UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

 

FORM 10-K

 

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
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: 001-07964

 

NOBLE ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		73-0785597
(State of incorporation)		(I.R.S. employer identification number)
100 Glenborough Drive, Suite 100
Houston, Texas		77067
(Address of principal executive offices)		(Zip Code)

 

(Registrant’s telephone number, including area code)

(281) 872-3100

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $3.33-1/3 par value		New York Stock Exchange, Inc.
Preferred Stock Purchase Rights		New York Stock Exchange, Inc.

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ý

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes   ý     No   o

 

Aggregate market value of Common Stock held by nonaffiliates as of June 30, 2004:  $2,590,000,000.

Number of shares of Common Stock outstanding as of February 25, 2005:  59,043,952.

 

DOCUMENT INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive proxy statement for the 2005 Annual Meeting of Stockholders to be held on April 26, 2005, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2004, are incorporated by reference into Part III.

 

 

TABLE OF CONTENTS

 

	PART I.
Item 1.	Business
	General
	Current Developments
	Crude Oil and Natural Gas
	Exploration, Exploitation and Development Activities
	Production Activities
	Acquisitions of Oil and Gas Properties, Leases and Concessions
	Dispositions of Oil and Gas Properties
	Marketing
	Regulations and Risks
	Competition
	Unconsolidated Subsidiaries
	Geographical Data
	Employees
	Available Information
Item 2.	Properties
	Offices
	Crude Oil and Natural Gas
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
	Executive Officers of the Registrant
	PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5c.	Stock Repurchases
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9a.	Controls and Procedures
Item 9b.	Other Information
	PART III.
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accounting Fees and Services
	PART IV.
Item 15.	Exhibits

 

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PART I

 

Item 1.                                   Business.

 

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates and projections as of the date of this filing. These statements by their nature are subject to risks, uncertainties and assumptions and are influenced by various factors. As a consequence, actual results may differ materially from those expressed in the forward-looking statements. For more information, see “Item 7a. Quantitative and Qualitative Disclosures About Market Risk—Cautionary Statement for Purposes of the Private Securities Litigation Reform Act of 1995 and Other Federal Securities Laws” of this Form 10-K.

 

General

 

Noble Energy, Inc. (the “Company” or “Noble Energy”), formerly known as Noble Affiliates, Inc., is a Delaware corporation that has been publicly traded on the New York Stock Exchange (“NYSE”) since 1980. Noble Energy has been engaged, directly or through its subsidiaries, in the exploration, production and marketing of crude oil and natural gas since 1932, when Noble Energy’s predecessor, Samedan Oil Corporation (“Samedan”), was organized. Noble Energy was organized in 1969 under the name “Noble Affiliates, Inc.” and was Samedan’s parent entity until Samedan was merged into Noble Energy effective December 31, 2002. The Company is noted for its innovative methods of marketing its international natural gas reserves through projects such as its methanol plant in Equatorial Guinea and its natural gas-to-power project (the “Machala Power Plant”) in Ecuador.

 

In this report, unless otherwise indicated or the context otherwise requires, the “Company” or the “Registrant” refers to Noble Energy and its subsidiaries. Effective December 31, 2001, Energy Development Corporation (“EDC”), a previously wholly-owned subsidiary of Samedan, was merged into Samedan, another previously wholly-owned subsidiary. Effective December 31, 2002, Samedan was merged into Noble Energy. Also effective December 31, 2002, Noble Trading, Inc. (“NTI”) was merged into Noble Gas Marketing, Inc. (“NGM”) under the new name of Noble Energy Marketing, Inc. (“NEMI”).

 

NEMI, a wholly-owned subsidiary, markets the majority of the Company’s domestic natural gas as well as third-party natural gas. NEMI also markets a portion of the Company’s domestic crude oil as well as third-party crude oil. For more information regarding NEMI’s operations, see “Item 1. Business—Crude Oil and Natural Gas—Marketing” of this Form 10-K.

 

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In this report, the following abbreviations are used:

 

Bbl(s)		Barrel(s)
MBbls		Thousand barrels
Bpd		Barrels per day
Bopd		Barrels oil per day
MMBbls		Million barrels
MBpd		Thousand barrels per day
MMBpd		Million barrels per day
MBopd		Thousand barrels oil per day
MMBopd		Million barrels oil per day
BOE		Barrels oil equivalent
Boepd		Barrels oil equivalent per day
MMBoe		Million barrels oil equivalent
MMBoepd		Million barrels oil equivalent per day
$MM		Millions of dollars
Kwh		Kilowatt hours
MW		Megawatt
MWH		Megawatt hours
Mcf		Thousand cubic feet
Mcfpd		Thousand cubic feet per day
Mcfe		Thousand cubic feet equivalent
MMcf		Million cubic feet
MMcfepd		Million cubic feet equivalent per day
MMcfpd		Million cubic feet per day
Bcf		Billion cubic feet
Bcfe		Billion cubic feet equivalent
Bcfepd		Billion cubic feet equivalent per day
Bcfpd		Billion cubic feet per day
BTU		British thermal unit
BTUpcf		British thermal unit per cubic foot
MMBTU		Million British thermal units
MMBTUpd		Million British thermal units per day
MTpd		Metric tons per day
LPG		Liquefied petroleum gas
LNG		Liquefied natural gas

 

For reporting BOE or Mcfe, one Bbl of oil, condensate or LPG is equal to six Mcf of natural gas.

 

Current Developments

 

Pending Merger with Patina Oil & Gas Corporation

 

On December 15, 2004, the Boards of Directors of Noble Energy and Patina Oil & Gas Corporation (“Patina”) approved Noble Energy’s merger (the “Merger Agreement”) with Patina. As a result of the proposed merger, Patina will merge into a wholly-owned subsidiary of Noble Energy, and Patina shareholders will receive aggregate consideration comprised of approximately 60 percent Noble Energy common stock and 40 percent cash. Total consideration for the outstanding shares of Patina is fixed at approximately $1.1 billion in cash and approximately 27 million Noble Energy shares, not including options and warrants exchanged in the transaction, and subject to adjustment as provided in the Merger Agreement. Under the terms of the Merger Agreement, Patina shareholders will have the right to elect to receive either cash or Noble Energy common stock, or a combination thereof, in exchange for their shares of Patina common stock, subject to an allocation mechanism if either the cash election or the stock election is oversubscribed. While the per share consideration was initially set in the Merger Agreement at $37.00 in cash or ..6252 shares of Noble Energy common stock, the per share consideration is subject to adjustment upwards or downwards. This adjustment will reflect 37.5126 percent of the difference between $59.18 and the price of Noble Energy’s shares during a specified period prior to closing. In addition, the per share consideration is adjusted so that each Patina share receives consideration representing equal value regardless of whether it is converted into cash or Noble Energy common stock. The proposed merger is subject to the approval of the shareholders of Patina and Noble Energy and other customary conditions. The proposed merger is expected to be completed in the second quarter of 2005.

 

For more information regarding the proposed merger between Noble Energy and Patina, please refer to the joint proxy statement/prospectus of Noble Energy and Patina that is included in the registration statement on Form S-4 filed by Noble Energy with the United States Securities and Exchange Commission (“SEC”) on January 25, 2005. This proxy statement/prospectus contains important information about the proposed merger. These materials are not yet final and will be amended. Investors and security holders of Noble Energy and Patina are urged to read the joint proxy statement/prospectus filed, and any other relevant materials filed by Noble Energy or Patina because they contain, or will contain, important information about Noble Energy, Patina and the proposed merger. The preliminary materials filed on January 25, 2005, the definitive versions of these materials and other relevant materials (when they

 

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become available) and any other documents filed by Noble Energy or Patina with the SEC, may be obtained for free at the SEC’s website at www.sec.gov. In addition, the documents filed with the SEC by Noble Energy may be obtained free of charge from Noble Energy’s website at www.nobleenergyinc.com. The documents filed with the SEC by Patina may be obtained free of charge from Patina’s website at www.patinaoil.com.

 

Crude Oil and Natural Gas

 

Noble Energy is an independent energy company engaged, directly or through its subsidiaries or various arrangements with other companies, in the exploration, development, production and marketing of crude oil and natural gas. Exploration activities include geophysical and geological evaluation and exploratory drilling on properties for which the Company has exploration rights. The Company has exploration, exploitation and production operations domestically and internationally. The domestic areas consist of: offshore in the Gulf of Mexico and California; the Gulf Coast Region (Louisiana and Texas); the Mid-continent Region (Oklahoma and Kansas); and the Rocky Mountain Region (Colorado, Montana, Nevada, Wyoming and California). The international areas of operations include Argentina, China, Ecuador, Equatorial Guinea, the Mediterranean Sea (Israel) and the North Sea (the Netherlands and the United Kingdom). For more information regarding Noble Energy’s crude oil and natural gas properties, see “Item 2. Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Exploration, Exploitation and Development Activities

 

Domestic Offshore. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in the Gulf of Mexico (Texas, Louisiana, Mississippi and Alabama) and California since 1968. The Company has shifted its domestic offshore exploration focus to Gulf of Mexico deepwater areas, and away from the Gulf of Mexico’s conventional shallow shelf, in order to take advantage of potentially larger prospect sizes. The Company’s current offshore production is derived from 157 gross wells operated by Noble Energy and 175 gross wells operated by others. At December 31, 2004, the Company held offshore federal leases covering 704,329 gross developed acres and 749,167 gross undeveloped acres on which the Company currently intends to conduct future exploration activities. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this
Form 10-K.

 

Domestic Onshore. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in three regions since the 1930s. The Gulf Coast Region covers onshore Louisiana and Texas. The Mid-continent Region covers Oklahoma and Kansas. Properties in the Rocky Mountain Region are located in Colorado, Montana, Nevada, Wyoming and California.

 

Noble Energy’s current onshore production is derived from 1,396 gross wells operated by the Company and 511 gross wells operated by others. At December 31, 2004, the Company held 645,275 gross developed acres and 352,664 gross undeveloped acres onshore on which the Company may conduct future exploration activities. For more information, see “Item 2. Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Domestic Division. On August 30, 2004, Noble Energy announced that the Company had combined the operations of its U.S. onshore and offshore divisions to create a single domestic division.

 

Argentina. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in Argentina since 1996. The Company’s producing properties are located in southern Argentina in the El Tordillo field, which is characterized by secondary recovery crude oil production. At December 31, 2004, the Company held 113,325 gross developed acres and 2,341,884 gross undeveloped acres in Argentina on which the Company may conduct future exploration activities. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

China. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in China since 1996. The Company has a concession offshore in the southern portion of Bohai Bay. At

 

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December 31, 2004, the Company held 7,413 gross developed acres and no gross undeveloped acres in China. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Ecuador. Noble Energy has been actively engaged in exploration, exploitation and development of natural gas properties in Ecuador since 1996. The Company is currently utilizing the natural gas from the Amistad field (offshore Ecuador), which was discovered in the 1970s, to generate electricity through its 100 percent-owned natural gas-fired power plant, located near the city of Machala. With current generating capacity of 130 MW of electricity, additional capital investment for combined cycle and a third turbine could ultimately increase the power plant’s capacity to generate approximately 300 MW of electricity into the Ecuadorian power grid. The concession covers 12,355 gross developed acres and 851,771 gross undeveloped acres encompassing the Amistad field on which the Company may conduct future exploration activities. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Equatorial Guinea. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties offshore Equatorial Guinea (West Africa) since 1990. Production from the Alba field consists of natural gas and condensate. The majority of the natural gas production is sold to a methanol plant, which began production in the second quarter of 2001. The methanol plant has a contract, which runs through 2026, to purchase natural gas from the Alba field. The plant is owned by Atlantic Methanol Production Company, LLC (“AMPCO”), in which the Company owns a 45 percent interest through its ownership interest in Atlantic Methanol Capital Company (“AMCCO”). For more information on the methanol plant, see “Item 1. Business—Unconsolidated Subsidiaries” of this Form 10-K.

 

In 2004, Noble Energy entered into an additional natural gas contract, which runs through 2023, with an LNG plant. Noble Energy does not hold an interest in the LNG plant. The Company has recorded reserves based on minimum contractual volumes required to be taken under the LNG agreement.

 

At December 31, 2004, the Company held 45,203 gross developed acres and 1,112,841 gross undeveloped acres offshore Equatorial Guinea on which the Company may conduct future exploration activities. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Israel. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in the Mediterranean Sea, offshore Israel, since 1998. The Company owns a 47 percent interest in three licenses and two leases. At December 31, 2004, the Company held 123,552 gross developed acres and 292,572 gross undeveloped acres located about 20 miles offshore Israel in water depths ranging from 700 feet to 5,000 feet. On December 24, 2003, Noble Energy and its partners announced the commencement of production of natural gas from its Mari-B field. Sales of natural gas to The Israel Electric Corporation Limited (“IEC”) began in February 2004 under a definitive agreement executed in June 2002. In September 2004, the Company entered into a separate agreement to provide natural gas for use in the Bazan Refinery located in Ashdod, Israel. Sales to Bazan are expected to commence during the third quarter of 2005. For more information, see “Item 2. Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

North Sea. Noble Energy has been actively engaged in exploration, exploitation and development of crude oil and natural gas properties in the North Sea (the Netherlands and the United Kingdom) since 1996. At December 31, 2004, the Company held 42,723 gross developed acres and 540,310 gross undeveloped acres on which the Company may conduct future exploration activities. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

Vietnam. In December 2003, Noble Energy elected not to pursue any additional exploration efforts in the Nam Con Son Basin of Vietnam. As a result, the Company wrote off its investment in Vietnam and its ownership in two blocks.

 

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Production Activities

 

Revenues from sales of crude oil, natural gas and gathering, marketing and processing (“GMP”) have accounted for approximately 90 percent or more of consolidated revenues for each of the last three fiscal years.

 

Operated Property Statistics. The percentage of properties operated by the Company indicates the amount of control over timing of operations. The percentage of operated crude oil and natural gas wells on both the well count and percentage of sales volume basis are shown in the following table as of December 31:

 

		2004				2003				2002
(in percentages)		Oil		Gas		Oil		Gas		Oil		Gas
Operated well count basis		18.2		59.2		19.6		60.1		23.3		62.8
Operated sales volume basis		29.1		57.9		33.3		48.8		29.3		45.1

 

Non-operated Property Statistics. The percentage of non-operated crude oil and natural gas wells on both the well count and the percentage of sales volume basis are shown in the following table as of December 31:

 

		2004				2003				2002
(in percentages)		Oil		Gas		Oil		Gas		Oil		Gas
Non-operated well count basis		81.8		40.8		80.4		39.9		76.7		37.2
Non-operated sales volume basis		70.9		42.1		66.7		51.2		70.7		54.9

 

Net Production. The following table sets forth Noble Energy’s net crude oil and natural gas production, including royalty, from continuing operations, for the three years ended December 31:

 

		2004		2003		2002
Crude oil production (MMBbls)		16.6		13.1		10.6
Natural gas production (Bcf)		134.3		122.9		124.5

 

Crude Oil and Natural Gas Equivalents. The following table sets forth Noble Energy’s net production stated in crude oil and natural gas equivalent volumes, including royalty, from continuing operations, for the three years ended December 31:

 

		2004		2003		2002
Total crude oil equivalents (MMBoe)		39.0		33.6		31.4
Total natural gas equivalents (Bcfe)		234.0		201.7		188.2

 

Acquisitions of Oil and Gas Properties, Leases and Concessions

 

During 2004, Noble Energy spent approximately $85.8 million on the purchase of proved crude oil and natural gas properties. The Company spent approximately $1.3 million in 2003 and $8.0 million in 2002 on the acquisition of proved crude oil and natural gas properties. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

During 2004, Noble Energy spent approximately $44.7 million on acquisitions of unproved properties. The Company spent approximately $10.2 million in 2003 and $30.5 million in 2002 on acquisitions of unproved properties. These properties were acquired through various offshore lease sales, domestic onshore lease acquisitions and international concession negotiations. For more information, see “Item 2.  Properties—Crude Oil and Natural Gas” of this Form 10-K.

 

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Dispositions of Oil and Gas Properties

 

During 2004, the Company completed its asset disposition program announced in July 2003. The sales price for the five packages of properties, before closing adjustments, totaled approximately $130 million. The properties held for disposition were reported as discontinued operations. The estimated reserves associated with these five packages were 24.2 MMBoe.

 

Marketing

 

NEMI seeks opportunities to enhance the value of the Company’s domestic natural gas production by marketing directly to end-users and aggregating natural gas to be sold to natural gas marketers and pipelines. During 2004, approximately 79 percent of NEMI’s total sales were to end-users. NEMI is also actively involved in the purchase and sale of natural gas from other producers. Such third-party natural gas production may be purchased from non-operators who own working interests in the Company’s wells or from other producers’ properties in which the Company may not own an interest. NEMI, through its wholly-owned subsidiary, Noble Gas Pipeline, Inc., engages in the installation, purchase and operation of natural gas gathering systems.

 

Noble Energy has a long-term natural gas sales contract with NEMI, whereby the Company is paid an index price for all natural gas sold to NEMI. The contract does not specify scheduled quantities or delivery points and expires on May 31, 2009. The Company sold approximately 56 percent of its natural gas production to NEMI in 2004. NEMI’s revenues from sales of natural gas, including related derivative transactions, less cost of goods sold, are reported in GMP. All intercompany sales and expenses are eliminated in the Company’s consolidated financial statements. The Company has a small number of long-term natural gas contracts with third parties representing approximately 12 percent of its 2004 natural gas sales.

 

Substantial competition in the natural gas marketplace continued in 2004. The Company’s average natural gas price from continuing operations, inclusive of the impact of commodity derivatives, increased $.61 from $4.13 per Mcf in 2003 to $4.74 per Mcf in 2004. Due to the volatility of natural gas prices, the Company has used derivative instruments and may do so in the future as a means of controlling its exposure to commodity price changes. For additional information, see “Item 7a. Quantitative and Qualitative Disclosures About Market Risk” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

 

Crude oil produced by the Company is sold to purchasers in the United States and foreign locations at various prices depending on the location and quality of the crude oil.  The Company has no long-term contracts with purchasers of its crude oil production. Crude oil and condensate are distributed through pipelines and by trucks to gatherers, transportation companies and end-users. NEMI markets approximately 42 percent of the Company’s crude oil production as well as certain third-party crude oil. The Company records all of NEMI’s revenues from sales of crude oil, less cost of goods sold, as GMP. All intercompany sales and expenses are eliminated in the Company’s consolidated financial statements.

 

Crude oil prices are affected by a variety of factors that are beyond the control of the Company. The Company’s average crude oil price from continuing operations, inclusive of the impact of commodity derivatives, increased $6.81 from $27.72 per Bbl in 2003 to $34.53 per Bbl in 2004. Due to the volatility of crude oil prices, the Company has used derivative instruments and may do so in the future as a means of controlling its exposure to commodity price changes. For additional information, see “Item 7a. Quantitative and Qualitative Disclosures About Market Risk” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

 

The largest single non-affiliated purchaser of the Company’s crude oil production in 2004 accounted for approximately 24 percent of the Company’s crude oil sales, representing approximately 10 percent of total revenues. The five largest purchasers accounted for approximately 68 percent of total crude oil sales. The largest single non-affiliated purchaser of the Company’s natural gas production in 2004 accounted for approximately eight percent of its natural gas sales, representing approximately four percent of total revenues. The five largest purchasers accounted

 

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for approximately 24 percent of total natural gas sales. The Company does not believe that its loss of a major crude oil or natural gas purchaser would have a material effect on the Company.

 

Regulations and Risks

 

General. Exploration for, and production and sale of, crude oil and natural gas are extensively regulated at the international, national, state and local levels. Crude oil and natural gas development and production activities are subject to various laws and regulations (and orders of regulatory bodies pursuant thereto) governing a wide variety of matters, including, among others, allowable rates of production, prevention of waste and pollution and protection of the environment. Laws affecting the crude oil and natural gas industry are under constant review for amendment or expansion and frequently increase the regulatory burden on companies. Noble Energy’s ability to economically produce and sell crude oil and natural gas is affected by a number of legal and regulatory factors, including federal, state and local laws and regulations in the United States and laws and regulations of foreign nations. Many of these governmental bodies have issued rules and regulations that are often difficult and costly to comply with, and that carry substantial penalties for failure to comply. These laws, regulations and orders may restrict the rate of crude oil and natural gas production below the rate that would otherwise exist in the absence of such laws, regulations and orders. The regulatory burden on the crude oil and natural gas industry increases its costs of doing business and consequently affects the Company’s profitability.

 

Certain Risks. In the Company’s exploration operations, losses may occur before any accumulation of crude oil or natural gas is found. If crude oil or natural gas is discovered, no assurance can be given that sufficient reserves will be developed to enable the Company to recover the costs incurred in obtaining the reserves or that reserves will be developed at a sufficient rate to replace reserves currently being produced and sold. The Company’s international operations are also subject to certain political, economic and other uncertainties including, among others, risk of war, expropriation, renegotiation or modification of existing contracts, taxation policies, foreign exchange restrictions, international monetary fluctuations and other hazards arising out of foreign governmental sovereignty over areas in which the Company conducts operations.

 

Environmental Matters. As a developer, owner and operator of crude oil and natural gas properties, the Company is subject to various federal, state, local and foreign country laws and regulations relating to the discharge of materials into, and the protection of, the environment. The unauthorized release or discharge of crude oil or certain other regulated substances from the Company’s domestic onshore or offshore facilities could subject the Company to liability under federal laws and regulations, including the Oil Pollution Act of 1990, the Outer Continental Shelf Lands Act and the Federal Water Pollution Control Act, as amended. These laws, among others, impose liability for such a release or discharge for pollution cleanup costs, damage to natural resources and the environment, various forms of direct and indirect economic losses, civil or criminal penalties, and orders or injunctions, including those that can require the suspension or cessation of operations causing or impacting or potentially impacting such release or discharge. The liability under these laws for such a release or discharge, subject to certain specified limitations on liability, may be large. If any pollution was caused by willful misconduct, willful negligence or gross negligence within the privity and knowledge of the Company, or was caused primarily by a violation of federal regulations, the Federal Water Pollution Control Act provides that such limitations on liability do not apply. Certain of the Company’s facilities are subject to regulations that require the preparation and implementation of spill prevention control and countermeasure plans relating to the prevention of, and preparation for, the possible discharge of crude oil into navigable waters.

 

The Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), also known as “Superfund,” imposes liability on certain classes of persons that generated hazardous substances that have been released into the environment or that own or operate facilities or vessels onto or into which hazardous substances are disposed. The Resource Conservation and Recovery Act, as amended, (“RCRA”) and regulations promulgated thereunder, regulate hazardous waste, including its generation, treatment, storage and disposal. CERCLA currently exempts crude oil, and RCRA currently exempts certain crude oil and natural gas exploration and production drilling materials, such as drilling fluids and produced waters, from the definitions of hazardous substance and hazardous waste, respectively. The Company’s operations, however, may involve the use or handling

 

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of other materials that may be classified as hazardous substances and hazardous wastes, and therefore, these statutes and regulations promulgated under them would apply to the Company’s generation, handling and disposal of these materials. In addition, there can be no assurance that such exemptions will be preserved in future amendments of such acts, if any, or that more stringent laws and regulations protecting the environment will not be adopted.

 

Certain of the Company’s facilities may also be subject to other federal environmental laws and regulations, including the Clean Air Act with respect to emissions of air pollutants.

 

Certain state or local laws or regulations and common law may impose liabilities in addition to, or restrictions more stringent than, those described herein.

 

The environmental laws, rules and regulations of foreign countries do not generally impose an additional compliance burden on the Company or on its subsidiaries.

 

The Company has made and will continue to make expenditures in its efforts to comply with environmental requirements. The Company does not believe that it has, to date, expended material amounts in connection with such activities or that compliance with such requirements will have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company. Although such requirements do have a substantial impact upon the energy industry, they do not appear to affect the Company any differently, or to any greater or lesser extent, than other companies in the industry.

 

Insurance. The Company has various types of insurance coverages as are customary in the industry that include directors and officers liability, general liability, well control, pollution, terrorism acts, physical damage insurance and business interruption insurance for certain international locations. The Company self-insures, is a shareholder in an industry mutual insurance company and purchases policies from third party insurance providers to cover various risks. The Company believes the coverages and types of insurance are adequate.

 

Competition

 

The oil and gas industry is highly competitive. Many companies and individuals are engaged in exploring for crude oil and natural gas and acquiring crude oil and natural gas properties, resulting in a high degree of competition for desirable exploratory and producing properties. A number of the companies with which the Company competes are larger and have greater financial resources than the Company.

 

The availability of a ready market for the Company’s crude oil and natural gas production depends on numerous factors beyond its control, including the level of consumer demand, the extent of worldwide crude oil and natural gas production, the costs and availability of alternative fuels, the costs and proximity of pipelines and other transportation facilities, regulation by state and federal authorities and the costs of complying with applicable environmental regulations.

 

Unconsolidated Subsidiaries

 

AMCCO, AMPCO, AMPCO Marketing LLC, AMPCO Services LLC and Samedan Methanol are accounted for using the equity method. The Company owns a 45 percent interest in AMPCO through its 50 percent ownership in AMCCO. AMPCO completed construction of a methanol plant in Equatorial Guinea in the second quarter of 2001.

 

The plant construction started during 1998, and initial production of commercial grade methanol commenced May 2, 2001. The plant is designed to produce 2,500 MTpd of methanol, which equates to approximately 20,000 Bpd. At this level of production, the plant would purchase approximately 125 MMcfpd of natural gas from the Alba field in which Noble Energy owns a 34 percent interest. The methanol plant has a contract, which runs through 2026, to purchase natural gas from the Alba field. The Company’s investment in the methanol plant is included in investment in unconsolidated subsidiaries on the Company’s balance sheets, and the Company’s share of earnings from its unconsolidated subsidiaries is reported in the revenue section of the Company’s statements of operations as

 

8

 

income from unconsolidated subsidiaries. For more information, see “Item 8. Financial Statements and Supplementary Data—Note 13 - - Unconsolidated Subsidiaries” of this Form 10-K.

 

Geographical Data

 

The Company has operations throughout the world and manages its operations by country. Information is grouped into five components that are all primarily in the business of crude oil and natural gas exploration, exploitation and production: United States, Equatorial Guinea, North Sea, Israel, and Other International, Corporate and Marketing. For more information, see “Item 8. Financial Statements and Supplementary Data—Note 15 - Geographical Data” of this Form 10-K.

 

Employees

 

The total number of employees of the Company decreased during the year from 583 at December 31, 2003 to 559 at December 31, 2004. In addition, 173 foreign nationals worked in Noble Energy offices in China, Ecuador, Equatorial Guinea, Israel and the United Kingdom as of December 31, 2004.

 

Available Information

 

The Company’s website address is www.nobleenergyinc.com. Available on this website under “Investor Relations -Investor Relations Menu - SEC Filings,” free of charge, are Noble Energy’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and officers and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.

 

Also posted on the Company’s website, and available in print upon request of any stockholder to the Investor Relations Department, are charters for the Company’s Audit Committee; Compensation, Benefits and Stock Option Committee; Corporate Governance and Nominating Committee; and Environment, Health and Safety Committee. Copies of the Code of Business Conduct and Ethics, and the Code of Ethics for Chief Executive and Senior Financial Officers governing our directors, officers and employees (the “Codes”) are also posted on the Company’s website under the “Corporate Governance” section. Within the time period required by the SEC and the NYSE, as applicable, the Company will post on its website any modifications to the Codes and any waivers applicable to senior officers as defined in the applicable Code, as required by the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).

 

In 2004, the Company submitted the annual certification of its Chief Executive Officer regarding the Company’s compliance with the NYSE’s corporate governance listing standards, pursuant to Section 303A.12(a) of the NYSE Listed Company Manual. A supplemental certification was delivered subsequently to the NYSE following the unexpected death of one of the Company’s independent directors.

 

Item 2.                                   Properties.

 

For crude oil and natural gas reserve information, see “Item 8. Financial Statements and Supplementary Data—Supplemental Oil and Gas Information” of this Form 10-K.

 

Offices

 

The principal corporate office of the Company is located in Houston, Texas. The Company maintains offices for domestic and international operations in Houston, Texas. The Company also maintains offices in China, Ecuador, Equatorial Guinea, Israel and the United Kingdom. NEMI’s office is located in Houston, Texas.  The Company also maintains an office in Ardmore, Oklahoma for centralized accounting, division orders, employee benefits, information technology and related administrative functions.

 

9

 

Crude Oil and Natural Gas

 

The Company searches for potential crude oil and natural gas properties, seeks to acquire exploration rights in areas of interest and conducts exploratory activities. These activities include geophysical and geological evaluation and exploratory drilling, where appropriate, on properties for which it acquired exploration rights. During 2004, Noble Energy drilled or participated in the drilling of 225 gross (108.8 net) wells, comprised of 95 gross (18.6 net) international wells and 130 gross (90.2 net) domestic wells. For more information regarding Noble Energy’s oil and gas properties, see “Item 1. Business—Crude Oil and Natural Gas” of this Form 10-K.

 

Domestic Offshore. During 2004, Noble Energy’s offshore drilling program included 19 gross (8.1 net) exploration and development wells. Of the wells drilled in 2004, 10 wells, or 53 percent, were commercial discoveries, seven wells were exploratory dry holes and two were development dry holes.

 

Viosca Knoll Block 917, 961 and 962 (“Swordfish”), a 2001 deepwater discovery, is located in approximately 4,500 feet of water. During 2004, Noble Energy acquired all of BP Exploration & Production, Inc.’s 50 percent working interest, increasing the Company’s working interest from 10 percent to 60 percent. Two well penetrations found crude oil and natural gas pay in multiple, high-quality reservoirs. During 2005, the three wells will be connected to existing infrastructure through subsea tiebacks. Production is expected to commence in the second quarter of 2005 at an initial rate of approximately 10,000 Boepd, net to Noble Energy. The Company recorded net reserves of 9.6 MMBoe in 2004.

 

Green Canyon 199 (“Lorien”), a July 2003 deepwater crude oil discovery, is located in approximately 2,200 feet of water. During 2004, Noble Energy acquired an additional interest in Lorien from ConocoPhillips. The acquisition increased the Company’s working interest from 20 percent to 60 percent and Noble Energy now operates the block. The discovery well was drilled to a total measured depth of 18,703 feet (or a total vertical depth of 17,432 feet) and encountered more than 120 feet of net pay, primarily crude oil. A successful appraisal sidetrack well was drilled in 2004 and a second appraisal well will be drilled in the first quarter of 2005. Both wells will be completed and tied back to area infrastructure during late 2005 or early 2006. Production is expected to commence in the first half of 2006 at an initial rate of approximately 12,000 Boepd, net to Noble Energy. The Company did not record any reserves on this property in 2004.

 

Green Canyon 768 (“Ticonderoga”), a 2004 deepwater crude oil discovery, is located near Kerr-McGee’s Constitution development on Green Canyon Block 680 and will be a subsea tieback to the planned Constitution spar. The Ticonderoga well spud on March 21, 2004 and is located in approximately 5,300 feet of water. The well drilled to a total measured depth of 13,556 feet (or a total vertical depth of 13,370 feet). The well encountered over 250 feet of net high-quality pay, primarily crude oil. The Company recorded net reserves of 15.9 MMBoe in 2004 from this discovery. Production is expected to commence by mid-2006 at an initial rate of approximately 10,000 to 12,000 Boepd, net to Noble Energy. The Company has a 50 percent working interest.

 

Noble Energy increased its working interest in the Eugene Island 254 field from 30 percent to 100 percent. After completing a successful two-well program, consisting of sidetracking and completing one well and recompleting another well, production was re-established in the field in November 2004 at a producing net rate of 1,300 Boepd.

 

Noble Energy was the successful bidder, alone or with partners, on 24 of 26 lease blocks at the Central Gulf of Mexico Outer Continental Shelf (the “Shelf”) Sale 190. On the Shelf, the Company bid on 24 lease blocks and was the high bidder on 22 lease blocks. All of the 22 blocks on which Noble Energy was the high bidder contain deep objectives below 15,000 feet. In the deepwater, the Company was the high bidder on two blocks. Net to the Company’s interest, the high bids totaled approximately $6.1 million. Noble Energy concentrated its bids on opportunities in the West Cameron, Chandeleur Sound and Mobile areas.

 

10

 

Domestic Onshore. During 2004, Noble Energy’s onshore drilling program included 111 gross (82.1 net) exploration and development wells. Of the wells drilled in 2004, 94 wells, or 85 percent, were commercial discoveries and 17 wells were dry holes. Of the 17 dry holes, nine were exploratory and expensed.

 

Activity in the onshore Gulf Coast region in 2004 remained high with 31 wells drilled, of which 24, or 77 percent, were successful. The majority of Noble Energy’s onshore exploration focus in 2004 was in the Gulf Coast region, where 15 out of 22 exploration wells were successfully completed.

 

In Duval County, Texas, Noble Energy drilled 10 wells, of which eight were successful. The prospects were identified with proprietary 3-D seismic acquired in late 2002. The eight successful wells were producing 2,930 Boepd, gross, at year-end 2004. Noble Energy’s working interests in the wells drilled in 2004 range from 85 percent to 100 percent.

 

During the year, the Company’s onshore development activity was focused in the Mid-continent and Rockies regions where 69 out of 77 development wells were successfully completed.

 

In the Niobrara Trend of northeast Colorado, results of infill drilling pilot programs were used to obtain area-wide regulatory approval for 40-acre development of the Niobrara formation. As a result of the regulatory approval that was granted late in the year, Noble Energy initiated an aggressive development drilling program. The Company plans to drill up to 235 Niobrara development wells in 2005.

 

Another rapidly growing area is the Piceance Basin in western Colorado. Noble Energy was successful in acquiring approximately 7,000 acres in the Piceance Basin in 2004 and began drilling several wells late in the year. The program is expected to continue in 2005.

 

Argentina. Noble Energy participated with a 13 percent working interest in 77 development wells in the El Tordillo field during 2004. The Company has been awarded, and is awaiting final government approval on, an operated crude oil and natural gas exploration permit of approximately 1.2 million acres. The permit is located adjacent to an existing permit of approximately 1.2 million acres in the Cuyo Basin of Mendoza Province in western Argentina.

 

China. Noble Energy, as operator, has a 57 percent working interest in the Cheng Dao Xi (“CDX”) field, which is located on the south side of Bohai Bay off the coast of China. Initial production from CDX commenced on January 13, 2003. During 2004, CDX averaged 3,883 Bopd net to Noble Energy.

 

Noble Energy continued its development of the CDX field with a successful drilling program in 2004. The results increased production above 5,000 Bopd net to Noble Energy at the end of 2004. The Company plans to drill two additional development wells in 2005.

 

Ecuador. In September 2002, Noble Energy commenced operations of its 100 percent-owned integrated natural gas-to-power project. The project includes the Amistad field, which is located in the shallow waters of the Gulf of Guayaquil near the coast of Ecuador. The power plant is located on the coast near Machala, Ecuador and connects to the Amistad field via a 40-mile pipeline. The Machala Power Plant is the only natural gas-fired commercial power generator in Ecuador and currently has a generating capacity of 130 MW of electricity from twin General Electric Frame 6Fa turbines. In 2004, the Company implemented a successful drilling program in the Amistad field that is projected to provide plant feedstock into the next decade.

 

Equatorial Guinea. During 2002, Noble Energy and its partners obtained approval from the government of Equatorial Guinea for Phases 2A and 2B Alba field expansion projects. The Phase 2A project included adding two platforms, 12 wells, three pipelines and two compressors. Initial startup of Phase 2A began in November 2003. The Phase 2A expansion is expected to increase condensate production by approximately 8,400 Bpd net to Noble Energy.

 

Phase 2B, which is scheduled to be completed during 2005, is expected to increase production of LPG by approximately 3,900 Bpd net to Noble Energy and condensate production by approximately 1,800 Bpd net to Noble

 

11

 

Energy. This project includes increasing processing capacity, storage and offloading facilities at the existing LPG plant.

 

Following the ramp-up of Phase 2A in 2005 and the completion of Phase 2B, condensate and LPG capacity will be approximately 15,800 Bpd net to Noble Energy and 4,700 Bpd net to Noble Energy, respectively.

 

Noble Energy, through its subsidiaries, holds a 34 percent working interest in the offshore Alba field and related condensate production facilities, a 28 percent interest in the Alba LPG plant and a 45 percent interest in the AMPCO plant. The AMPCO plant purchases and processes approximately 125 MMcfpd of natural gas into 2,500 MTpd of methanol.

 

In 2004, Noble Energy signed a Production Sharing Contract (“PSC”) with the Republic of Equatorial Guinea covering Block “O” offshore Bioko Island and acquired an interest in a PSC for Block “I”, also located offshore Bioko Island. Under the terms of these agreements, Noble Energy will be Technical Operator with a 45 percent working interest in Block “O” and a 40 percent working interest in Block “I”. Exploration drilling is expected to begin in 2005 on Block “O”.

 

Israel. The Company and its partners have an agreement to provide approximately 170 MMcfpd of natural gas for use in IEC’s power plants. In September 2004, the Company entered into a separate agreement to provide approximately 11 MMcfpd of natural gas for use in the Bazan Refinery located in Ashdod, Israel. Natural gas is produced from the Mari-B field, which was discovered in 2000, offshore Israel. Sales to IEC commenced February 18, 2004 and sales to Bazan are expected to commence during the third quarter of 2005. Noble Energy has a 47 percent working interest in the Mari-B field. During 2004, the Mari-B field averaged 48 MMcfpd net to Noble Energy. The Company has two additional discoveries offshore Israel, which are planned to be subsea tied into the Mari-B platform.

 

North Sea. The Company continued to focus on production and exploration growth in 2004 and added reserves in producing fields. The Company participated in two successful non-operated appraisal wells in the U.K. sector of the North Sea, one of which is expected to lead to the development of the Dumbarton field during 2005 and 2006. The Company also participated in drilling an exploratory dry hole in the Danish sector, the license for which has been subsequently relinquished.

 

During the year, the Company entered into an exchange agreement with Talisman Energy (UK) Limited whereby the Company disposed of its interests in the producing Buchan and Hannay fields and the Tweedsmuir development project in exchange for a producing interest in the MacCulloch field and cash.

 

12

 

Net Exploratory and Development Wells. The following table sets forth, for each of the last three years, the number of net exploratory and development wells drilled by or on behalf of Noble Energy. An exploratory well is a well drilled to find and produce crude oil or natural gas in an unproved area, to find a new reservoir in a field previously found to be productive of crude oil or natural gas in another reservoir, or to extend a known reservoir. A development well, for purposes of the following table and as defined in the rules and regulations of the SEC, is a well drilled within the proved area of a crude oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive. The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. Completion refers to the installation of permanent equipment for the production of crude oil or natural gas, or in the case of a dry hole, to the reporting of abandonment to the appropriate agency.

 

		Net Exploratory Wells								Net Development Wells
Year Ended		Productive(1)				Dry(2)				Productive(1)				Dry(2)
December 31,		U.S.		Int’l		U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
2004		10.70		.30		8.45		1.05		62.37		17.25		8.73
2003		10.84		.07		12.40		2.67		25.10		7.32		8.16
2002		9.78				11.45		3.27		41.53		12.84		11.17

 

(1)          A productive well is an exploratory or development well that is not a dry hole.

 

(2)          A dry hole is an exploratory or development well determined to be incapable of producing either crude oil or natural gas in sufficient quantities to justify completion as an oil or gas well.

 

At January 31, 2005, Noble Energy was drilling 3 gross (1.1 net) exploratory wells and 13 gross (5.7 net) development wells. These wells are located onshore in Colorado, Louisiana, Montana, Oklahoma, Texas, Argentina and offshore Equatorial Guinea and the Gulf of Mexico. These wells have objectives ranging from approximately 1,700 feet to 25,000 feet. The drilling cost to Noble Energy of these wells will be approximately $13.9 million if all are dry and approximately $18.2 million if all are completed as producing wells.

 

13

 

Crude Oil and Natural Gas Wells. Due to the various asset dispositions in 2003 and 2004, there was a significant decrease from 2002 in the number of wells in which Noble Energy held an interest. The number of productive crude oil and natural gas wells in which Noble Energy held an interest as of December 31 follows:

 

		2004(1)(2)				2003(1)(2)				2002(1)(2)
		Gross		Net		Gross		Net		Gross		Net
Crude Oil Wells
United States – Onshore		179.0		105.9		196.0		118.2		1,131.0		458.7
United States – Offshore		165.0		109.2		186.0		114.2		232.0		95.7
International		713.0		98.6		716.0		88.8		687.0		81.3
Total		1,057.0		313.7		1,098.0		321.2		2,050.0		635.7
Natural Gas Wells
United States – Onshore		1,728.0		1,121.5		1,645.0		1,042.1		1,603.0		1,006.6
United States – Offshore		167.0		73.5		299.0		116.5		265.0		184.9
International		28.0		10.3		34.0		8.4		42.0		13.1
Total		1,923.0		1,205.3		1,978.0		1,167.0		1,910.0		1,204.6

 

(1)          Productive wells are producing wells and wells capable of production. A gross well is a well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned. A net well is deemed to exist when the sum of fractional ownership working interests in gross wells equals one. The number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.

 

(2)          One or more completions in the same borehole are counted as one well in this table.

 

The following table summarizes multiple completions and non-producing wells as of December 31 for the years shown. Included in wells not producing are productive wells awaiting additional action, pipeline connections or shut-in for various reasons.

 

		2004				2003				2002
		Gross		Net		Gross		Net		Gross		Net
Multiple Completions
Crude Oil		7.0		4.6		9.0		5.8		12.0		6.0
Natural Gas		20.0		8.1		29.0		11.3		28.0		8.9
Not Producing (Shut-in)
Crude Oil		516.0		102.5		573.0		109.2		565.0		212.3
Natural Gas		297.0		127.2		337.0		142.5		121.0		73.0

 

At year-end 2004, Noble Energy had less than 16 percent of its crude oil and natural gas sales volumes, on an Mcfe basis, committed to long-term supply contracts and had no similar agreements with foreign governments or authorities.

 

Since January 1, 2004, no crude oil or natural gas reserve information has been filed with, or included in any report to any federal authority or agency other than the SEC and the Energy Information Administration (“EIA”). Noble Energy files Form 23, including reserve and other information, with the EIA.

 

SEC guidelines do not limit reserve bookings to only contracted volumes if it can be demonstrated that there is reasonable certainty that a market exists. The Company has booked reserves in excess of contracted volumes for Israel due to the reasonable certainty of the existence of markets in future periods. In Israel, the Company has a natural gas contract with IEC, which is expected to run through 2014, and a contract with the Israel Bazan Refinery

 

14

 

through the year 2015. The Israeli natural gas market, as estimated by the Israeli Ministry of National Infrastructure, from 2005 to 2020, is significantly greater than Noble Energy’s uncontracted net estimated proved reserves.

 

Average Sales Price. The following table sets forth, for each of the last three years, the average sales price per unit of crude oil produced and per unit of natural gas produced, and the average production cost per unit from continuing operations.

 

		Year Ended December 31,
		2004			2003			2002
Average sales price per Bbl of crude oil (1):
United States		$	31.90		$	26.21		$	23.29
International		$	36.94		$	28.94		$	24.98
Combined (2)		$	34.53		$	27.72		$	24.22
Average sales price per Mcf of natural gas (1):
United States		$	6.00		$	4.75		$	3.24
International (3)		$	1.88		$	1.17		$	1.18
Combined (4)		$	4.74		$	4.13		$	2.89
Average production cost per BOE (5):
United States		$	5.46		$	4.43		$	3.76
International		$	4.99		$	5.40		$	4.16
Combined		$	5.27		$	4.78		$	3.88

 

(1)          Includes royalties.

 

(2)          Reflects a reduction of $3.05 per Bbl in 2004, $1.01 per Bbl in 2003 and $.02 per Bbl in 2002 from hedging in the United States.

 

(3)          Ecuador natural gas revenues and natural gas production volumes are excluded in the calculation of the International average sales price per Mcf of natural gas. The natural gas-to-power project in Ecuador is 100 percent owned by Noble Energy. Intercompany natural gas sales are eliminated for accounting purposes.

 

(4)          Reflects a reduction of $.08 per Mcf in 2004 and $.44 per Mcf in 2003 and an increase of $.05 per Mcf in 2002 from hedging in the United States.

 

(5)          Oil and gas production costs include lease operating expense, production taxes, ad valorem taxes, workover expense and transportation costs.

 

15

 

 

Significant Offshore Undeveloped Lease Holdings (interests rounded to nearest whole percent)

 

 

Block			Working Interest (%)
East Breaks
464	*		48
465	*		48
475	*		100
510	*		33
519	*		100
563	*		100
Green Canyon
85	*		50
142			100
185	*		100
186	*		100
187	*		100
199	*		60
228	*		100
238	*		40
303	*		40
507	*		50
723	*		100
724	*		100
767	*		50
955	*		7
958	*		25
East Cameron
342			50
348			30
355			100
South Timbalier
62			100
278			50
Ship Shoal
73			50
Mustang Island
829			50
830			50
831			60
Vermilion
208			25
227			50
228			50
230			100
235			100
352			100
353			100
391			100
Garden Banks
25			50
416	*		100
460	*		100
461	*		100
751	*		100
795	*		100
841	*		39
Main Pass
107			25
110			25
South Marsh Island
4			100
38			100
145			100
195			50
Viosca Knoll
23			100
65			100
157			100
383			24
908	*		100
Mississippi Canyon
26	*		75
70	*		75
71	*		75
115	*		75
116	*		100
122	*		75
123	*		75
159	*		75
204	*		100
524	*		50
595	*		24
602	*		75
639	*		24
665	*		50
769	*		100
811	*		30
849	*		34
855	*		30
856	*		30
857	*		30
892	*		35
896	*		67
900	*		30
901	*		30
911	*		40
999	*		30
1000	*		30
Chandeleur Sound
1			100
4			100
18			100
39			100
Mobile
942			100
943			100
987			100
Ewing Bank
834	*		14
949			52
993			53
High Island
A-218			100
A-230			100
A-422			100
A-587			3
Atwater Valley
10	*		100
11	*		100
23	*		100
66	*		100
67	*		100
327	*		79
533	*		40
West Cameron
359			100
360			100
372			100
373			100
389			100
392			100
393			100
400			100
404			100
405			100
406			100
411			100
412			100
418			100
419			100
420			100
421			100
422			50
423			100
438			100
443			100
446			100

 

*Located in water deeper than 1,000 feet.

 

16

 

The developed and undeveloped acreage (including both leases and concessions) that Noble Energy held as of December 31, 2004, is as follows:

 

		Developed Acreage (1)(2)				Undeveloped Acreage (2)(3)(4)
Location		Gross Acres		Net Acres		Gross Acres		Net Acres
United States Onshore
Alabama						2,926		505
California		812		333		25,459		8,181
Colorado		79,252		60,372		37,578		31,046
Kansas		92,956		52,627		21,604		14,222
Louisiana		31,030		10,709		29,613		11,498
Michigan						1,876		427
Mississippi		878		34		1,884		51
Montana		201,783		123,603		3,798		1,452
Nevada						61,076		60,031
New Mexico		1,797		897		2,200		1,613
North Dakota						685		314
Oklahoma		136,057		47,385		11,353		5,521
Texas		74,421		30,818		82,115		30,257
Utah		1,280		260		8,514		5,446
Wyoming		25,009		10,928		61,983		32,970
Total United States Onshore		645,275		337,966		352,664		203,534
United States Offshore (Federal Waters)
Alabama		92,160		45,158		37,834		32,081
California		38,833		12,039		52,364		9,422
Louisiana		376,634		164,810		402,938		320,704
Mississippi		37,756		19,260		138,240		74,870
Texas		158,946		73,560		117,791		85,145
Total United States Offshore (Federal Waters)		704,329		314,827		749,167		522,222
International
Argentina		113,325		15,548		2,341,884		2,341,884
China		7,413		4,225
Ecuador		12,355		12,355		851,771		851,771
Equatorial Guinea		45,203		15,727		1,112,841		481,291
Israel		123,552		58,142		292,572		137,681
Netherlands		865		130		74,749		11,212
United Kingdom		41,858		3,536		465,561		131,263
Total International		344,571		109,663		5,139,378		3,955,102
Total (5)		1,694,175		762,456		6,241,209		4,680,858

 

(1)          Developed acreage is acreage spaced or assignable to productive wells.

 

(2)          A gross acre is an acre in which a working interest is owned. A net acre is deemed to exist when the sum of fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

 

(3)          Undeveloped acreage is considered to be those leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and natural gas regardless of whether or not such acreage contains proved reserves. Included within undeveloped acreage are those leased acres (held by production under the terms of a lease) that are not within the spacing unit containing, or acreage assigned to, the productive well so holding such lease.

 

(4)          The Argentina acreage includes one concession totaling 1,163,865 acres subject to final governmental approval.

 

(5)          If production is not established, approximately 143,507 gross acres (88,350 net acres), 248,777 gross acres (127,235 net acres) and 91,175 gross acres (71,700 net acres) will expire during 2005, 2006 and 2007, respectively.

 

17