total sales volumes in 2013. In March 2013, we initiated production from the Tamar field just two-and-a-half years after sanction. Tamar’s performance has been outstanding, with gross production since startup averaging 750 MMcf/d and peak production hitting 1 Bcf/d during periods of high demand. During the year, we drilled two additional gas discoveries at Karish and Tamar Southwest. Tamar Southwest was immediately sanctioned for development and will be produced utilizing Tamar infrastructure. Earlier in the year, the Tamar expansion project was sanctioned, which will enhance the peak deliver- ability of the field. Since our first drilling in Israel in 1999, Noble Energy has discovered approximately 40 Tcf in the Mediterranean. Leviathan, the largest discovery in 2010, created an opportu- nity for Israel to become an exporter of energy. Israel finalized an export policy that was one of the critical elements needed for us to move forward with Leviathan. We expect full field devel- opment to involve several phases, and multiple development options are under- way. The agreement that provides for Woodside Petroleum Ltd. to enter the project also continues to progress. The value of Woodside’s LNG expertise and financial capacity will be a strategic addition to the development of Leviathan. Our West Africa operations continue to strongly contribute to our success and delivered 29 percent of our total sales volumes in 2013. During the year, the Alen development began production early and is performing well. Equatorial Guinea represents our longest-running international business. We are the only oil and natural gas company that has maintained a continuous presence there for more than 20 years. To better position us for the future, we continue to build and develop an outstanding organization. As part of this effort, we expanded our leader- ship team to assure that we have the skilled resources to manage our rapid growth in the coming years. Early in the year we were pleased that Molly Williamson, currently a scholar at the Middle East Institute and former senior U.S. State Department official, joined us as a director. Her expertise brings further enhancement to Noble Energy’s highly skilled and experienced Board of Directors. We clearly understand that delivery of our future plans fully depends on exceptional execution by our employees. I greatly appreciate their commitment to the delivery of value through safe, responsible operations, financial discipline and community engagement. On behalf of the Board of Directors and our employees, I want to thank all of our stakeholders for their continued confi- dence and support of Noble Energy. Charles D. Davidson Chairman and CEO 6 0 4 , 1 9 0 2 , 1 4 8 1 , 1 2 9 0 , 1 0 2 8 09 10 11 12 13 Year-end Proved Reserves (MMBoe) 06 Discovered Resources (BBoe) (Discovered unbooked resources plus proven reserves) 7.8 6.1 4.3 2.0 1.8 2009 2010 2011 2012 2013 07 Operating and Financial Data Operating Data Year-end Proved Reserves Liquids (MMBbls) Natural Gas (Bcf) Total (MMBoe) Sales Volumes from Continuing Operations Liquids (MBbl/d) [1] Natural Gas (MMcf/d) Total (MBoe/d) Average Sales Price 2013 2012 2011 2010 2009 435 5,828 1,406 357 369 4,964 5,043 1,184 1,209 123 901 273 109 774 239 78 806 213 365 4,361 1,092 75 781 205 336 2,904 820 73 776 202 Crude Oil and Condensate (per Bbl) [2] Natural Gas (per Mcf) $ 100.29 $ 2.97 $ 101.52 $ 99.17 $ 75.76 $ 55.32 $ 2.19 $ 3.00 $ 2.98 $ 2.52 Financial Data 2013 2012 2011 2010 2009 (In millions, except per share amounts and ratios) Revenues Income (Loss) from Continuing Operations [3] Net Income (Loss) [3] Income (Loss) from Continuing Operations per Share Diluted [4] Net Income (Loss) per Share Diluted [4] Weighted Average Shares Diluted [4] Cash Dividends per Share [4] Net Cash Provided by Operating Activities Capital Expenditures [5] Total Assets Total Debt Stockholders’ Equity Total Debt-to-Book-Capital Ratio $ 4,223 $ 3,404 $ 2,713 $ 2,160 $ 5,015 $ $ 907 978 $ 965 $ 1,027 $ 2.50 $ 2.69 $ $ 2.68 2.86 359 $ $ $ $ 412 453 1.15 1.27 357 $ $ $ $ 631 $ (159) 725 $ (131) 1.78 $ (0.46) 2.05 $ (0.38) 354 347 363 $ 0.55 $ 2,937 $ 4,311 $ 19,642 $ 4,824 $ 9,184 35% $ 0.45 $ 0.40 $ 0.36 $ 0.36 $ 2,933 $ 2,170 $ 1,946 $ 1,508 $ 3,626 $ 3,024 $ 2,143 $ 1,317 $ 17,554 $ 16,444 $ 13,282 $ 11,807 $ 4,108 $ 4,469 $ 2,272 $ 2,037 $ 8,258 $ 7,265 $ 6,848 $ 6,157 33% 38% 25% 25% Debt per Boe $ 3.43 $ 3.47 $ 3.70 $ 2.08 $ 2.48 [1] Includes sales from equity method investees [2] Excludes equity method investees [3] See Reconciliation of Net Income (Loss) to Adjusted Earnings per the company’s earnings releases [4] Amounts adjusted for the 2-for-1 stock split which occurred in 2013 [5] Excludes non-cash increase in capital lease obligations and corporate acquisitions 08 DIRECTORS AND OFFICERS CORPORATE INFORMATION Directors Executive Officers Charles D. Davidson (4) Chairman of the Board and Chief Executive Officer, Noble Energy, Inc. Jeffery L. Berenson (2) (3) President and Chief Executive Officer, Berenson & Company Michael A. Cawley (1) (3) Retired Trustee, President and Chief Executive Officer, The Samuel Roberts Noble Foundation, Inc. Edward F. Cox (2) (3) (4) Retired Partner, Patterson Belknap Webb & Tyler LLP Thomas J. Edelman (2) (3) (4) Managing Partner, White Deer Energy LP Eric P. Grubman (1) (3) Executive Vice President, National Football League Kirby L. Hedrick (2) (3) (4) Former Executive Vice President, Phillips Petroleum Company Scott D. Urban (1) (3) (4) Former Group Vice President, BP William T. Van Kleef (1) (3) Former Executive Vice President and Chief Operating Officer, Tesoro Corporation Molly K. Williamson (2) (3) (4) Scholar with the Middle Eastern Institute Committee Membership (1) Audit Committee (2) Compensation, Benefits and Stock Option Committee (3) Corporate Governance and Nominating Committee (4) Environment, Health and Safety Committee Charles D. Davidson Chairman of the Board and Chief Executive Officer David L. Stover President and Chief Operating Officer Kenneth M. Fisher Executive Vice President and Chief Financial Officer Ted D. Brown Senior Vice President and Advisor to the CEO and President Rodney D. Cook* Senior Vice President and Advisor to the CEO and President Susan M. Cunningham Senior Vice President, Gulf of Mexico, West Africa and Frontier J. Keith Elliott Senior Vice President, Eastern Mediterranean Arnold J. Johnson Senior Vice President, General Counsel and Secretary John T. Lewis Senior Vice President, Corporate Development Mike Putnam Vice President, Exploration and Geoscience Charles J. (Chip) Rimer Senior Vice President, Global Operations and EHS&R Andrea Lee Robison Senior Vice President, Human Resources and Administration Gary W. Willingham Senior Vice President, US Onshore * Retired March 31, 2014 Annual Meeting The Annual Meeting of Stockholders of Noble Energy, Inc. will be held on Tuesday, April 22, 2014, at 9:30 a.m. Central Time, at The Woodlands Waterway Marriott Hotel & Convention Center located at 1601 Lake Robbins Drive, The Woodlands, Texas 77380. All stockholders are cordially invited to attend. Form 10-K The company’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission (SEC), is included in this report. Additional copies are available without charge upon request by writing to: Investor Relations, Noble Energy, Inc., 1001 Noble Energy Way, Houston, Texas 77070; via the company’s website: www.nobleenergyinc.com; or via the SEC’s website: www.sec.gov. Forward-Looking Statements This 2013 Annual Report to Stockholders contains forward- looking statements based on expectations, estimates and projections as of the date of this report. These statements by their nature are subject to risks, uncertainties and assumptions and are influenced by various factors. As a conse- quence, actual results may differ materially from those expressed in the forward-looking state- ments. For more information, see “Item 1A. Risk Factors. Disclosure Regarding Forward- Looking Statements” in Noble Energy’s Form 10-K included in this report. The SEC requires oil and gas companies, in their filings with the SEC, to disclose proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The SEC permits the optional disclosure of probable and possible reserves; however, we have not disclosed our probable and possible reserves in our filings with the SEC. We use certain terms in this publication, such as “net unrisked resources,” “net exploration resources,” “risked resources” and “discovered resources,” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. Investors are urged to consider closely the disclosures and risk factors in our Form 10-K included in this report. Noble Energy, Inc. Corporate Headquarters 1001 Noble Energy Way Houston, Texas 77070 281.872.3100 www.nobleenergyinc.com Investor Relations David Larson Vice President, Investor Relations 281.872.3100 investor_relations@ nobleenergyinc.com Communications and Media Relations Ben Dillon Vice President, Communications and Government Relations 281.872.3100 media@nobleenergyinc.com Independent Public Accountants KPMG LLP Transfer Agent and Registrar Wells Fargo Bank, N.A. Shareowner Services P.O. Box 64854 St. Paul, MN 55164-0854 800.468.9716 www.shareowneronline.com Common Stock Listed New York Stock Exchange Symbol – NBL www.nobleenergyinc.com 

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