Tuesday, May 2, 2017

Noble Firing On All Cylinders With Balanced Portfolio - FORBES

(Photo by Kobi Gideon/GPO via Getty Images)
MAY 2, 2017 @ 11:38 AM 828 
Claire Poole

Noble CEO David Stover met with Prime Minister Benjamin Netanyahu earlier this year about the company's developments off the coast of Israel, where it's exporting natural gas to Jordan for the first time.

Noble Energy Inc. seems to be firing on all cylinders.

The Houston oil and gas explorer reported solid first quarter financial results, beating analysts' expectations for earnings, revenues and production. Its wells in the Delaware Basin in West Texas and the Denver-Julesburg Basin in the Rockies are outperforming expectations and targets and it began exporting natural gas from Israel to Jordan for the first time. The company also is continuing to improve its portfolio, selling natural gas properties in Appalachia's Marcellus Shale to an unnamed buyer for $1.2 billion, which will help it pay down debt incurred after its $2.7 billion purchase of Clayton Williams Energy Inc.

So why are some analysts so ho-hum on the stock? Seaport Global Securities rates it a neutral with a price target of $36 per share, vs. its close yesterday of $32.30, while Tudor, Pickering Holt & Co. has it at a hold and Raymond James has it at market perform.

The company -- led by CEO David Stover -- has had its setbacks. This time a year ago it hit a dry hole on its Silvergate exploration prospect in the Gulf of Mexico -- its fourth in a year-and-a-half (after similar results at its Cheetah development in Cameroon, its Humpback prospect in the Falkland Islands and its Madison project in the Gulf of Mexico). And some considered its acquisition of Clayton Williams -- which closed last month -- a bit pricey, even though it gave Noble scale in the sought-after Delaware Basin.

RBC Capital Markets analyst Scott Hanold thinks it's time for investors to add exploration and production companies to their portfolios given improving economics and their low valuations and cites Noble as one of his four best ideas (the other three are Anadarko Petroleum Corp., Extraction Oil & Gas LLC and SRC Energy Inc.). He cites the company for its balanced inventory of capital-efficient projects both on and offshore and in the U.S. as well as abroad.

Evercore ISI also is impressed, resuming coverage of Noble on Tuesday with an outperform rating and a price target of $40 per share.

TPH expects Noble to shed more assets over the next 12 months, including its interests in the Tamar natural gas field off the coast of Israel, some of its non-core properties in the DJ Basin and some of its infrastructure assets to affiliate Noble Midstream Partners. Those divestitures could help it pay down more debt and develop its most promising prospects further, which could result in better returns -- and a higher stock price down the road.