In response to the COVID-19 pandemic and a significant decline in oil and gas demand and prices, Noble Energy is focusing on liquidity and balance sheet strength. With that in mind, Noble has further reduced its 2020 capex, executive team salaries, and implemented a furlough program for employees.
“Recent events have had an unprecedented and unpredictable impact on the global economy and the oil and gas industry”, said David L. Stover , Noble Energy’s Chairman and CEO.
“We are acting quickly and aggressively to confront today’s economic challenges with a focus on Noble Energy’s financial strength and to position the company to improve shareholder value “.
Stover added: “The actions taken to date are expected to generate more than one billion dollars in annualized cash savings, and we will continue to remain agile to ensure the long-term success of the business”.
Reducing capex
Noble Energy said on Wednesday it is reducing its planned 2020 capital expenditures by an additional $350 million, such that total 2020 capital expenditures are now expected to range between $800 and $900 million.
The incremental capital spending reductions are primarily in the U.S. onshore business.
The company’s updated 2020 U.S. onshore capital allocation is estimated to be approximately $600 million, with approximately $250 million planned for international/offshore.
Organizational changes
Effective 1 May 2020, salaries for the CEO, Senior Officers, and Vice Presidents have been reduced by 20 per cent, 15 per cent, and 10 per cent, respectively. In addition, the board of directors has elected to reduce their 2020 cash retainer by 25 per cent.
Furthermore, the company recently implemented an employee-based furlough program and part-time work status impacting more than 30 per cent of the company’s U.S workforce. These actions were taken to align the workforce and costs with reduced activity levels.
Noble noted that these programs are designed to be temporary until higher activity levels are justified.
As of the end of March 2020, the company had $4.4 billion in liquidity, including $1.4 billion in cash and $3 billion in available revolver capacity. Noble Energy increased its cash balance by drawing $1 billion from its revolving credit facility during the first quarter.
The company’s revolving credit facility is unsecured, supported by 26 financial institutions, and provides committed access to $4 billion through March 2023. The company intends to maintain the cash on its balance sheet and may repay amounts borrowed at any time.
Dividend
In light of the current unpredictable environment and with a focus on financial liquidity, Noble Energy’s board of directors declared a quarterly cash dividend of $0.02 per common share payable on 26 May 2020, to the shareholders of record at the close of business on 11 May 2020.
At the annualized rate of $0.08 per share, the reduction is anticipated to preserve approximately $195 million in annualized cash flow. The board will continue to review the dividend quarterly in the context of market conditions.