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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                             

Commission file number: 0-7062

NOBLE ENERGY, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation)		   73-0785597
(I.R.S. employer identification number)

350 Glenborough Drive, Suite 100
Houston, Texas
(Address of principal executive offices)
 
77067
(Zip Code)

        (281) 872-3100
(Registrant's telephone number, including area code)

        NOBLE AFFILIATES, INC.
(Registrant's former name)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

        Yes ý    No    o

        Number of shares of common stock outstanding as of July 31, 2002: 57,287,570


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

NOBLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in thousands)

 
   (Unaudited)
June 30,
2002
   December 31,
2001
  
ASSETS              
Current Assets:              
  Cash and short-term investments   $ 1,681   $ 73,237  
  Accounts receivable-trade     168,621     182,979  
  Oil and gas price risk management receivable     6,799     33,424  
  Materials and supplies inventories     10,745     10,828  
  Other current assets     21,800     51,103  
   
 
 
    Total Current Assets     209,646     351,571  
   
 
 
Property, Plant and Equipment, at cost     4,134,013     3,974,754  
  Less: accumulated depreciation, depletion and amortization     (2,089,679 )   (2,021,543 )
   
 
 
    Total property, plant and equipment, net     2,044,334     1,953,211  
   
 
 
Investment in Unconsolidated Subsidiary     236,763     117,735  
   
 
 
Other Assets     72,829     57,331  
   
 
 
    Total Assets   $ 2,563,572   $ 2,479,848  
   
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY              
Current Liabilities:              
  Accounts payable-trade   $ 232,415   $ 270,091  
  Short-term note payable     24,775     25,000  
  Current installments of long-term debt     46,378     19,507  
  Oil and gas price risk management payable     8,512     25,363  
  Other current liabilities     38,171     40,624  
   
 
 
    Total Current Liabilities     350,251     380,585  
   
 
 
Deferred Income Taxes     180,535     176,259  
   
 
 
Other Deferred Credits and Noncurrent Liabilities     77,533     75,629  
   
 
 
Long-Term Debt     947,012     837,177  
   
 
 
Shareholders' Equity:              
  Common stock     199,240     198,369  
  Capital in excess of par value     402,905     396,104  
  Retained earnings     447,443     449,985  
  Accumulated other comprehensive income (loss)     (2,017 )   5,070  
   
 
 
      1,047,571     1,049,528  
Less Common Stock in Treasury (at cost, 2,505,522 shares)     (39,330 )   (39,330 )
   
 
 
    Total Shareholders' Equity     1,008,241     1,010,198  
   
 
 
      Total Liabilities and Shareholders' Equity   $ 2,563,572   $ 2,479,848  
   
 
 

See notes to consolidated condensed financial statements.

2


NOBLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)

 
   Three Months Ended June 30,
  
 
   2002
   2001
  
REVENUES:              
  Oil and gas sales and royalties   $ 181,359   $ 229,644  
  Gathering, marketing and processing     152,548     184,348  
  Loss from unconsolidated subsidiary     (3,480 )   (1,044 )
  Other income (loss)     (135 )   520  
   
 
 
      330,292     413,468  
   
 
 
COSTS AND EXPENSES:              
  Oil and gas operations     33,507     32,675  
  Oil and gas exploration     20,233     26,777  
  Gathering, marketing and processing     150,522     181,645  
  Depreciation, depletion and amortization     73,049     76,869  
  Selling, general and administrative     12,083     10,691  
  Interest     16,694     9,287  
  Interest capitalized     (4,732 )   (3,916 )
   
 
 
      301,356     334,028  
   
 
 
INCOME BEFORE TAXES     28,936     79,440  
INCOME TAX PROVISION     11,817 (1)   28,106 (1)
   
 
 
NET INCOME   $ 17,119   $ 51,334  
   
 
 
BASIC EARNINGS PER SHARE   $ .30 (2) $ .91 (2)
   
 
 
DILUTED EARNINGS PER SHARE   $ .30 (2) $ .89 (2)
   
 
 

See notes to consolidated condensed financial statements.

3


NOBLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)

 
   Six Months Ended June 30,
  
 
   2002
   2001
  
REVENUES:              
  Oil and gas sales and royalties   $ 327,431   $ 545,990  
  Gathering, marketing and processing     321,544     427,969  
  Loss from unconsolidated subsidiary     (3,905 )   (747 )
  Other income     2,872     1,270  
   
 
 
      647,942     974,482  
   
 
 
COSTS AND EXPENSES:              
  Oil and gas operations     70,655     66,568  
  Oil and gas exploration     56,638     65,291  
  Gathering, marketing and processing     317,822     421,675  
  Depreciation, depletion and amortization     148,551     141,112  
  Selling, general and administrative     23,406     22,481  
  Interest     32,113     19,736  
  Interest capitalized     (9,083 )   (6,804 )
   
 
 
      640,102     730,059  
   
 
 
INCOME BEFORE TAXES     7,840     244,423  
INCOME TAX PROVISION     5,819 (1)   87,180 (1)
   
 
 
NET INCOME   $ 2,021   $ 157,243  
   
 
 
BASIC EARNINGS PER SHARE   $ .04 (2) $ 2.79 (2)
   
 
 
DILUTED EARNINGS PER SHARE   $ .03 (2) $ 2.74 (2)
   
 
 

See notes to consolidated condensed financial statements.

4


NOBLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)

 
   Comprehensive
Income (Loss)
   Common
Stock
   Capital in
Excess of
Par Value
   Retained
Earnings
   Accumulated
Other
Comprehensive
Income (Loss)
   Treasury
Stock
At Cost
   Total
Shareholders'
Equity
  
Balance at December 31, 2001         $ 198,369   $ 396,104   $ 449,985   $ 5,070   $ (39,330 ) $ 1,010,198  
  Net income   $ 2,021                 2,021                 2,021  
  Reclassification of unrealized gains on securities to net income, net of $1,313 income tax     2,438                       2,438           2,438  
  Change in fair value of cash flow hedges, net of income tax     (9,525 )                     (9,525 )         (9,525 )
  Shares issued           871     6,801                       7,672  
  Dividends declared ($.08 per share)                       (4,563 )               (4,563 )
   
 
 
 
 
 
 
 
  Total   $ (5,066 )                                    
   
                                     
Balance at June 30, 2002         $ 199,240   $ 402,905   $ 447,443   $ (2,017 ) $ (39,330 ) $ 1,008,241  
         
 
 
 
 
 
 

See notes to consolidated condensed financial statements.

5


NOBLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

 
   Six Months Ended June 30,
  
 
   2002
   2001
  
Cash Flows from Operating Activities:              
  Net income   $ 2,021   $ 157,243  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation, depletion and amortization     148,551     141,112  
    Dry hole     30,244     45,241  
    Amortization of undeveloped lease costs     7,717     7,344  
    (Gain) loss on disposal of assets     (2,556 )   34  
    Deferred income taxes     4,276     24,474  
    Loss from unconsolidated subsidiary     3,905     747  
    Dividends received from unconsolidated subsidiary     488        
    Increase (decrease) in deferred credits     1,904     33,810  
    (Increase) decrease in other     (14,046 )   (9,633 )
  Changes in working capital, not including cash:              
    (Increase) decrease in accounts receivable     14,358     21,187  
    (Increase) decrease in other current assets and inventories     30,709     (48,989 )
    Increase (decrease) in accounts payable     (37,676 )   1,483  
    Increase (decrease) in other current liabilities     (2,452 )   (7,541 )
   
 
 
Net Cash Provided by Operating Activities     187,443     366,512  
   
 
 

Cash Flows From Investing Activities:
 
 
 
 
 
 
 
  Capital expenditures     (295,096 )   (365,077 )
  Investment in unconsolidated subsidiary     (6,844 )   (42,120 )
  Proceeds from sale of property, plant and equipment     20,016     150  
  Distribution from unconsolidated subsidiary     5,500        
   
 
 
Net Cash Used in Investing Activities     (276,424 )   (407,047 )
   
 
 

Cash Flows From Financing Activities:
 
 
 
 
 
 
 
  Exercise of stock options     7,672     16,523  
  Cash dividends     (4,563 )   (4,514 )
  Proceeds from bank debt     122,842     180,000  
  Repayment of bank debt     (95,000 )   (110,000 )
  Repayment of note payable obtained on Aspect acquisition     (13,526 )      
   
 
 
Net Cash Provided by Financing Activities     17,425     82,009  
   
 
 
Increase (Decrease) in Cash and Short-term Investments     (71,556 )   41,474  
   
 
 
Cash and Short-term Investments at Beginning of Period     73,237     23,152  
   
 
 
Cash and Short-term Investments at End of Period   $ 1,681   $ 64,626  
   
 
 

Supplemental Disclosures of Cash Flow Information:
 
 
 
 
 
 
 
  Cash paid (received) during the period for:              
  Interest (net of amount capitalized)   $ 13,801   $ 14,162  
  Income taxes paid (refunded)   $ (40,394 ) $ 66,131  
  Debt obtained from consolidation of AMCCO (net of discount)   $ 122,510   $    

See notes to consolidated condensed financial statements.

6


NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

        In the opinion of Noble Energy, Inc. (the "Company"), the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of necessary and normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2002 and December 31, 2001; the results of operations for the three month and six month periods ended June 30, 2002 and 2001, respectively; the statement of comprehensive income and equity for the six month period ended June 30, 2002; and the cash flows for the six month periods ended June 30, 2002 and 2001. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001.

(1) INCOME TAX PROVISION

        For the three months ended June 30:

 
   2002
   2001
 
   (In thousands)
Current   $ 5,981   $ 13,923
Deferred     5,836     14,183
   
 
    $ 11,817   $ 28,106
   
 

        For the six months ended June 30:

 
   2002
   2001
 
   (In thousands)
Current   $ 1,543   $ 62,706
Deferred     4,276     24,474
   
 
    $ 5,819   $ 87,180
   
 

7

(2) BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE

        Basic earnings per share of common stock was computed using the weighted average number of shares of common stock outstanding during each period. The diluted net income per share of common stock includes the effect of outstanding stock options.

        The following table summarizes the calculation of basic earnings per share ("EPS") and diluted EPS.

For the three months ended June 30:

 
   2002
   2001
(in thousands, except per share)
   Income
(Numerator)
    
   Shares
(Denominator)
   Income
(Numerator)
    
   Shares
(Denominator)
Net income/shares   $ 17,119         57,171   $ 51,334         56,590
   
 
 
 
 
 
Basic EPS         $ .30             $ .91    
   
 
 
 
 
 

Net income/shares
 
$
17,119
 
 
 
 
57,171
 
$
51,334
 
 
 
 
56,590
Effect of Dilutive Securities                                
  Stock options               724               822
   
 
 
 
 
 
Adjusted net income/shares   $ 17,119         57,895   $ 51,334         57,412
   
 
 
 
 
 
Diluted EPS         $ .30             $ .89    
   
 
 
 
 
 

For the six months ended June 30:

 
   2002
   2001
(in thousands, except per share)
   Income
(Numerator)
    
   Shares
(Denominator)
   Income
(Numerator)
    
   Shares
(Denominator)
Net income/shares   $ 2,021         57,094   $ 157,243         56,455
   
 
 
 
 
 
Basic EPS         $ .04             $ 2.79    
   
 
 
 
 
 

Net income/shares
 
$
2,021
 
 
 
 
57,094
 
$
157,243
 
 
 
 
56,455
Effect of Dilutive Securities                                
  Stock options               658               1,004
   
 
 
 
 
 
Adjusted net income/shares   $ 2,021         57,752   $ 157,243         57,459
   
 
 
 
 
 
Diluted EPS         $ .03             $ 2.74    
   
 
 
 
 
 

(3) TRADING AND HEDGING ACTIVITIES

        The Company, through its subsidiaries, from time to time, uses various price risk management arrangements in connection with anticipated crude oil and natural gas sales to minimize the impact of product price fluctuations. Such arrangements include fixed price forward sales, costless collars and other contractual arrangements. Although these arrangements expose the Company to credit risk, the Company takes reasonable steps to protect itself from nonperformance by its counterparties; however, the Company is not able to predict sudden changes in its counterparties' creditworthiness. Gains and losses from such arrangements related to the Company's oil and gas production and which qualify for

8


hedge accounting treatment are recorded in oil and gas sales and royalties upon sale of the associated products.

        During the second quarter of 2002, the Company entered into various natural gas costless collars, natural gas costless collar combinations and crude oil costless collar transactions related to its production.

        In second quarter 2002, the natural gas costless collars were for 80,000 MMBTU of natural gas per day, with floor prices ranging from $2.75 to $3.25 per MMBTU and ceiling prices ranging from $3.50 to $5.10 per MMBTU; the costless collar combinations were for 100,000 MMBTU of natural gas per day, with floor prices ranging from $2.00 to $2.25 per MMBTU and ceiling prices ranging from $2.95 to $3.10 per MMBTU, with a $.25 to $.30 premium to index on prices below the floors. The realized effect of the natural gas arrangements on gas sales for the second quarter was a decrease of $.06 per MCF. For the first six months of 2002, the Company had natural gas costless collars for 160,387 MMBTU per day, with floor prices ranging from $2.00 to $3.25 per MMBTU and ceiling prices ranging from $2.45 to $5.10 per MMBTU. The realized effect of the costless collar transactions for the first six months of 2002 in the average natural gas price was an increase of $.03 per MCF.

        The crude oil costless collars for the second quarter were for 110 BBLS of oil per day, with a floor price of $24.00 per BBL and a ceiling price of $29.40 per BBL. There was no realized effect on oil sales for second quarter 2002 for these costless collars.

        In addition, the Company has entered into natural gas arrangements to support the Company's investment program for the periods: July to September 2002, costless collars for 120,000 MMBTU of natural gas per day, with floor prices ranging from $2.75 to $3.25 per MMBTU and ceiling prices ranging from $3.50 to $5.10 per MMBTU; July to September 2002, costless collar combinations for 75,000 MMBTU of natural gas per day, with floor prices ranging from $3.00 to $3.25 per MMBTU and ceiling prices ranging from $4.30 to $5.00 per MMBTU, with a $.50 premium to index price on prices below the floor prices; October to December 2002, costless collars for 115,000 MMBTU of natural gas per day, with floor prices ranging from $3.00 to $3.50 per MMBTU and ceiling prices ranging from $3.75 to $5.05 per MMBTU. Of the 120,000 MMBTU of natural gas per day costless collars for July to September 2002 and of the 115,000 MMBTU of natural gas per day costless collars for October to December 2002, 60,000 MMBTU for the third quarter and 25,000 MMBTU for the fourth quarter 2002 of natural gas per day were terminated and, as a result, the Company will recognize an additional $.70 to $.34 per MMBTU on the 60,000 to 25,000 MMBTU of natural gas per day in the third and fourth quarters of 2002, respectively.

        The Company has entered into various crude oil costless collar transactions for July to September 2002 for 10,000 BBLS of oil per day, with floor prices ranging from $23.00 to $24.00 per BBL and ceiling prices ranging from $29.30 to $30.00 per BBL.

        The Company has costless collar transactions r