Imperial Capital: Noble Energy On Track For Sustainable FCF Generation In 2020

Noble Energy, Inc. (NYSE: NBL) is at an inflection point, with goals of lowering spending and increasing production in 2019, according to Imperial Capital.

The Analyst

Imperial Capital’s Irene Haas maintains an Outperform rating on Noble Energy with a $39 price target. 

The Thesis

Noble Energy recorded revenue, adjusted EBITDA and cash flow per share of $5 billion, $3 billion and $4.93, respectively, for the 12 months ended Dec. 31, 2018.

On that day, the company had cash of around $716 million, $6.7 billion in long-term debt and total liquidity of $4.7 billion, Haas said in a Wednesday note. 

For 2019, Noble Energy has guided to consolidated capex of around $2.7 billion. This is lower than the $3.5 billion recorded in 2018 and is below Imperial Capital’s estimate of $3.8 billion.

The company expects 5-percent production growth, with growth in onshore U.S. offsetting a decline in production from West Africa and flat production from Israel, the analyst said. 

Noble Energy expects to grow production by 15-20 percent in 2020, alongside a 15-20-percent decline in spending and free cash flow generation of $500 million.

Imperial Capital raised its 2019 EBITDA and CFPS estimates for Noble Energy from $2.802 billion to $2.831.9 billion and from $4.99 to $5.22, respectively.

Price Action

Shares of Noble Energy rose slightly to close trading at $23.70 on Tuesday.

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