uploads///NBL Debt Position

Analyzing Noble Energy’s Debt Position

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Jan. 13 2016, Updated 4:06 p.m. ET

Noble Energy’s debt

As of September 30, 2015, Noble Energy’s (NBL) total debt stood at ~$8 billion. With ~$1 billion in cash and cash equivalents, the company’s net debt was ~$7 billion at the end of 3Q15.

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Debt ratio

Net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) is a debt ratio that shows how many years it would take for a company to pay back its debt under the current situation. As seen in the above chart, as of 3Q15, Noble Energy’s net debt-to-EBITDA is quite high, at ~4.4x. Even when compared with its own net debt-to-EBITDA historical average of ~1.5x, the current ratio is still high. The increase in the net debt-to-EBITDA ratio in the last two quarters can be attributed to a steep increase in net debt as well as falling EBITDA due to lower natural gas prices and crude oil prices.

In 3Q15, Noble Energy completed the acquisition of Rosetta Resources in an all-stock transaction valued at $2.1 billion plus the assumption of Rosetta’s net debt of $1.8 billion. This transaction caused a steep increase in Noble Energy’s net debt in 3Q15.

Noble Energy’s leverage in 3Q15

Another metric used to gauge a company’s indebtedness is the debt-to-equity ratio. As of 3Q15, Noble Energy had a debt-to-equity ratio of ~65%, which is midrange compared with the ratios of other upstream companies within the S&P 500 (SPY). Range Resources (RRC), EQT Corporation (EQT), and Cimarex Energy (XEC) have debt-to-equity ratios of ~116%, ~43%, and ~44%, respectively. A higher debt-to-equity ratio usually indicates higher risk, as it means that a company has been aggressively financing its growth through debt.

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