On Jun 20, 2014, the shares of Noble Energy Inc. (NBL) touched a 52-week high of $78.68. The share price surged on the back of the company’s recent announcement to form a midstream Master Limited partnership ("MLP") with its Marcellus partner CONSOL Energy Inc. (CNX). In addition, the company’s plan to expand acreage in the deepwater Gulf of Mexico as well as its attractive dividend raise boosted the share price. The price finally closed at $78.64, up 34.9% from the year-ago closing.
Strong natural gas prices along with sizeable production from Noble Energy's’s core oil and gas plays led to the momentum. The company saw a 16% and 23% year-over-year surge in domestic and international sales volumes, respectively, in the first quarter of 2014.
The prime U.S. onshore assets - Marcellus and Denver/Julesburg - proved to be the key production drivers for Noble Energy. The application of extended reach lateral programs in these assets accelerated output.
Meanwhile, Noble Energy’s capacity expansion projects at the Tamar play and advancement of the Leviathan prospect in Eastern Mediterranean have helped the company to penetrate the gas-hungry Middle Eastern markets. It sealed lucrative long-term gas supply contracts with international customers like Egypt and Jordan.
A promising asset portfolio prompted Noble Energy to reward its shareholders with a 29% hike in its quarterly dividend rate to 18 cents per share. This would certainly go a long way in retaining investors’ confidence in the stock.
We believe that there are plenty of growth opportunities for Noble Energy thanks to the formation of the midstream MLP. The decision is well-timed given the U.S. Department of Energy’s approval of gas exports.
In addition, Noble Energy’s deal with BP Exploration & Production Inc., a business wing of BP Plc (BP), to purchase 50% of BP's stake in 17 deepwater exploration leases will unlock favorable reserve prospects in the Gulf of Mexico.
Currently, Noble Energy carries a Zacks Rank #3 (Hold). A better-ranked stock in the oil and gas sector is Encana Corp. (ECA). It sports a Zacks Rank #1 (Strong Buy).