Noble Energy Earnings Call Nuggets: Adjusted Deferred Tax Rate and Niobrara Wattenberg

Noble Energy Inc (NYSE:NBL) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Adjusted Deferred Tax Rate

Charles Meade – Johnson Rice: Let me start with one kind of financial one. Your deferred or I should say your adjusted deferred tax rate for the quarter was a little higher than you guys had guided to and I think most people were looking for and I’m sure there is some idiosyncratic reasons for why that happened in Q2, but I wonder, if you could just give some detail on why that moves around and how that might affect the outlook for that item in the back half of ’13?

Kenneth M. Fisher – SVP and CFO: Sure, Charles, this is Ken Fisher. The deferred rate came in at about the 19%. That’s a calculation that we do quarterly, projected on the full year’s provision – tax provision and the – we had forecast some less utilization of some foreign tax net operating losses in the foreign jurisdiction. But if you look at it on a full year basis, the guidance range we give is 5.

Charles Meade – Johnson Rice: So, is it kind of a fair simplification that it’s kind of like a quarterly mark-to-market on what you expect you are going to be in the year?

Kenneth M. Fisher – SVP and CFO: Yes. We were high in the first quarter, little lower in the second quarter, but here the guidance stays the same.

Charles Meade – Johnson Rice: Then shifting to the operations of maybe this is the best question for Dave. I was a little bit – I know you guys have guided to a lower, higher downtime in both the in the DJ and Gulf of Mexico for Q2, but – you had a string of five or six or more consistent U.S. oil growth broken here, and as I’m looking at the breakdown to that, it seems like with some of the – both the fudge you have on the DJ horizontal volume growth and that growth trend is intact. And so, I think what we’re left with is maybe the legacy production into the DJ maybe underperforming or perhaps as Chuck mentioned – I know there was some anticipated downtown at Swordfish for Q2, but sounds like maybe the reserve, the Galapagos coast tieback in Na Kika might have had some unexpected downtime. So, wonder if you could decompose that?

David L. Stover – President and COO: Let’s start with the best news is what we’re at now. You know when I mentioned where we’re at on overall Company production and also where the DJ backup to in that 95 to 100 range. But what we saw a little bit in the second quarter was we had probably a little longer downtime on that Na Kika getting the Galapagos production back up, so that had an impact, obviously, that’s what 12,000 barrels a day and any extra week of that has a big impact in the quarter. Then in the DJ, the other thing we saw is as we were doing some of these plant – I will say we the operator was doing some of the plant facility downtime we had a little extra plants facility downtime in the DJ on that, but that’s all back up and running now. The exciting thing out there is we are on the verge of bringing on a big new fertility up there with that LaSalle plant in September. So I’d say all of that was just temporary Charles, and that’s why we are excited about where we are back up to on the DJ volumes and actually how that overall horizontal production is performing. So when you have any of that period of downtime and then bringing anything back on it does affect the legacy wells much more than the horizontal producers.

Niobrara Wattenberg

Leo Mariani – RBC Capital Markets: You talked about on the call having some tightly spaced multi-zone wells in the Niobrara basically producing from the A, B, C in the Codell. Could you give us a little bit more color on kind of what you saw on that and maybe elaborate on what you think the potential is multi-zone development across broader areas of the Niobrara Wattenberg?

David L. Stover – President and COO: Yes. I mean we have been talking Leo for a while here or I guess this year on how a large part of the focus is testing these different multi-layer horizons and what we have seen so far is that they look every bit as good as the Niobrara B, especially when you adjust for the various thickness of those intervals in these particular areas. I think one of the comments I had in the notes here today was particularly on the Codell. Horizontal wells where they are looking as good as our Niobrara wells and we are actually going to now starting to test that on a little longer extended-reach basis on some of that. So, I think what you’ll see us evolving into is we are continuing to test some of these others zones. We’ll start to mix in some of these longer laterals in with some of these zones, on some of this. So, I’d say all of that’s been very encouraging. I think we are still optimistic at the end of the day when you said on a complete pattern out here. You’ll have a mix of different zones in some of these areas and that’s why we are continuing to say, on a base horizontal B program up here in Northern Wattenberg and in the oil window. The base program that we’ve been focusing around is at kind of 16 wells per section for the B. It’s not going to surprise us, if we don’t have more wells per section where you got a combination of B and some mix of these other zones depending on their thickness in different parts of the field…

Leo Mariani – RBC Capital Markets: I guess you also talked about the La Salle facility. Is that going to potentially debottleneck any production for you guys? You think we would see production increase maybe more significantly in the fourth quarter. Is that up and running there in the Niobrara?

David L. Stover – President and COO: Yeah. It’s a good point. It will be a big help up there. As a lot of our focus has been here in the Northern Wattenberg piece, La Salle will help to pick up a large part of that volume up there what I think is little bit southwest of the Wells Ranch area if I remember correctly where it’s located. This actually will come into play in an area where we’ve had probably our largest activity recently. So, it will be interesting to see how that ramps up and as I said it is kind of in two phases that that’s coming on here in late third quarter and into the fourth quarter. So, the real impact to that will be seen in the fourth quarter.

Charles D. Davidson – Chairman and CEO: Just as a reminder, that plant is part of a multi-plant expansion that’s ongoing there and we expect further expansions in 2014 as well. So, this is all about staying ahead of the production and managing the overall program to a very broad area. So, there has been a lot of projects underway, not only that but some compression and some other work to accommodate the gas production. So, we’re very encouraged by the additional facilities that are going in and they are going to be needed because we’re growing our production very rapidly…

David L. Stover – President and COO: And, as I mentioned, we’re putting some of our own facilities up there into Northern Colorado for that area.

Leo Mariani – RBC Capital Markets: Just in terms of Israel real quick here, I guess I head some chatter around potentially some incremental taxes levied on export gas. I wanted to get your thoughts on that? I guess is there any potential still to develop Cyprus jointly with Leviathan, any read on the new export policy (when that) allows for that?

Charles D. Davidson – Chairman and CEO: I think you characterized correctly is that chatter on taxes is, our sense is, that was really more of a reiteration of what’s already included in the existing Sheshinski and so we’re not anticipating from our perspective and from our plans anything incremental on that side. On the thinking on Cyprus LNG and the possibility of developing that with Leviathan right now, the export policy that’s been issued basically provides that LNG would be in Israeli territorial waters but there are some possible provisions where you could go back to the government and seek to do something differently. We are not at that point yet. We are right now moving – as we noted moving forward with the appraisal at Cyprus. That will give us a good handle on that. We have already entered into a Memorandum of Understanding that is the basis of an LNG project, a one-train project at Cyprus. So we are continuing to look at all the options on the Leviathan, but as just a reminder we see some of the regional and domestic gas sales options for Leviathan, they are most likely going to some of the early projects that we move forward because we have got increased demand in Israel and other regional demand that has been growing. So it’s – our thinking right now is the Leviathan is going to be a combination of an LNG export as well as domestic sales and we are continuing to move those plans forward.

A Closer Look: Noble Energy Earnings Cheat Sheet>>

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