We retain our Neutral recommendation on Noble Energy Inc. (NBL). The oil and gas exploration as well as production operator currently carries a Zacks Rank #3 (Hold).
Why the Reiteration?
Noble Energy maintained its good run and posted favorable earnings results in the first quarter of 2013, widely surpassing our expectation. Production ramp-up in the U.S. onshore assets primarily led to the uptrend.
The Neutral reiteration takes into account the threat of operational disturbances from violent storms. The company has to be extra cautious given the recent prediction by National Oceanic Atmospheric Administration regarding increased hurricane activity in 2013.
Noble Energy’s Tamar field in offshore Israel and its Alen prospect in Equatorial Guinea will nevertheless be the key growth drivers. The company will substantially benefit from rising natural gas demand in Israel. Further, the company’s increased stake in the high-quality Gunflint block in the Gulf of Mexico will complement returns.
However, dependence on third party for marketability of production might act as a headwind. Moreover, commodity price volatility will continue to affect Noble Energy’s business.
All said, growth prospects from the domestic assets look encouraging thanks to the increased production activities in the Marcellus and Denver/Julesburg Basins which will benefit Noble significantly.
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