Noble Energy (NBL) Prices Notes Worth $1B To Refinance Debts

Noble Energy Inc. (NYSE:NBL) announced that it has priced a public offering of $500 million of 3.250% Senior Notes due 2029 and $500 million of 4.200% Senior Notes due 2049. The price of the offering to the public for the 2029 and 2049 notes is 99.982% and 99.930% of the principal amounts, respectively.

The company intends to utilize the net proceeds from the offering and available cash in hand to redeem its outstanding $1-billion principal amount of the 4.15% Senior Notes due 2021. The surplus proceeds, if any, will be utilized for general corporate purposes that may include the repayment or redemption of outstanding indebtedness.

Lower-Than-S&P 500 Debt Level

Noble Energy’s debt-to-capitalization ratio currently stands at 40.81%, lower than S&P 500 group’s average of 43.37%. Since 2016, the company has reduced net debt by $2.6 billion, which resulted in annual interest savings of $230 million per year.

Proper management of long-term debt led to a 11.6% year-over-year decline in interest expenses in first-half 2019. The issue of low-interest-bearing notes will further lower Noble Energy’s cost of capital over the long term. The company requires fund to develop its domestic and international assets.

Assets in Permian Basin

Per the latest release of the U.S. Energy Information Administration (“EIA”), U.S. crude oil production will average 12.2 million barrels per day (b/d) in 2019, indicating an improvement from the 2018 level of 1.2 million. The same is expected to rise 1.0 million b/d in 2020 to an annual average of 13.2 million b/d. We expect a major portion of the overall increase in oil production to come from the Permian Basin.

Given the existing reserves of the Permian Basin, major oil and gas producing companies of the United States are concentrating on expanding operations in the region. Occidental Petroleum (NYSE:OXY) edged out Chevron Corporation (NYSE:CVX) to acquire Anadarko Petroleum (NYSE:APC) for further expanding presence in the region.

Noble Energy already has a very attractive portfolio in the Permian Basin region, and the acquisition of Rosetta Resources further enhanced its presence in the resource-rich Eagle Ford Shale and Permian Basin.

Israel Assets to Support Growth

In addition to strong domestic assets of Noble Energy, offshore assets in Israel are going to support long-term growth. In Israel, Noble Energy received the necessary permission to go ahead with the Leviathan development work, with first gas targeted within 2019-end. The Leviathan project is 88% complete. The company is targeting gross production of 800 million cubic feet per day in 2020, when the much awaited Leviathan project will start production. We expect this project to boost cash flow of the company in 2020. Notably, Noble Energy’s interest in the Tamar field will allow it to benefit from rising demand for natural gas in the region.

Price Movement

Noble Energy’s shares have outperformed its industry year to date.

Zacks Rank & A Key Pick

Noble Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock from the same sector is Montage Resources Corporation (NYSE:MR) , which sports a Zacks Rank #1. The company delivered average positive earnings surprise of 340.74% in the last four quarters. The Zacks Consensus Estimate for the current year has moved up 27.1% in the past 60 days.

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