Noble Energy Inc.’s (NYSE: NBL) record sales volumes from its U.S. onshore and Eastern Mediterranean assets led the Houston-based company to a quarterly sales volumes record of 427,000 barrels of oil equivalent per day (Mboe/d), an increase of 43%, during the second quarter of 2016.

Giving an assist were sales volumes from the Gulf of Mexico (GoM) where the Gunflint development joined Big Bend and Dantzler. The number skyrocketed by 125% compared to a year ago to average nearly 27 Mboe/d.

But the highs did not translate into record profits for Noble, which is also working to fine-tune completion techniques in the prolific Permian Basin. As the world’s energy demand needs fail to keep pace with growing production volumes, Noble reported a second-quarter net loss of $315 million, compared with a loss of $109 million a year ago.

It is among the plethora of oil and gas companies that have reported losses in recent weeks amid tumbling oil prices, which dipped below $40/bbl on Aug. 2 for the first time since April. The WTI oil price rose slightly on Aug. 3.

Noble Energy CEO David Stover pointed out the declining forward curve on oil as well as the “resilient global supply and high inventory” and the slightly improving gas 2017 outlook that he expects will soften in subsequent years.

“Significant volatility in both commodities remains. We have not yet seen market fundamentals reach a point where we would consider changing our capital plans for the year,” Stover said during the company’s earnings call Aug. 3. “At the same time our execution and operating performance have increased our inventory and resource potential for when the environment is appropriate to accelerate.”

Thanks to better drilling efficiency among other operational improvements, Noble produced more with less during the second quarter. Capex was down about 70% to $262 million for the quarter, and the company said it plans to keep its capital budget of less than $1.5 billion for the 2016 while raising its 2016 sales volume forecast to an average of 415 Mboe/d, a 7% increase on a divesture-adjusted basis from its original 2016 expectation.

More Onshore

Noble plans to put more capital toward its U.S. unconventional liquids-rich plays in the third quarter—80% compared with 65% in the second quarter. Adding to the company’s flexibility, Stover said, is its inventory of drilled but uncompleted wells, which are expected to total about 140 by year-end.

“As we look forward, our capital will be prioritized on accelerating our Delaware Basin position, developing our D-J and Eagle Ford positions and post-sanction implementing the first phase of Leviathan,” he added. “Our other offshore assets will provide necessary cash to support these activities.”

Meanwhile, the company continues to accelerate drilling and completion activity. Noble’s Texas operations in the Eagle Ford and Permian were among the areas highlighted.

Seven wells in the Gates Ranch area of the Lower Eagle Ford went online during the second quarter, helping to push quarterly sales volumes for Texas operations to a record 74 Mboe/d, up 17% from a year ago.

While Eagle Ford volumes comprised the bulk of the production at 90%, there was plenty of talk about the Permian’s Delaware Basin. Its Calamity Jane well (CJ2101H), which tested slickwater and higher frack intensity, performed better than expected, flowing 2,541 boe/d during the first 30 days of IP. Noble said the well outperformed the 700 Mboe type curve by more than 75%. The nearly 3,000-ft lateral well was completed using 3,000 pounds of sand and slick water.

Lateral lengths are expected to get longer in the Delaware Basin as Noble continues to test various completion techniques. Enhanced completion tactics are already paying off in the Eagle Ford, where volumes increased 32% from first-quarter 2016. Here, the Gates North Wells well tracked above the 3 MMboe type curve, more than 3x the planned type curve, Noble said.

Moving Offshore

While enhanced completion techniques are boosting production onshore, subsea tiebacks are proving to be crucial to unlocking barrels in the GoM, where the two-well Gunflint oil development started production in mid-July. The field is ramping up and is expected to hit gross production of at least 20 Mboe/d, Noble said.

“This is the third Middle Miocene tieback to commence production in the past 12 months, contributing to the almost doubling of our Gulf of Mexico volumes this year,” said Gary Willingham, executive vice president of operations for Noble.

Despite the Thunder Hawk production facility being temporarily shut-in in June due to issues at the downstream third-party gas processing plant, Willingham said production was strong from the Big Bend and Dantzler fields. Together, the fields contributed 16 Mboe/d net to Noble.

Offshore Equatorial Guinea, the Marathon Oil-operated compression platform at the Alba Field started production and is “expected to support field production plateau of approximately 200 Mboe/d gross, 55 Mboe/d net to Noble.” The company has a 35% working interest in the field.

In all, sales volumes in West Africa averaged 72 Mboe/d for the second quarter, Noble reported, noting the Aseng Field offshore Equatorial Guinea reached a 75 MMbbl cumulative oil production milestone.

“Our Gulf of Mexico and Africa assets don’t often get the attention from the equity markets that they deserve,” Willingham said. “The company’s major project execution capabilities were highlighted again with the successes of Gunflint and Alba, and these capabilities continue to deliver substantial value for Noble Energy. Looking forward, near-term capital needs in both are relatively low and the assets remain significant cash flow generators.”

Mediterranean Growth

Noble also saw its Israel natural gas volumes rise 28% to average 276 million cubic feet per day (MMcf/d), boosted by growth in Tamar volumes—up 30% from the same period last year.

“The higher volumes were primarily driven by greater displacement of coal for natural gas in the power generation sector and growth from industrial customers, as well as warmer weather in the quarter,” Noble said.

The company plans to drill another well in the Tamar Field later this year to help meet peak demand, he said.

But the verdict is still out on a final investment decision for the Leviathan Field, which is believed to hold about 22 Tcf of gas. Word could arrive by year-end. Noble is working to finalize additional sales contracts, financing plans, engineering work and project cost estimates over the coming months, Willingham said.

“FEED work is underway and early indications are that this continues to be a great opportunity to lock in very competitive costs for this long-life resource project,” he added.

Velda Addison can be reached at vaddison@hartenergy.com.

Offshore