OREANDA-NEWS. Fitch Ratings has assigned 'BBB-' first-time ratings to Noble Energy, Inc.'s (NYSE: NBL) Long-term Issuer Default Rating (IDR) and senior unsecured ratings. The Rating Outlook is Stable.

Approximately $8 billion in debt is affected by today's rating action. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Noble Energy's ratings reflect its high quality, diverse reserve base, resilient production profile, strong liquidity, and robust corporate actions taken to date to defend credit quality in the commodity price downturn, including a dividend cut, equity issuance, and asset sales. Other positives include substantial long-term growth opportunities and exposure to international natural gas sales. Offsetting factors include limited near-term free cash flow (FCF) generation, long-term capital spending requirements, capital structure concerns, and execution risk on the asset sales side.

ASSET QUALITY
Noble has a higher quality, diversified portfolio with international gas, deep water offshore Gulf of Mexico and West Africa projects, and a presence in multiple onshore plays (DJ, Permian, Eagle Ford, Marcellus) that offer more optionality in the allocation of capital. The Eastern Mediterranean gas assets (Tamar, Leviathan) are relatively unique among independent E&P peers given their low expected decline rates, attractive operating cost profile, and majority committed sales volumes to a politically stable OECD country in the Middle East (Israel) at prices that compare favorably to recent U.S. gas prices ($5.30 recently vs. HH of $1.80). Noble, however, has a lower exposure to higher margin crude than peers, with only 30% of its 390 mboepd from oil, and 15% of its production from highly depressed NGLs.

STRONG LIQUIDITY, FLEXIBLE SPENDING
Noble's liquidity is strong. The company had approximately $5.2 billion of pro forma liquidity at year-end 2015, $1.2 billion of that available in pro forma cash on the balance sheet, including the $200 million of subsequent divestitures. The $4 billion revolving credit facility matures in August 2020. Noble currently has a considerable maturity wall of approximately $2.4 billion consisting of a recently established term loan and senior notes due in early 2019. Fitch views the maturity wall as a credit concern, but believes that capital and term loan market access will remain intact with a portion reduced through proceeds from asset sales in the next three years. Fitch would also note that the company's unsecured committed revolver was voluntarily extended by the lending syndicate one year to August 2020.

Covenants across NBL's capital structure are generally light and include a 65% debt to cap ratio on the revolver and term loan with a carve out for non-cash oil and gas impairments (actual debt-to-cap ratio 43% as of Dec. 31, 2015, covenant debt-to-cap ratio 38%).

Noble is focused on lowering its cost structure, reducing capital spending to align with cash flow, and maintaining production in the current low price environment. Noble is the operator on a majority of its projects, which are largely held by production, giving the company operational and budgeting flexibility that is beneficial in times of depressed prices. The company was able to cut capex 42%, from almost $5 billion in 2014 to $2.9 billion in 2015, and plans to reduce it another 48% to $1.5 billion in 2016. Fitch's base case projects the company to have FCF of negative $300 million in 2016, but has sufficient cash on the balance sheet and additional potential asset sale levers to reduce or eliminate funding gaps. Additionally, Noble was proactive in shoring up liquidity by raising over $1.1 billion in equity in February 2015 and receiving an additional $200 million in non-core asset divestiture proceeds in January 2016. Under a prolonged low price environment, Fitch expects the company would have additional capex flexibility, as well as flexibility around the dividend if needed.

WEAKER METRICS
Fitch's base case forecasts Noble's debt/EBITDA will increase to around 4.5x in 2016 and 2017 due to continued price weakness and the company's relatively low hedge position in 2017. Fitch's base case forecasts total debt/EBITDA of around 3.0x in 2018 due to the combination of higher assumed hydrocarbon prices and Fitch's expectation that asset sale proceeds will result in a cumulative gross debt reduction of approximately $1.5 billion. Key upstream metrics demonstrate the effects of lower price realizations as well, with the Fitch-calculated debt/1p reserves, debt/PD reserves, and debt/flowing barrel metrics of $5.60/boe, $8.50/boe, and $22,415, respectively, as of Dec. 31, 2015.

CONSIDERABLE ASSET SALE OPTIONS
Fitch recognizes that Noble's many offshore Gulf of Mexico, Eastern Mediterranean, and non-core acreage and infrastructure assets provide considerable additional liquidity potential. Noble's Eastern Mediterranean assets specifically should provide the company with the ability to raise capital that could be used to repay debt and fund capex. Additionally, the company has shown willingness to pull-back on shareholder-friendly actions, such as reducing the dividend 40% and using equity for M&A activity. The required sale of a portion of Noble's interest in the Tamar asset within the next six years will reduce its ownership of a key high cash flow generating asset, but generate additional liquidity.

LONG-TERM GROWTH
Noble is well positioned for long-term growth, with ample undeveloped opportunities that include a substantial acreage position in the DJ Basin, southwest Marcellus, multiple offshore opportunities in the Gulf of Mexico, and the Leviathan natural gas field in Israel. Additionally, the 2015 Rosetta merger opens up additional production growth opportunities in the Permian and Eagle Ford basins.

Substantial capex will be required to develop these projects, however, and many, most notably the Leviathan field, have heightened execution and political risk. Fitch would note that the company's ability to develop all of its current prospects in a lower for longer scenario is likely to be challenging and would view a leveraging acceleration of developmental activity negatively. Israel's natural gas framework should provide stabilization and reduce some execution and longer term revenue risks, but the region's political and economic environment remains an event risk.

KEY ASSUMPTIONS
Fitch's key assumptions for the issuer include:
--WTI oil prices of $35/bbl in 2016, $45/bbl in 2017, and $55/bbl in 2018;
--Henry Hub natural gas prices of $2.25/mcf in 2016, $2.50/mcf in 2017, and $2.75/mcf in 2018;
--Capex of $1.5 billion in 2016; flexibility in 2017 and 2018 to maintain neutral net cash flow;
--Production growth of 2% from 2015 to 2018 due to production increases from new well completions and a full year of Rosetta assets partially offset by natural decline rates.

RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to a positive rating action include:

--Mid-cycle debt/EBITDA below 2.0x-2.5x on a sustained basis;
--Mid-cycle debt/flowing barrel of $15,000-$17,500/boe and/or debt/Proved Developed Reserves of below $5.00-$5.50/boe on a sustained basis;

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

--Failure to maintain a clear, conservative financial policy;
--Failure to make meaningful gross debt reductions over the next three years that results in gross debt below $7 billion by year end 2018 while preserving liquidity;
--Mid-cycle debt/EBITDA above 3.0x on a sustained basis;
--Mid-cycle debt/flowing barrel above $20,000/boe and/or debt/Proved Developed Reserves of over $6.00/boe on a sustained basis;
--A major operational issue across key production centers.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following ratings:

Noble Energy, Inc.
--IDR 'BBB-';
--$4 billion senior unsecured revolving credit facility 'BBB-';
--$1.4 billion senior unsecured term loan 'BBB-';
--Senior unsecured notes 'BBB-'.