Noble sees no need to issue new debt, aims to strengthen balance sheet, repay existing debt

By Paul Deckelman

New York, May 11 – Noble Energy, Inc. sees no need for and has “no interest” in issuing any new debt at this time, a senior executive said Wednesday.

In fact, said Gary J. Willingham, the executive vice president for operations at the Houston-based oil and natural gas exploration and production company, “we’ve been focused this year on actually strengthening the balance sheet and possibly paying down some debt, certainly getting the operations into a cash-flow-neutral state going forward.”

Asset sales boost cash

He told attendees at the Citigroup 2016 Global Energy & Utilities Conference in Boston that the company hopes to do this by improving its underlying operations and via asset sales, such as the transaction Noble announced on May 3 selling some oil and natural gas properties in the Greeley Crescent area of Weld County in northeastern Colorado.

Noble is selling some 33,100 primarily undeveloped net acres within the DJ Basin geological formation to Synergy Resources Corp. for $505 million. The effective date of the transaction is April 1, and closing is expected to occur as early as next month, subject to customary terms and conditions.

Willingham told the conference participants that “it’s great acreage – but not on our development timeline any time soon. So when you have other folks come, and there were multiple folks that expressed an interest in that acreage, and they value it on the basis of going out and developing it today, versus for us it was many, many, years out, it was a compelling value decision to make to spin off some of that acreage.”

The deal “provides a nice bit of cash coming in the door – a little over $500 million [and] allows us to continue to strengthen the balance sheet and provide some dry powder for other opportunities that come along, when they come along.”

He said that so far this year, the company has lined up transaction generating nearly $800 million of expected proceeds, with “about a third already in the door.”

Therefore, he declared, “there’s really not a need to issue debt.”

The company has “really no interest in issuing any more at this point,” he concluded.

Refinancing takes out bonds

According to Noble’s latest 10-Q filing with the Securities and Exchange Commission issued last week and covering the 2016 first quarter, as of the end of that reporting period on March 31, Noble had long-term debt of $7.88 billion, a $94 million reduction from $7.98 billion at the end of fiscal 2015 on Dec. 31. The change was primarily due to a reduction in unamortized premium following a first-quarter debt refinancing.

In January, Noble entered into a new $1.4 billion term loan facility due in January of 2019. As of March 31, the interest rate on those borrowings worked out to 1.69%.

Noble used the proceeds from the term loan to take out via a concurrent tender offer an approximately equal face amount of three series of existing bonds that it assumed as a result of its acquisition last year of sector peer Rosetta Resources Inc.

The tender offer resulted in the extinguishment of $314 million of the old Rosetta 5 5/8% senior notes due 2022, leaving $379 million outstanding on the balance sheet as of March 31, down from $693 million at Dec. 31.

It took out $583 million of Rosetta 5 7/8% senior notes due 2022, leaving just $18 million on the balance sheet, down from $597 million at Dec. 31.

And it bought $491 million of Rosetta’s 5 7/8% senior notes due 2024, leaving just $8 million on the first-quarter balance sheet, down from $499 million at Dec. 31.

The company’s capital structure at March 31 also included several other series of its own bonds, unchanged in amount from Dec. 31, the regulatory filing indicated.

These included $1 billion of 8¼% senior notes due 2019; $1 billion of 4.15% senior notes due 2021; $100 million of 7¼% senior notes due 2023; $650 million of 3.9% senior notes due 2024; $250 million of 8% senior notes due 2027; $850 million of 6% senior notes due 2041; $1 billion of 5¼% senior notes due 2043; $850 million of 5.05% senior notes due 2044; and $84 million of 7¼% senior debentures due in August of 2097.

The balance sheet also included $390 million of capital lease obligations, down from $403 million at Dec. 31.

The company has a $4 billion unsecured revolving credit facility due in August of 2020. The facility was undrawn as of both Dec. 31 and March 31 of this year.

The balance sheet showed $953 million of cash and equivalents at March 31, down from $1.03 billion on Dec. 31.

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