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Analyzing Noble Energy’s 3Q15 Earnings Call

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Noble Energy’s 3Q15 earnings call

In 3Q15, Noble Energy (NBL) reported a 20% quarter-over-quarter reduction in its capital expenditures. In the 3Q15 earnings call, the company’s chairman, president, and chief financial officer David Stover said that “this has come not only from adjusting our activity levels, but also from our relentless focus on increasing operating efficiencies and driving down well costs.” Stover also affirmed that Noble Energy will continue its focus on reducing its quarter-over-quarter capital expenditure and expects the company to be cash flow neutral or better in 2016.

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Israel expansion

In the 3Q15 earnings call, David Stover said that Noble Energy is committed to its Tamar gas field expansion in Israel, mainly because regional customers are undersupplied by almost 4 billion cubic feet of natural gas per day. Stover stated that these expansion plans are progressing well, with the Israeli government recently finalizing the regulatory framework for hydrocarbon development in the country.

Offshore advantage

Due to the current lower energy prices, many offshore players are exiting deepwater assets. Stover said that Noble Energy might take advantage of this situation to increase its acreage. He said that “we have an exploration staff that’s had a tremendous amount of success in the past, that gives us that capability right now where others may not have that, and I think that creates opportunity.”

Wall Street ratings

Currently, ~57% of Wall Street analysts rate Noble Energy as a “buy,” ~38% of analysts rate it as a “hold,” and ~5% rate the stock a “sell.” The median price target from these recommendations is $43.53, which is ~37% higher than the closing price of $31.69 on January 6, 2016. Based on the median price targets of recommendations from Wall Street analysts, S&P 500 (SPY) upstream companies Range Resources (RRC), EOG Resources (EOG), and Pioneer Natural Resources (PXD) have potential upsides of ~45%, ~26%, and ~30%, respectively, from their closing prices on January 6, 2016.

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