UPDATE 2-Noble Energy's weak production forecast surprises Wall Street

Thu Feb 6, 2014 12:39pm EST

By Ernest Scheyder

Feb 6 (Reuters) - Oil and natural gas producer Noble Energy Inc surprised Wall Street on Thursday with a weak production forecast and a lower-than-expected quarterly profit as its costs spiked.

The report comes as Noble Energy, like many of its peers, spends heavily to find more oil and natural gas to satisfy Wall Street's demands for constant reserve growth. Energy resources are becoming increasingly hard to find, a difficulty that is prompting spending that would have been considered astronomical a decade ago.

Noble Energy, for instance, spent $1.1 billion in the fourth quarter on capital projects, ending the year with reserves 19 percent higher than 2012.

Despite the new reserves, Noble Energy expects to produce 280,000 to 288,000 barrels of oil equivalent per day (boe/d) this quarter. That is less than it produced in the fourth quarter and far below analysts' expectations of at least 300,000 boe/d in the first quarter.

The company said weather was why results were out of whack. A rare December snowstorm in Israel, where the company has begun supplying natural gas for heating and electricity generation, sharply boosted demand. The first-quarter production forecast reflects a leveling out of demand, Chief Executive Charles Davidson said on a conference call with investors.

"The first quarter is really right on track with where we expected and right on track to deliver the growth rate that we've laid out this year," Davidson said.

For the fourth quarter, Noble Energy reported net income of $134 million, or 37 cents per share, compared with $251 million, or 70 cents per share, in the year-ago period.

Excluding hedging losses and other one-time items, the company earned 50 cents per share, compared with the 60 cents expected, on average, by analysts, according to Thomson Reuters I/B/E/S.

Sales rose 16 percent to 293,000 barrels of oil equivalent per day (boe/d), exceeding the company's previously announced forecast for the quarter.

Almost half of the sales were in crude oil, with the rest in natural gas.

Operating expenses, including the cost of finding, transporting and storing oil and natural gas, increased 22 percent from the same quarter in 2012.

The increase was starkest in exploration expenses, which more than doubled. The company's production taxes rose 31 percent, also surprising Wall Street analysts.

Noble has identified giant natural gas fields off the coast of Israel as one of its most promising developments, but the cost to develop them and other areas will be high.

The company is also growing rapidly in the Marcellus and Denver-Julesburg shale basins in the United States.

Noble Energy's shares were up 0.3 percent at $62.24 in mid-day trading on Thursday. The stock has lost about 5 percent of its value in the past six months.

BlackRock Inc said on Wednesday that it now owns 6.1 percent of Noble Energy's shares, making it the company's third-largest shareholder.