On May 17, 2013 shares of Noble Energy Inc. (NBL) soared to a new 52-week high of $121.36. The company’s series of property sales and solid exploration ventures thrust the stock to a new high.
The key earnings drivers for Noble Energy were the Leviathan and Tamar prospect in the Eastern Mediterranean and Galapagos in the Gulf of Mexico (GoM). The 15-year long-term natural gas supply commitment to meet rising power demand in Israel proved to be a major turning point for Noble Energy.
Further, the company accrued a sizeable $1.15 billion from its Kansas, Dumbarton and Lochranza, Permian and Mid-Continent asset sales. This allowed Noble Energy the financial flexibility to invest in its growth-centric projects.
Other noteworthy steps that acted as a catalyst were the stake purchase in the Falkland Oil and Gas Limited’s licensed areas of around 10 million acres. Exploration companies like Noble Energy thrive on reserve accretion and escalating exploration options. At the end of 2012, Noble Energy discovered the Big Bend prospect in deepwater GoM.
Going forward, the company’s investments in the new venture exploration program will generate substantial returns.
The recent quarterly dividend increase of 12% to 28 cents per share from 25 cents came on the back of a favorable balance sheet position. This would certainly arrest investors’ confidence in the stock.
The present valuation makes the shares of Noble Energy look attractive. The forward price/earnings (P/E) multiple of 17.9x is lower than the industry average of 19.7x, reflecting a discount of 9.1%. In addition, Return on Equity ("ROE") of the company is 10.8%, higher than the peer group average of 7.1%.
Presently, Noble Energy carries a Zacks Rank #3 (Hold). However, other exploration operators with a Zacks Rank #1 are Abraxas Petroleum Corporation (AXAS), EPL Oil & Gas, Inc. (EPL) and Sandridge Mississippian Trust II (SDR). Based in Houston, Texas, Noble Energy operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids.
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