Higher Commodity Prices Boost Noble's Sales Revenue

Profit margin declines despite revenue growth.
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Higher commodity prices helped

Noble Energy's

(NBL) - Get Report

net sales revenue for third-quarter fiscal 2008 grow 37.7% to $1.06 billion from $768.44 million a year ago. However, the company's gross profit margin declined 100 basis points to 79.02% from 80.02% despite higher revenue growth.

Net income rose to $974.00 million or $5.37 per share from $222.68 million or $1.28 per share as the latest quarter recorded a $637.00 million gain. Adjusted net income for the quarter stood at $395.00 million or $2.08 per share.

Product-wise, crude oil and condensate sales surged 39.8% to $629 million due to a 60.3% rise in average realized prices. Average consolidated realized prices of crude oil and condensate increased to $101.82 per barrel from $63.53 per barrel. However, total sales volume declined to 69,000 barrels per day (MBpd) from 79,000 MBpd.

Noble's average sales volume declined marginally to 211,000 barrels of oil equivalent per day (MBoepd), from 213,000 MBoepd. Geographically, U.S. MBoepd volumes increased 3.7%, while international MBoepd volumes fell 5.6%.

Natural gas revenue jumped 22% to $361 million from $296 million on higher prices. Total sales volume of natural gas fell 1.7% to 760 million cubic feet per day (MMcfpd), while average realized prices increased to $5.31 per thousand cubic feet for natural gas from $4.30 per Mcf. Meanwhile, Natural gas liquids revenue was $50 million, while its realized price was $57.06 per MBpd.

Meanwhile, production costs including lease-operating, production and ad valorem taxes and transportation expenses, were $8.48 per barrel of oil equivalent (Boe), which increased from $6.43 in the prior year's quarter. Operating profit margin improved 922 basis points to 51.42% from 42.20%.

Interest expenses decreased 24.6% to $25.00 million from $33.17 million. Consequently, the interest coverage ratio surged 122.5% to 21.76 from 9.78. Noble's earnings multiplied more than 4 times helped mostly by a noncash gain from a mark-to-market change in the company's commodity contracts.

Cash and cash equivalents more than doubled to $992.00 million from $450.77 million in the prior-year quarter. Total equity climbed 30.0% to $6.01 billion from $4.62 billion. Total debt mounted 6.8% to $2.10 billion from $1.97 billion. Consequently, the debt-to-equity ratio improved to 0.35 from 0.43. The company's return on assets ascended 321 basis points to 11.10% from 7.89%, while return on equity expanded 489 basis points to 22.40% from 17.51%. Currently, the company has a quick ratio of 1.20, which shows its ability to cover short-term cash needs.

Noble has exploration plans with a drill ship arriving offshore Israel to spot an exploration well. The company has assembled 2 million net acres in that region. It continues to invest in the Rocky Mountains and particularly the Wattenberg field, which makes up about 75% of its Rocky Mountain volumes.

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