ATW Atwood Oceanics, Inc. (delisted)

Independent energy company, Noble Energy Inc. (NBL) inked a three-year agreement with a subsidiary of Texas-based drilling contracting company, Atwood Oceanics Inc. (ATW) for the construction of a new build drillship to enhance its major deepwater exploration and development activities.

The drillship, Atwood Advantage, has the capability to reach at greater depths. The first exploration prospect to be drilled is at the Eastern Mediterranean play. Currently the drillship is under construction by South Korea-based Daewoo Shipbuilding & Marine Engineering Corporation, Limited. The product is expected to be received in the fourth quarter of 2013.

The presence of dual BOP systems, 40,000 feet drill depth ratings, improved offline capabilities and increased mobility will certainly boost Noble Energy’s worldwide exploration projects. The implementation of BOP systems would enable the company to save on its increasing spread costs which will spur margins in the near term.

The contract signifies Noble Energy’s hardened focus on the growth of its overseas offshore exploration programs. We believe the company’s new strategy of optimizing its global oil and natural gas assets will generate favorable returns.

Moreover, the steady rise in crude oil and slowly recovering natural gas prices in the international market will propel the revenue performance of the company. Also, Noble Energy’s series of non-core asset sale of over $1.1 billion during the second quarter 2012 will stimulate the pace of the company’s core deepwater exploration projects. This will lead to smooth and timely execution of the programs.

Noble Energy’s Galapagos prospect in the Gulf of Mexico has made tremendous progress with all the three wells producing at levels higher than originally projected. The company's net production of 13,000 barrels of oil per day and 8 million cubic feet of natural gas per day outstripped earlier projection by about 30%. However, unexpected rig accidents in the deepwater operations and unplanned outages are risks that Noble Energy needs to watch out for.

Noble Energy expects its sales volumes to improve due to higher contribution from Galapagos, continuation of the drilling programs in DJ Basin and Marcellus Shale, and increased sales in Israel. For 2012, sales volume is expected to be in the range of 236 thousand barrels of oil equivalent per day (Mboe/d) to 244 Mboe/d.

Currently, the Zacks Consensus Estimates for the third quarter and full year 2012 for Texas-based Noble Energy are pegged at $1.05 per share and $4.91 per share, respectively.

One of the company’s closest peers, Apache Corporation (APA), recently announced its decision to divest a 20% stake in Kitimat liquefied natural gas (“LNG”) export project for $15 billion.

Noble Energy currently has a Zacks #3 Rank (short-term Hold rating). The company operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids. As of now, the company has a market capitalization of $16.57 billion.

 
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