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10-Q



























































Delaware73-0785597(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)1001 Noble Energy WayHouston, Texas77070(Address of principal executive offices)(Zip Code)(281) 872-3100(Registrant’s telephone number, including area code)























Large accelerated filerxAccelerated fileroNon-accelerated fileroSmaller reporting companyoEmerging growth companyo




















479,799,000








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Part I.Financial Information3Item 1.Financial Statements3Consolidated Statements of Operations and Comprehensive Income3Consolidated Balance Sheets4Consolidated Statements of Cash Flows5Consolidated Statements of Equity6Notes to Consolidated Financial Statements7Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 3.Quantitative and Qualitative Disclosures About Market Risk50Item 4.Controls and Procedures51Part II.Other Information51Item 1.Legal Proceedings51Item 1A.Risk Factors51Item 2.Unregistered Sales of Equity Securities and Use of Proceeds52Item 3.Defaults Upon Senior Securities52Item 4.Mine Safety Disclosures52Item 5.Other Information52Item 6.Exhibits53Signatures54











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Three Months Ended September 30,Nine Months Ended September 30,2018201720182017RevenuesOil, NGL and Gas Sales$1,136$907$3,409$2,918Sales of Purchased Oil and Gas and Other13753380137Total1,2739603,7893,055Costs and ExpensesProduction Expense273280886866Exploration Expense256489136Depreciation, Depletion and Amortization4855231,4181,554Loss on Marcellus Shale Exit Activities—4—2,326Gain on Divestitures, Net(193)—(859)—Asset Impairments——168—General and Administrative107102316304Other Operating Expense (Income), Net78(15)222132Total7759582,2405,318Operating Income (Loss)49821,549(2,263)Other (Income) ExpenseLoss (Gain) on Commodity Derivative Instruments15522483(145)Interest, Net of Amount Capitalized7088216271Other Non-Operating (Income) Expense, Net(34)100(10)94Total191210689220Income (Loss) Before Income Taxes307(208)860(2,483)Income Tax Expense (Benefit)59(93)44(917)Net Income (Loss) and Comprehensive Income (Loss) Including Noncontrolling Interests248(115)816(1,566)Less: Net Income and Comprehensive Income Attributable to Noncontrolling Interests21215846Net Income (Loss) and Comprehensive Income (Loss) Attributable to Noble Energy$227$(136)$758$(1,612)Net Income (Loss) Attributable to Noble Energy per Common ShareBasic$0.47$(0.28)$1.57$(3.47)Diluted$0.47$(0.28)$1.56$(3.47)Weighted Average Number of Common Shares OutstandingBasic482487484464Diluted484487486464














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September 30, 2018December 31, 2017ASSETSCurrent AssetsCash and Cash Equivalents$720$675Accounts Receivable, Net698748Other Current Assets309780Total Current Assets1,7272,203Property, Plant and EquipmentOil and Gas Properties (Successful Efforts Method of Accounting)29,02929,678Property, Plant and Equipment, Other893879Total Property, Plant and Equipment, Gross29,92230,557Accumulated Depreciation, Depletion and Amortization(11,677)(13,055)Total Property, Plant and Equipment, Net18,24517,502Other Noncurrent Assets774461Goodwill1,4011,310Total Assets$22,147$21,476LIABILITIES AND EQUITYCurrent LiabilitiesAccounts Payable – Trade$1,239$1,161Other Current Liabilities885578Total Current Liabilities2,1241,739Long-Term Debt6,5716,746Deferred Income Taxes9831,127Other Noncurrent Liabilities1,0751,245Total Liabilities10,75310,857Commitments and ContingenciesShareholders’ EquityPreferred Stock - Par Value $1.00 per share; 4 Million Shares Authorized; None Issued——Common Stock - Par Value $0.01 per share; 1 Billion Shares Authorized; 523 Million and 529 Million Shares Issued, respectively55Additional Paid in Capital8,2498,438Accumulated Other Comprehensive Loss(27)(30)Treasury Stock, at Cost; 39 Million Shares(731)(725)Retained Earnings2,8502,248Noble Energy Share of Equity10,3469,936Noncontrolling Interests1,048683Total Equity11,39410,619Total Liabilities and Equity$22,147$21,476














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Nine Months Ended September 30,20182017Cash Flows From Operating ActivitiesNet Income (Loss) Including Noncontrolling Interests$816$(1,566)Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating ActivitiesDepreciation, Depletion and Amortization1,4181,554Loss on Marcellus Shale Exit Activities—2,326Gain on Divestitures, Net(859)—Asset Impairments168—Deferred Income Tax Benefit(150)(988)Undeveloped Leasehold Impairment—51(Gain) Loss on Extinguishment of Debt, Net(3)98Loss (Gain) on Commodity Derivative Instruments483(145)Net Cash (Paid) Received in Settlement of Commodity Derivative Instruments(160)18Stock Based Compensation5383Other Adjustments for Noncash Items Included in Income (Loss)(5)14Changes in Operating Assets and LiabilitiesDecrease (Increase) in Accounts Receivable114(148)(Decrease) Increase in Accounts Payable(91)230Increase (Decrease) in Current Income Taxes Payable54(41)Other Current Assets and Liabilities, Net19(5)Other Operating Assets and Liabilities, Net(81)(63)Net Cash Provided by Operating Activities1,7761,418Cash Flows From Investing ActivitiesAdditions to Property, Plant and Equipment(2,589)(1,956)Proceeds from Sale of 7.5% Interest in Tamar Field484—Proceeds from Sale of CONE Gathering LLC and CNX Midstream Partners Common Units691—Proceeds from Gulf of Mexico Divestiture383—Proceeds from Marcellus Shale Upstream Divestiture—1,028Clayton Williams Energy Acquisition, Net of Cash Received—(616)Saddle Butte Acquisition, Net of Cash Received(650)—Other Acquisitions(3)(357)Proceeds from Other Divestitures182129Additions to Equity Method Investments—(68)Net Cash Used in Investing Activities(1,502)(1,840)Cash Flows From Financing ActivitiesDividends Paid, Common Stock(156)(141)Purchase and Retirement of Common Stock(223)—Proceeds from Noble Midstream Services Revolving Credit Facility690245Repayment of Noble Midstream Services Revolving Credit Facility(725)(45)Proceeds from Noble Midstream Services Term Loan Credit Facility500—Contributions from Noncontrolling Interest Owners348—Issuance of Noble Midstream Partners Common Units, Net of Offering Costs—138Proceeds from Revolving Credit Facility1,4501,585Repayment of Revolving Credit Facility(1,680)(1,310)Repayment of Clayton Williams Energy Long-term Debt—(595)Proceeds from Issuance of Senior Notes, Net—1,086Repayment of Senior Notes(384)(1,096)Repayment of Capital Lease Obligation(49)(44)Distributions to Noncontrolling Interest Owners and Other(37)(47)Net Cash Used in Financing Activities(266)(224)Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash8(646)Cash, Cash Equivalents, and Restricted Cash at Beginning of Period7131,210Cash, Cash Equivalents, and Restricted Cash at End of Period$721$564











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Attributable to Noble EnergyCommonStockAdditionalPaid inCapitalAccumulated OtherComprehensiveLossTreasuryStock atCostRetainedEarningsNon-controlling InterestsTotal EquityDecember 31, 2017$5$8,438$(30)$(725)$2,248$683$10,619Net Income————75858816Stock-based Compensation—63————63Dividends (32 cents per share)————(156)—(156)Purchase and Retirement of Common Stock—(233)————(233)Clayton Williams Energy Acquisition—(25)————(25)Distributions to Noncontrolling Interest Owners—————(35)(35)Contributions from Noncontrolling Interest Owners—————348348Other—63(6)—(6)(3)September 30, 2018$5$8,249$(27)$(731)$2,850$1,048$11,394December 31, 2016$5$6,450$(31)$(692)$3,556$312$9,600Net (Loss) Income————(1,612)46(1,566)Clayton Williams Energy Acquisition—1,876—(25)——1,851Stock-based Compensation—80————80Dividends (30 cents per share)————(141)—(141)Issuance of Noble Midstream Partners Common Units, Net of Offering Costs—————138138Distributions to Noncontrolling Interest Owners—————(19)(19)Other—92(11)———September 30, 2017$5$8,415$(29)$(728)$1,803$477$9,943














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Note
 1. Organization and Nature of Operations


Noble Energy, Inc. (Noble Energy, we or us) is a leading independent energy company engaged in worldwide crude oil and natural gas exploration and production. Our historical operating areas include: US onshore, primarily the DJ Basin, Delaware Basin, Eagle Ford Shale and Marcellus Shale (until June 2017); US offshore Gulf of Mexico (until April 2018); Eastern Mediterranean; and West Africa. Our Midstream segment develops, owns, operates and acquires domestic midstream infrastructure assets, with current focus areas being the DJ and Delaware Basins.








Note
 2. Basis of Presentation


Presentation
 The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (US GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. The accompanying consolidated financial statements atSeptember 30, 2018andDecember 31, 2017and for thethree and nine months ended September 30, 2018and2017contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods. Certain prior-period amounts have been reclassified to conform to the current period presentation. For the periods presented, net income is materially consistent with comprehensive income or loss.





These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year endedDecember 31, 2017 .


Consolidation
 Our consolidated financial statements include our accounts, the accounts of subsidiaries which Noble Energy wholly owns, and the accounts of Noble Midstream Partners LP (Noble Midstream Partners), which is considered a variable interest entity (VIE) for which Noble Energy is the primary beneficiary. In addition, we use the equity method of accounting for investments in entities that we do not control, but over which we exert significant influence. All significant intercompany balances and transactions have been eliminated upon consolidation.


Estimates
  The preparation of consolidated financial statements in conformity with US GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.


Investment in Shares of Tamar Petroleum Ltd.
 We account for our investment in shares of Tamar Petroleum Ltd. at fair value and record changes in fair value in other non-operating (income) expense, net in our consolidated statements of operations.
 Note 3. Acquisitions and Divestitures  Note 6. Fair Value Measurements and Disclosures


Goodwill
 As ofSeptember 30, 2018, our consolidated balance sheet includes goodwill of $1.4billion, which is allocated to our Texas and Midstream reporting units. Goodwill is not amortized to earnings but is assessed for impairment on an annual basis during third quarter, or more frequently as circumstances require, at the reporting unit level.





As such, we performed Step 1 of the goodwill impairment test, used to identify potential impairment. The result of the Step 1 test indicated that the fair values of the Texas and Midstream reporting units exceeded their carrying values, including goodwill, and therefore, we concluded no impairment existed as ofSeptember 30, 2018 .


Intangible Assets
 Intangible assets consist of customer contracts and relationships acquired by Noble Midstream Partners in its acquisition of Saddle Butte Rockies Midstream, LLC and affiliates (collectively, Saddle Butte). We recorded the intangible assets at their estimated fair values at the date of acquisition. Amortization is calculated using the straight-line method, which reflects the pattern in which the estimated economic benefit is expected to be received over the estimated useful life of the intangible assets, which is currently over periods ofsevento13years. As ofSeptember 30, 2018, the net book value of the intangible assets was$318 million. Amortization expense of$8 millionand$22 millionfor thethree and nine months ended








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Note 3. Acquisitions and Divestitures


Stock Repurchase Program
 OnFebruary 15, 2018, we announced that the Company's Board of Directors authorized a $750million share repurchase program which expiresDecember 31, 2020 . All purchases will be made from time to time in the open market or private transactions, depending on market conditions, and may be discontinued at any time.
   3.4
  7.4
  30.07
  31.34


ASC 606, Revenue from Contracts with Customers
 Our revenue is derived from the sale of crude oil, NGL and natural gas production, primarily to crude oil refining companies, midstream marketing companies, marketers, industrial companies, electric utility companies, independent power producers and cogeneration facilities, among others. We account for revenue in accordance with ASC 606,Revenue from Contracts with Customers(ASC 606), which we adopted on January 1, 2018 using the modified retrospective method. Under ASC 606, performance obligations are the unit of account and generally represent distinct goods or services that are promised to customers. For sales of crude oil, NGLs and natural gas, each unit sold is generally considered a distinct good and the related performance obligation is generally satisfied at a point in time. We recognize our sales revenues at a point in time and upon delivery to a customer at the contractually stated price and for the quantity of product delivered. In Israel, because our contracts are long-term arrangements, we recognize revenues from the sale of natural gas over the life of the contract based on the quantity of natural gas delivered.











2
  5
  Note 11. Segment Information

















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Transaction Price Allocated to Remaining Performance Obligations – Israel Remaining performance obligations represent the transaction price of firm sales arrangements for which volumes have not been delivered. Pursuant to ASC 606, short and long-term interruptible contracts and long-term dedicated production agreements are excluded from the disclosure due to uncertainty associated with estimating future production volumes and future market prices. However, certain of our natural gas sales contracts in Israel have fixed annual sales volumes and fixed base pricing with annual index escalations. The following table includes estimated revenues based upon those certain agreements with fixed minimum take-or-pay sales volumes. Our actual future sales volumes under these agreements may exceed future minimum volume commitments.
 (millions)Oct - Dec 201820192020TotalNatural Gas Revenues(1)$54$137$169$360


|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The remaining performance obligations are estimated utilizing the contractual base or floor price provision in effect. Our future revenues from the sale of natural gas under these associated contracts will vary from the amounts presented above due to components of variable consideration above the contractual base or floor provision, such as index-based escalations and market price changes.

MIDSTREAM REVENUE ARRANGEMENTS





Crude Oil Purchase and Sale Arrangements – US As part of the Saddle Butte acquisition in first quarter 2018, we acquired a pipeline and associated third party contracts which include transactions for the purchase and sale of crude oil with varying counterparties. Revenues and expenses from the sales and purchases are recorded on a gross basis as we act as a principal in these transactions by assuming control of the purchased commodity before it is transferred to the customer. The purchases and sales of crude oil are recorded at the prevailing market prices.


Recently Issued Accounting Standards














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Other statements of operations information is as follows:
 Three Months Ended September 30,Nine Months Ended September 30,(millions)2018201720182017Sales of Purchased Oil and Gas and OtherSales of Purchased Oil and Gas(1)$72$—$191$—Income from Equity Method Investees4446140125Midstream Services Revenues – Third Party2174912Total$137$53$380$137Production ExpenseLease Operating Expense$124$151$411$414Production and Ad Valorem Taxes4731151104Gathering, Transportation and Processing Expense9793292333Other Royalty Expense553215Total$273$280$886$866Exploration ExpenseLeasehold Impairment$—$33$—$51Seismic, Geological and Geophysical471720Staff Expense14114140Other7133125Total$25$64$89$136Other Operating Expense (Income), NetMarketing Expense(2)$11$6$21$39Purchased Oil and Gas(1)76—204—Clayton Williams Energy Acquisition Expenses—4—98Gain on Asset Retirement Obligation Revisions(3)(10)(42)(21)(42)Other, Net1171837Total$78$(15)$222$132Other Non-Operating (Income) Expense, NetGain on Investment in Shares of Tamar Petroleum Ltd., Net(4)$(32)$—$(6)$—Loss (Gain) on Extinguishment of Debt, Net—98(3)98Other, Net(2)2(1)(4)Total$(34)$100$(10)$94


|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As part of the Saddle Butte acquisition in first quarter 2018, we acquired certain contracts which include the purchase and sale of crude oil with third parties. In addition, we entered into certain transactions beginning in first quarter 2018 for the purchase of third party natural gas and the subsequent sale of natural gas to other third parties. The natural gas is transported through firm transportation capacity we retained following the Marcellus Shale upstream divestiture in second quarter 2017 and is part of our mitigation efforts to utilize capacity and reduce our financial commitment. SeeNote11. Segment InformationandNote12. Marcellus Shale Firm Transportation Contracts.

|    |                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Amounts relate to unutilized firm transportation and shortfalls in delivering or transporting minimum volumes under certain commitments primarily in the DJ Basin for 2018 and in the DJ Basin and Marcellus Shale for 2017 (prior to the Marcellus Shale upstream divestiture in second quarter 2017).

|    |                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Gain resulted from downward asset retirement obligation revisions in locations where we have no remaining assets. SeeNote 8. Asset Retirement Obligations.

|    |                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Amounts forthird quarter and first nine months of 2018include a gain of$15 millionand a loss of$25 million, respectively, due to changes in the fair value of our investment in shares of Tamar Petroleum Ltd. In addition,third quarter and first nine months of 2018include dividend income of$17 millionand$31 million, respectively. SeeNote 6. Fair Value Measurements and Disclosures.







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Other balance sheet information is as follows:


(millions)September 30, 2018December 31, 2017Accounts Receivable, NetCommodity Sales$475$455Joint Interest Billings147207Other90103Allowance for Doubtful Accounts(14)(17)Total$698$748Other Current AssetsInventories, Materials and Supplies$52$66Inventories, Crude Oil3416Assets Held for Sale(1)—629Restricted Cash(2)138Investment in Shares of Tamar Petroleum Ltd.(3)165—Prepaid Expenses and Other Current Assets5731Total$309$780Other Noncurrent AssetsEquity Method Investments(4)$295$305Customer-Related Intangible Assets(5)318—Mutual Fund Investments5857Net Deferred Income Tax Asset2525Other Assets, Noncurrent7874Total$774$461Other Current LiabilitiesProduction and Ad Valorem Taxes$112$84Commodity Derivative Liabilities29458Income Taxes Payable5718Asset Retirement Obligations(6)9251Interest Payable8767Current Portion of Capital Lease Obligations4461Liabilities Associated with Assets Held for Sale(1)—55Compensation and Benefits Payable7698Other Liabilities, Current12386Total$885$578Other Noncurrent LiabilitiesDeferred Compensation Liabilities$182$197Asset Retirement Obligations(6)582824Marcellus Shale Firm Transportation Commitment(7)6976Production and Ad Valorem Taxes6069Commodity Derivative Liabilities10015Other Liabilities, Noncurrent8264Total$1,075$1,245


|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | There are no assets held for sale atSeptember 30, 2018. Assets held for sale atDecember 31, 2017include assets in the Greeley Crescent area of the DJ Basin, a7.5%interest in the Tamar field, offshore Israel, our investment in Southwest Royalties, Inc. acquired in the Clayton Williams Energy Acquisition, and the CONE investments. Liabilities associated with assets held for sale primarily represent asset retirement obligations and other liabilities to be assumed by the purchaser. SeeNote3. Acquisitions and Divestitures.







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|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Balance atSeptember 30, 2018represents Noble Midstream Partners collateral on letters of credit. Balance atDecember 31, 2017represents amount held in escrow pending closing of the Saddle Butte acquisition. SeeNote3. Acquisitions and Divestitures.

|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Amount relates to our investment in shares of Tamar Petroleum Ltd. SeeNote3. Acquisitions and DivestituresandNote 6. Fair Value Measurements and Disclosures.

|    |                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | In 2018, we sold our units in CNX Midstream Partners LP, which was previously recorded as an equity method investment. AtDecember 31, 2017, this investment was included in assets held for sale. SeeNote 3. Acquisitions and DivestituresandNote 6. Fair Value Measurements and Disclosures.

|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Amount relates to intangible assets acquired in the Saddle Butte acquisition and is net of$22 millionof accumulated amortization. SeeNote3. Acquisitions and Divestitures.

|    |                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | The decrease in asset retirement obligations during thenine months ended September 30, 2018is primarily due to liabilities assumed by purchasers of divested assets during the period, partially offset by revisions, accretion and additional liabilities incurred. SeeNote8. Asset Retirement Obligations.

|    |                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Amounts relate to the long-term portion of retained firm transportation agreements. The current portion of these obligations is included in other liabilities, current. SeeNote12. Marcellus Shale Firm Transportation Contracts.




Reconciliation of Total CashWe define total cash as cash, cash equivalents and restricted cash. The following table provides a reconciliation of total cash:Nine Months Ended September 30,(millions)20182017Cash and Cash Equivalents at Beginning of Period$675$1,180Restricted Cash at Beginning of Period3830Cash, Cash Equivalents, and Restricted Cash at Beginning of Period$713$1,210Cash and Cash Equivalents at End of Period$720$564Restricted Cash at End of Period1—Cash, Cash Equivalents, and Restricted Cash at End of Period$721$564








Note
 3. Acquisitions and Divestitures





480
  168


383
  24


100
  2
  63


23


7.5
   7.5
  38.5
  224
  484
  7.5
  502
  84


190
  15
  15
  25
  Note 2. Basis of Presentation  Note 6. Fair Value Measurements and Disclosures








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376
  86


21.9
  16.6
  163
  7.5
  32.5
  25


60


50
  308
  196


21.7
  34.1
  7.5
  135
  109


14.2
  22.3
  248
  198


64
  no





681
  663
  18
  343


206
  340
  110


58
  4





301
  246








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56
  1.9
  637
  2.5


The following table represents the final allocation of the total purchase price of Clayton Williams Energy to the assets acquired and liabilities assumed, based on the fair value at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill.
 (millions)Fair Value of Common Stock Issued$1,851Plus: Cash Consideration Paid to Clayton Williams Energy Stockholders637Total Purchase Price$2,488Plus Liabilities Assumed by Noble Energy:Accounts Payable99Other Current Liabilities38Long-Term Deferred Tax Liability515Long-Term Debt595Asset Retirement Obligations63Total Purchase Price Plus Liabilities Assumed$3,798


The fair value of Clayton Williams Energy's identifiable assets was as follows:(millions)Cash and Cash Equivalents$21Other Current Assets70Oil and Gas Properties:Proved Reserves722Undeveloped Leasehold Costs1,571Gathering and Processing Assets48Asset Retirement Costs63Other Noncurrent Assets12Implied Goodwill1,291Total Asset Value$3,798


595





1.3











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The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the Clayton Williams Energy Acquisition taken place on January 1,
 2017; furthermore, the financial information is not intended to be a projection of future results.Three Months Ended September 30,Nine Months Ended September 30,(millions, except per share amounts)2018(1)20172018(1)2017Revenues$1,273$960$3,789$3,102Net Income (Loss) and Comprehensive Income (Loss) Attributable to Noble Energy227(133)758(1,561)Net Income (Loss) Attributable to Noble Energy per Common ShareBasic$0.47$(0.27)$1.57$(3.21)Diluted$0.47$(0.27)$1.56$(3.21)


|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|(1) | No pro forma adjustments were made for the period as Clayton Williams Energy operations are included in our historical results.




1.2
  1.0
  100
  33.3
  3.30
  Note 5. Debt


2.3
  1.5
  3.4
  883


41
  Note 12. Marcellus Shale Firm Transportation Contracts


393
  241
  190
  51


15
  40
  20
  270


111,000


270
  245
  562,430
  138
  90


133
  50
  66.5








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segment. Noble Midstream Partners serves as the operator of the Advantage Pipeline system, which includes a crude oil pipeline in the Delaware Basin from Reeves County, Texas to Crane County, Texas.








Note
 4. Derivative Instruments and Hedging Activities





Note


As of
 September 30, 2018, the following crude oil derivative contracts were outstanding:SwapsCollarsSettlementPeriodType of ContractIndexBbls PerDayWeighted Average DifferentialWeightedAverageFixedPriceWeightedAverageShort PutPriceWeightedAverageFloorPriceWeightedAverageCeilingPrice2018SwapsNYMEX WTI66,000$—$60.30$—$—$—2018CollarsNYMEX WTI18,000———50.4258.822018Three-Way CollarsNYMEX WTI10,000——45.5052.5069.092018Three-Way CollarsDated Brent3,000——40.0050.0070.412018SwapsICE Brent2,000—59.00———2018CollarsICE Brent2,000———50.0055.252018Three-Way CollarsICE Brent5,000——43.0050.0059.502018Basis Swaps(1)20,000(2.30)————2019SwapsNYMEX WTI44,000—58.37———2019Three-Way CollarsNYMEX WTI11,000——52.0562.0575.842019SwapsICE Brent5,000—57.00———2019Three-Way CollarsICE Brent3,000——43.0050.0064.072019Basis Swaps(1)27,000(3.23)————2020Swaption(2)NYMEX WTI5,000—61.79———2020Basis Swaps(1)15,000(5.01)————


|    |                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have entered into crude oil basis swap contracts in order to establish a fixed amount for the differential between pricing in Midland, Texas, and Cushing, Oklahoma. The weighted average differential represents the amount of reduction to Cushing, Oklahoma prices for the notional volumes covered by the basis swap contracts.

|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | We have entered into certain derivative contracts (swaptions), which give counterparties the right, but not the obligation, to enter into swap agreements with us on the option expiration dates.
















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SwapsCollarsSettlementPeriodType of ContractIndexMMBtuPer DayWeighted Average DifferentialWeightedAverageFixedPriceWeightedAverageShort PutPriceWeightedAverageFloorPriceWeightedAverageCeilingPrice2018Three-Way CollarsNYMEX HH120,000$—$—$2.50$2.88$3.652019Three-Way CollarsNYMEX HH104,000——2.252.652.952019Basis Swaps(1)52,000(0.74)————


|    |                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have entered into natural gas basis swap contracts in order to establish a fixed amount for the differential between index pricing for Colorado Interstate Gas and NYMEX Henry Hub. The weighted average differential represents the amount of reduction to NYMEX Henry Hub prices for the notional volumes covered by the basis swap contracts.

The fair values of commodity derivative instruments in our consolidated balance sheets were as follows:Fair Value of Derivative InstrumentsAsset Derivative InstrumentsLiability Derivative InstrumentsSeptember 30, 2018December 31, 2017September 30, 2018December 31, 2017(millions)Balance Sheet LocationFairValueBalance Sheet LocationFairValueBalance Sheet LocationFairValueBalance Sheet LocationFairValueCommodity DerivativeInstrumentsCurrent Assets$—Current Assets$2Current Liabilities$294Current Liabilities$58Noncurrent Assets—Noncurrent Assets—Noncurrent Liabilities100Noncurrent Liabilities15Total$—$2$394$73





The effect of commodity derivative instruments on our consolidated statements of operations was as follows:Three Months Ended September 30,Nine Months Ended September 30,(millions)2018201720182017Cash Paid (Received) in Settlement of Commodity Derivative InstrumentsCrude Oil$68$(4)$164$(20)Natural Gas(1)—(4)2Total Cash Paid (Received) in Settlement of Commodity Derivative Instruments67(4)160(18)Non-cash Portion of Loss (Gain) on Commodity Derivative InstrumentsCrude Oil8527316(64)Natural Gas3(1)7(63)Total Non-cash Portion of Loss (Gain) on Commodity Derivative Instruments8826323(127)Loss (Gain) on Commodity Derivative InstrumentsCrude Oil15323480(84)Natural Gas2(1)3(61)Total Loss (Gain) on Commodity Derivative Instruments$155$22$483$(145)











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Note
 5. Debt


Debt consists of the following:
 September 30, 2018December 31, 2017(millions, except percentages)DebtInterest RateDebtInterest RateRevolving Credit Facility, due March 9, 2023$——%$2302.27%Noble Midstream Services Revolving Credit Facility, due March 9, 2023503.32%852.75%Noble Midstream Services Term Loan Credit Facility, due July 31, 20215003.17%——%Leviathan Term Loan Facility, due February 23, 2025——%——%Senior Notes, due May 1, 2021(1)——%3795.63%Senior Notes, due December 15, 20211,0004.15%1,0004.15%Senior Notes, due October 15, 20231007.25%1007.25%Senior Notes, due November 15, 20246503.90%6503.90%Senior Notes, due April 1, 20272508.00%2508.00%Senior Notes, due January 15, 20286003.85%6003.85%Senior Notes, due March 1, 20418506.00%8506.00%Senior Notes, due November 15, 20431,0005.25%1,0005.25%Senior Notes, due November 15, 20448505.05%8505.05%Senior Notes, due August 15, 20475004.95%5004.95%Other Senior Notes and Debentures(2)927.13%927.13%Capital Lease Obligations234—%273—%Total6,6766,859Unamortized Discount(23)(24)Unamortized Premium(1)—12Unamortized Debt Issuance Costs(38)(40)Total Debt, Net of Unamortized Discount, Premium and Debt Issuance Costs6,6156,807Less Amounts Due Within One Year:Capital Lease Obligations(44)(61)Long-Term Debt Due After One Year$6,571$6,746


|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In second quarter 2018, we redeemed all of the Senior Notes due May 1, 2021, and expensed the associated premium. SeeRedemption of Senior Notes, below.

|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes$8 millionof Senior Notes due June 1, 2024 and$84 millionof Senior Debentures due August 1, 2097.  The weighted average interest rate for these instruments is7.13%.

4.0
          500








350
  800








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0.5
  1.00


480
      50


500


0.00
  0.50
  1.00
  1.50
    500





1.0
  625


35


3.50
  3.25
  3.75
  1.00





Note


379
  395
  11
  5
  10
  5








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Annual Debt MaturitiesOur nearest annual maturity of outstanding debt, excluding capital lease payments and outstanding balances under the revolving credit facilities and the Noble Midstream Services Term Loan Credit Facility, is$1.0 billion of senior notes which mature in December 2021. The Noble Midstream Services Term Loan Credit Facility matures in July 2021 and the Revolving Credit Facility and Noble Midstream Services Revolving Credit Facility both mature in March 2023. As of September 30, 2018, no other balances are due within the next five years.





Note
 6. Fair Value Measurements and Disclosures














Note


15


Note 2. Basis of Presentation  Note














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Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows:


Fair Value Measurements Using(millions)Quoted Prices inActive Markets(Level 1)(1)Significant OtherObservable Inputs(Level 2)(2)SignificantUnobservableInputs   (Level 3)(3)Adjustment(4)Fair Value MeasurementSeptember 30, 2018Financial Assets:Mutual Fund Investments$58$—$—$—$58Commodity Derivative Instruments—35—(35)—Investment in Tamar Petroleum Ltd. (38,495,575 Shares)—165——165Financial Liabilities:Commodity Derivative Instruments—(429)—35(394)Portion of Deferred Compensation Liability Measured at Fair Value(73)———(73)Stock Based Compensation Liability Measured at Fair Value(14)———(14)December 31, 2017Financial Assets:Mutual Fund Investments$57$—$—$—$57Commodity Derivative Instruments—7—(5)2Financial Liabilities:Commodity Derivative Instruments—(78)—5(73)Portion of Deferred Compensation Liability Measured at Fair Value(71)———(71)Stock Based Compensation Liability Measured at Fair Value(10)———(10)


|    |                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Level 1 measurements are fair value measurements which use quoted market prices (unadjusted) in active markets for identical assets or liabilities. We use Level 1 inputs when available as Level 1 inputs generally provide the most reliable evidence of fair value.

|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Level 2 measurements are fair value measurements which use inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(3) | Level 3 measurements are fair value measurements which use unobservable inputs.

|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Amount represents the impact of netting provisions within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.










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168
  Note 3. Acquisitions and Divestitures





The fair value of the investment at December 31, 2017, was based on the published market price of the common units at that date. During second quarter 2018, we sold
 7.5 millionof our21.7 millioncommon units in CNX Midstream Partners. In third quarter 2018, we sold the remaining14.2million common units. SeeNote 3. Acquisitions and Divestitures.September 30, 2018December 31, 2017(millions)Carrying AmountFair ValueCarrying AmountFair ValueInvestment in CNX Midstream Partners (0 Common Units and 21,692,198 Common Units, respectively)$—$—$70$364





Note


Fair value information regarding our debt is as follows:
 September 30, 2018December 31, 2017(millions)Carrying AmountFair Value(1)Carrying AmountFair ValueLong-Term Debt(2)$6,442$6,498$6,586$7,142


|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of September 30, 2018, the fair value of long-term debt approximates the carrying amount, primarily due to the current rising interest rate environment.

|    |                                                                                           
|--- | ------------------------------------------------------------------------------------------
|(2) | Excludes unamortized discount, premium, debt issuance costs and capital lease obligations.







Note
 7. Capitalized Exploratory Well Costs and Undeveloped Leasehold Costs





Changes in capitalized exploratory well costs are as follows and exclude amounts that were capitalized and subsequently expensed in the same period:
 (millions)Nine Months Ended September 30, 2018Capitalized Exploratory Well Costs, Beginning of Period$520Additions to Capitalized Exploratory Well Costs Pending Determination of Proved Reserves7Divestitures(1)(168)Reclassified to Proved Oil and Gas Properties Based on Determination of Proved Reserves(1)Capitalized Exploratory Well Costs Charged to Expense—Capitalized Exploratory Well Costs, End of Period$358


|    |                                                             
|--- | ------------------------------------------------------------
|(1) | Represents costs primarily related to Gulf of Mexico assets.







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The following table provides an aging of capitalized exploratory well costs based on the date that drilling commenced:


(millions)September 30, 2018December 31, 2017Exploratory Well Costs Capitalized for a Period of One Year or Less$8$10Exploratory Well Costs Capitalized for a Period Greater Than One Year Since Commencement of Drilling350510Balance at End of Period$358$520Number of Projects with Exploratory Well Costs That Have Been Capitalized for a Period Greater Than One Year Since Commencement of Drilling78








2.6
  2.4
  129


53


During the first nine months of 2018, we transferred$259 millionand$20 millionof undeveloped leasehold costs associated with Delaware Basin and Eagle Ford Shale assets, respectively, to proved properties. These transfers resulted from additions of proved reserves through development activities. In addition,$43 millionof capitalized costs associated with Gulf of Mexico leases and licenses and$36 millionof capitalized costs associated with other US onshore properties were removed from undeveloped leasehold costs due to divestiture of the associated assets in second quarter and third quarter 2018, respectively. SeeNote 3. Acquisitions and Divestitures .





Note
 8. Asset Retirement Obligations


Changes in ARO are as follows:
 Nine Months Ended September 30,(millions)20182017Asset Retirement Obligations, Beginning Balance$875$935Liabilities Incurred1683Liabilities Settled(309)(53)Revisions of Estimates67(56)Accretion Expense(1)2535Asset Retirement Obligations, Ending Balance$674$944


|    |                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|(1) | Accretion expense is included in depreciation, depletion and amortization (DD&A)expense in the consolidated statements ofoperations.

216
  24
  69
  84
  11
  6








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For theNine Months Ended September 30, 2017Liabilities incurred included$58 millionrelated to the Clayton Williams Energy Acquisition and$25 millionprimarily for other US onshore wells and facilities placed into service. Liabilities settled included$37 millionrelated to abandonment of onshore US properties,$12 millionrelated to properties sold in the Marcellus Shale upstream divestiture and$4 millionrelated to other offshore international and US properties. Revisions of estimates related to decreases in cost and timing estimates of$42 millionassociated with the North Sea abandonment project and$29 millionfor US onshore and Gulf of Mexico, partially offset by an increase of$15 million for West Africa.





Note
 9. Income Taxes


The income tax expense (benefit) consists of the following:
 Three Months Ended September 30,Nine Months Ended September 30,(millions, except percentages)2018201720182017Current$45$22$194$71Deferred14(115)(150)(988)Total Income Tax Expense (Benefit)$59$(93)$44$(917)Effective Tax Rate19.2%44.7%5.1%36.9%





268
  252
  16
  107
  145








145
    7.5


In our major tax jurisdictions, the earliest years remaining open to examination are as follows: US –2014, Israel –2015(2013 with respect to Israel Oil Profits Tax) andEquatorial Guinea –2013 .











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Note
 10. Income Per Share Attributable to Noble Energy


Noble Energy's basic income (loss) per share of common stock is computed by dividing net income (loss) attributable to Noble Energy by the weighted average number of shares of Noble Energy common stock outstanding during each period. The following table summarizes the calculation of basic and diluted income (loss) per share:Three Months Ended September 30,Nine Months Ended September 30,(millions, except per share amounts)2018201720182017Net Income (Loss) and Comprehensive Income (Loss) Attributable to Noble Energy$227$(136)$758$(1,612)Weighted Average Number of Shares Outstanding, Basic482487484464Incremental Shares from Assumed Conversion of Dilutive Stock Options, Restricted Stock, and Shares of Common Stock in Rabbi Trust2—2—Weighted Average Number of Shares Outstanding, Diluted484487486464Income (Loss) Per Share, Basic$0.47$(0.28)$1.57$(3.47)Income (Loss) Per Share, Diluted0.47(0.28)1.56(3.47)Number of Antidilutive Stock Options, Shares of Restricted Stock, and Shares of Common Stock in Rabbi Trust Excluded from Calculation Above13161416








Note
 11. Segment Information





Oil and Gas Exploration and ProductionMidstream(millions)ConsolidatedUnitedStatesEasternMediter-   raneanWestAfricaOther Int'lUnited StatesIntersegment Eliminations and Other(1)CorporateThree Months Ended September 30, 2018Crude Oil Sales$744$655$2$87$—$—$—$—NGL Sales166166——————Natural Gas Sales226981226————Total Crude Oil, NGL and Natural Gas Sales1,13691912493————Sales of Purchased Oil and Gas7226———46——Income from Equity Method Investees and Other65——34—31——Intersegment Revenues—————91(91)—Total Revenues1,273945124127—168(91)—Lease Operating Expense124114715——(12)—Production and Ad Valorem Taxes4746———1——Gathering, Transportation and Processing Expense97129———28(60)—Other Royalty Expense55——————Total Production Expense273294715—29(72)—








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Oil and Gas Exploration and ProductionMidstream(millions)ConsolidatedUnitedStatesEasternMediter-   raneanWestAfricaOther Int'lUnited StatesIntersegment Eliminations and Other(1)CorporateDD&A4854141625124(5)10(Gain) Loss on Divestitures, Net(193)5———(198)——Purchased Oil and Gas7632———44——Gain on Asset Retirement Obligation Revisions(10)———(10)———Loss on Commodity Derivative Instruments155140—15————Gain on Investment in Shares of Tamar Petroleum Ltd., Net(32)—(32)—————Income (Loss) Before Income Taxes3073114368(17)268(16)(170)Three Months Ended September 30, 2017Crude Oil Sales$553$487$2$64$—$—$—$—NGL Sales116116——————Natural Gas Sales238931396————Total Crude Oil, NGL and Natural Gas Sales90769614170————Income from Equity Method Investees and Other53——33—20——Intersegment Revenues—————72(72)—Total Revenues960696141103—92(72)—Lease Operating Expense151118925——(1)—Production and Ad Valorem Taxes3130———1——Gathering, Transportation and Processing Expense93129———20(56)—Other Royalty Expense55——————Total Production Expense280282925—21(57)—DD&A5234421841110(1)12Gain on Asset Retirement Obligation Revisions(42)———(42)———Loss on Debt Extinguishment98——————98Loss on Commodity Derivative Instruments2216—6————(Loss) Income Before Income Taxes(208)(115)109242358(12)(295)Nine Months Ended September 30, 2018Crude Oil Sales$2,266$1,972$6$288$—$—$—$—NGL Sales449449——————Natural Gas Sales69431636216————Total Crude Oil, NGL and Natural Gas Sales3,4092,737368304————Sales of Purchased Oil and Gas19181———110——Income from Equity Method Investees and Other189——105—84——Intersegment Revenues—————257(257)—Total Revenues3,7892,818368409—451(257)—








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Oil and Gas Exploration and ProductionMidstream(millions)ConsolidatedUnitedStatesEasternMediter-   raneanWestAfricaOther Int'lUnited StatesIntersegment Eliminations and Other(1)CorporateLease Operating Expense4113541956——(18)—Production and Ad Valorem Taxes151147———4——Gathering, Transportation and Processing Expense292389———71(168)—Other Royalty Expense3232——————Total Production Expense8869221956—75(186)—DD&A1,4181,2144477162(13)33(Gain) Loss on Divestitures, Net(859)20(376)——(503)——Asset Impairments168168——————Purchased Oil and Gas20498———106——Gain on Asset Retirement Obligation Revisions(21)———(21)———Loss on Commodity Derivative Instruments483400—83————Gain on Investment in Shares of Tamar Petroleum Ltd., Net(6)—(6)—————Income (Loss) Before Income Taxes860(94)678180(44)690(52)(498)Nine Months Ended September 30, 2017Crude Oil Sales$1,637$1,383$5$249$—$—$—$—NGL Sales329329——————Natural Gas Sales95253440117————Total Crude Oil, NGL and Natural Gas Sales2,9182,246406266————Income from Equity Method Investees and Other137——84—53——Intersegment Revenues—————198(198)—Total Revenues3,0552,246406350—251(198)—Lease Operating Expense4143322365——(6)—Production and Ad Valorem Taxes104102———2——Gathering, Transportation and Processing Expense333416———53(136)—Other Royalty Expense1515——————Total Production Expense8668652365—55(142)—DD&A1,5541,32658114420(2)34Loss on Marcellus Shale Exit Activities2,3262,326——————Clayton Williams Energy Acquisition Expenses9898——————Loss on Debt Extinguishment98——————98Gain on Asset Retirement Obligation Revisions(42)———(42)———Gain on Commodity Derivative Instruments(145)(138)—(7)————(Loss) Income Before Income Taxes(2,483)(2,433)31616211165(47)(657)








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Oil and Gas Exploration and ProductionMidstream(millions)ConsolidatedUnitedStatesEasternMediter-   raneanWestAfricaOther Int'lUnited StatesIntersegment Eliminations and Other(1)CorporateSeptember 30, 2018Goodwill(2)$1,401$1,291$—$—$—$110$—$—Total Assets(3)22,14715,4403,1841,208662,318(150)81December 31, 2017Goodwill(2)1,3101,310——————Total Assets21,47615,7672,8461,3081141,357(163)247


|    |                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The intersegment eliminations related to income (loss) before income taxes are the result of midstream expenditures.  These costs are presented as property, plant and equipment within the E&P business on an unconsolidated basis, in accordance with the successful efforts method of accounting, and are eliminated upon consolidation.

|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Goodwill in the United States reportable segment is associated with our Texas reporting unit. Goodwill in the Midstream segment is associated with the first quarter 2018 Saddle Butte acquisition.

|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(3) | $318 millionof total assets in the Midstream segment relates to intangible assets acquired in the first quarter 2018 Saddle Butte acquisition.










Note
 12. Marcellus Shale Firm Transportation Contracts


1.5
  925
  1.5


93


|  |                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $41 million, discounted, for a retained transportation contract for a pipeline project that is in service; however, we no longer have production to satisfy this commitment and we do not have plans to utilize this capacity in the future; and

|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $52 million, discounted, for future commitments to a third party who assumed a portion of our retained capacity relating to pipeline projects that were placed into service.




The change in the Marcellus Shale firm transportation commitment, discounted, is as follows:
 (millions)September 30, 2018December 31, 2017Balance at Beginning of Period$90$—Firm Transportation Accrual—93Payments(9)(3)Balance at End of Period$81$90Less Current Portion Included in Other Current Liabilities1214Long-term Portion Included in Other Noncurrent Liabilities$69$76


450,000








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Three Months Ended September 30,Nine Months Ended September 30,(millions)Statements of Operations Location2018201720182017Sales of Purchased GasSales of Purchased Oil and Gas and Other$26$—$81$—Cost of Purchased of GasOther Operating Expense (Income), Net$24$—$77$—Firm Transportation ExpenseOther Operating Expense (Income), Net7—18—Unutilized Firm Transportation ExpenseOther Operating Expense (Income), Net1—3—Purchased Gas, TotalOther Operating Expense (Income), Net$32$—$98$—Sales of Purchased Gas, Net$(6)$—$(17)$—


We expect to continue our commercialization actions, including utilizing pipeline capacity through purchase transactions of third party natural gas and separate sale transactions to other third parties, to mitigate these firm transportation commitments. Some of our commercialization efforts may require pipeline and/or FERC approval to ultimately reduce our financial commitment associated with these contracts. At the date each pipeline is placed in service and our commitment begins, we will evaluate our position. If we determine that we will not utilize a portion, or all, of the contracted pipeline capacity, we will accrue a liability at fair value for the net amount of the estimated remaining financial commitment. We cannot guarantee our commercialization efforts will be successful and we may recognize substantial future liabilities. SeeNote 2. Basis of PresentationandNote3. Acquisitions and Divestitures .








Note
 13. Contingencies








5
  5
  4
  83





Note





135
  41


1.6
  1.4


Colorado Clean Water Act Referral Notice In September 2018, we received a letter from the US Department of Justice providing notification of referral from the EPA of alleged Clean Water Act violations at an upstream production facility and a midstream gathering facility in Weld County, Colorado. The letter requests an opportunity to discuss settlement of the alleged violations. Given the uncertainty associated with enforcement actions of this nature, we are unable to predict the ultimate outcome of this action at this time, but believe that the resolution of this action will not have a material adverse effect on our financial position, results of operations or cash flows.

















|  |                    
|- | -------------------
|• | Executive Overview;

|  |                   
|- | ------------------
|• | Operating Outlook;

|  |                             
|- | ----------------------------
|• | Results of Operations – E&P;

|  |                                   
|- | ----------------------------------
|• | Results of Operations – Midstream;

|  |                                       
|- | --------------------------------------
|• | Results of Operations – Corporate; and

|  |                                 
|- | --------------------------------
|• | Liquidity and Capital Resources.

























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Liquidity and Capital Resources











Exploration and Production (E&P) – Results of Operations


Exploration and Production (E&P) – Development Projects


Item 1. Financial Statements – Note 3. Acquisitions and Divestitures








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Item 1. Financial Statements – Note


Item 1. Financial Statements  – Note 4. Derivative Instruments and Hedging Activities





Operating Outlook – 2018 Capital Investment Program








See Item 1. Financial Statements – Note 3. Acquisitions and Divestitures








Exploration and Production (E&P) – Results of Operations





Item 1. Financial Statements – Note























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|  |                                                                                                      
|- | -----------------------------------------------------------------------------------------------------
|• | commodity prices, including price realizations on specific crude oil, natural gas and NGL production;

|  |                                 
|- | --------------------------------
|• | operating and development costs;

|  |                                                                                 
|- | --------------------------------------------------------------------------------
|• | production, drilling and delivery commitments, or other contractual obligations;

|  |                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------
|• | access and availability of gathering, transportation, takeaway and processing capacity for US onshore production volumes;

|  |                  
|- | -----------------
|• | drilling results;

|  |                                        
|- | ---------------------------------------
|• | property acquisitions and divestitures;

|  |                      
|- | ---------------------
|• | exploration activity;

|  |                            
|- | ---------------------------
|• | cash flows from operations;

|  |                     
|- | --------------------
|• | indebtedness levels;

|  |                                                       
|- | ------------------------------------------------------
|• | availability of financing or other sources of funding;

|  |                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | impact of new laws and regulations on our business practices, including potential legislative or regulatory changes regarding the use of hydraulic fracturing; and

|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|• | potential changes in the fiscal regimes of the US and other countries in which we operate.

Liquidity and Capital Resources – Financing Activities








Part II. Other Information - Item IA. Risk Factors























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Item 1. Financial Statements – Note











|  |                                                    
|- | ---------------------------------------------------
|• | total average daily sales volumes of345MBoe/d, net;

|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|• | record average daily sales volumes for US onshore crude oil of109MBbl/d, net; and

|  |                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------
|• | record average daily sales volumes of approximately1.1 Bcfe/d, gross, offshore Israel, primarily from the Tamar field.







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|  |                                                              
|- | -------------------------------------------------------------
|• | total loss of$155 millionon commodity derivative instruments;

|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|• | pre-tax income of $225million, as compared with pre-tax income of $41million forthird quarter 2017; and

|  |                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------
|• | capital expenditures, excluding acquisitions, of$696 million, as compared with $596 millionforthird quarter 2017.







Three Months Ended September 30,Nine Months Ended September 30,(millions)2018201720182017Oil, NGL and Gas Sales to Third Parties(1)$1,136$907$3,409$2,918Sales of Purchased Gas(2)26—81—Income from Equity Method Investees343310584Total Revenues1,1969403,5953,002Production Expense(1)316316997953Exploration Expense256489136Depreciation, Depletion and Amortization4565021,3361,502Purchased Gas(2)32—98—Loss on Marcellus Shale Exit Activities—4—2,326Loss (Gain) on Divestitures, Net(3)5—(356)—Asset Impairments(4)——168—Loss (Gain) on Commodity Derivative Instruments15522483(145)Gain on Investment in Shares of Tamar Petroleum Ltd., Net(5)(32)—(6)—Clayton Williams Energy Acquisition Expenses—4—98Income (Loss) Before Income Taxes22541720(1,944)


|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 1, 2018, we adopted ASC 606. As a result of adoption, we changed the presentation of certain US midstream processing arrangements related to net and gross presentation of revenues and expenses. This presentation change resulted in a decrease of $2million to revenues and production expense for third quarter 2018 and an increase of$5 millionto revenues and production expense for first nine months of 2018, respectively. SeeItem 1. Financial Statements – Note 2. Basis of Presentation.

|    |                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Beginning in first quarter 2018, as part of our Marcellus Shale firm transportation mitigation efforts, we entered into certain transactions for the purchase of third party natural gas and the subsequent sale of natural gas to other third parties. SeeItem 1. Financial Statements - Note12. Marcellus Shale Firm Transportation ContractsandSales of Purchased Gas,Netbelow.

|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Amount for the nine months ended September 30, 2018, includes a gain of $376 million on the sale of a 7.5% interest in the Tamar field, offshore Israel.

|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(4) | Amount relates to the Gulf of Mexico asset sale. SeeItem 1. Financial Statements - Note3. Acquisitions and Divestitures.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Amounts forthird quarter and first nine months of 2018include a gain of $15 million and a loss of $25 million, respectively, due to changes in the fair value of our investment in shares of Tamar Petroleum Ltd. In addition, amounts forthird quarter and first nine months of 2018include dividend income of $17 million and $31 million, respectively. The shares in Tamar Petroleum were sold in two separate transactions on October 2 and October 3, 2018, for pre-tax proceeds of $163 million, net of transaction expenses. SeeItem 1. Financial Statements - Note3. Acquisitions and DivestituresandItem 1. Financial Statements - Note6. Fair Value Measurements and Disclosures.










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Sales Volumes(1)Average Realized Sales Prices(1)Crude Oil & Condensate(MBbl/d)NGLs(MBbl/d)NaturalGas(MMcf/d)Total(MBoe/d)(2)Crude Oil & Condensate(Per Bbl)NGLs(Per Bbl)NaturalGas(Per Mcf)Three Months Ended September 30, 2018United States10963464249$65.54$28.58$2.31Eastern Mediterranean——24141——5.49West Africa(3)13—2174973.70—0.27Total Consolidated Operations1226392233966.4128.582.66Equity Investees(4)15—674.8848.27—Total12368922345$66.50$29.92$2.66Three Months Ended September 30, 2017United States11456449244$46.63$22.88$2.23Eastern Mediterranean——28348——5.36West Africa(3)13—2465451.32—0.27Total Consolidated Operations1275697834647.1322.882.65Equity Investees(4)27—952.6937.49—Total12963978355$47.27$24.56$2.65Nine Months Ended September 30, 2018United States(5)11363479255$63.98$26.22$2.42Eastern Mediterranean——24241——5.48West Africa(3)15—2165171.55—0.27Total Consolidated Operations1286393734764.8626.222.71Equity Investees(4)25—772.4643.70—Total13068937354$64.95$27.50$2.71Nine Months Ended September 30, 2017United States10856637270$47.07$21.66$3.06Eastern Mediterranean——27646——5.33West Africa(3)18—2405851.29—0.27Total Consolidated Operations126561,15337447.6621.663.02Equity Investees(4)16—751.7236.23—Total127621,153381$47.75$23.07$3.02


|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 1, 2018, we adopted ASC 606. As a result of adoption, we changed the presentation of certain US midstream processing arrangements as related to net and gross presentation of revenues and expenses. SeeItem 1. Financial Statements – Note 2. Basis of Presentation. This presentation change resulted in the following:

|  |                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|◦ | decrease in NGL revenues, and corresponding decrease in production expense, of $1million forthird quarter 2018and increase in NGL revenues, and corresponding increase in production expense, of $8million for thefirst nine months of 2018;

|  |                                                                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|◦ | decreases in natural gas revenues, and corresponding decreases in production expense, of $1million and $3million forthird quarter and first nine months of 2018, respectively;

|  |                                                                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|◦ | increases in NGL and natural gas sales volumes of 5 MBbl/d and 31 MMcf/d, respectively, for boththird quarter and first nine months of 2018, respectively; and

|  |                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|◦ | reductions in average realized NGL and natural gas sales prices of $2.67/Bbl and $0.10/Mcf, respectively, forthird quarter 2018and $1.61/Bbl and $0.10/Mcf, respectively, for thefirst nine months of 2018.







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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Natural gas is converted on the basis of six Mcf of gas per one barrel of crude oil equivalent. This ratio reflects an energy content equivalency and not a price or revenue equivalency. Given commodity price disparities, the prices for a barrel of crude oil equivalent for US natural gas and NGLs are significantly less than the price for a barrel of crude oil. In Israel, we sell natural gas under contracts where the majority of the price is fixed, resulting in less commodity price disparity between reporting periods.

|    |                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Natural gas from the Alba field in Equatorial Guinea is sold under contract for $0.25 per MMBtu to a methanol plant, an LPG plant, an LNG plant and a power generation plant. The methanol and LPG plants are owned by affiliated entities accounted for under the equity method of accounting.

|    |                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|(4) | Volumes represent sales of condensate and LPG from the LPG plant in Equatorial Guinea. SeeIncome from Equity Method Investees,below.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Includes 9 MBoe/d forfirst nine months of 2018related to Gulf of Mexico assets sold in April 2018. SeeItem 1. Financial Statements – Note 3. Acquisitions and Divestitures.

Sales Revenues(millions)Crude Oil & CondensateNGLsNaturalGasTotalThree Months Ended September 30, 2017$553$116$238$907Changes due to(Decrease) Increase in Sales Volumes(28)8(28)(48)Increase in Sales Prices(1)2194317279Impact of ASC 606 Adoption—(1)(1)(2)Three Months Ended September 30, 2018$744$166$226$1,136Nine Months Ended September 30, 2017$1,637$329$952$2,918Changes due toIncrease (Decrease) in Sales Volumes2010(218)(188)Increase (Decrease) in Sales Prices(1)609102(37)674Impact of ASC 606 Adoption—8(3)5Nine Months Ended September 30, 2018$2,266$449$694$3,409


|    |                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Changes exclude gains and losses related to commodity derivative instruments. SeeItem 1. Financial Statements - Note 4. Derivative Instruments and Hedging Activitiesfor gains and losses and cash paid (received) in settlement of commodity derivative instruments for the periods presented.







|  |                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | increases of41%and36%forthird quarter and first nine months of 2018, respectively, in average realized prices due to the partial rebalancing of global supply and demand factors and exposure to Brent pricing in West Africa; and

|  |                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | higher US onshore sales volumes of16MBbl/d and20MBbl/d forthird quarter and first nine months of 2018, respectively, primarily driven by an increase in development activity in the Delaware and DJ Basins;




|  |                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower Gulf of Mexico sales volumes of21MBbl/d and15MBbl/d forthird quarter and first nine months of 2018, respectively, due to natural field decline as well as the sale of the Gulf of Mexico assets in second quarter 2018; and

|  |                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------
|• | lower offshore Equatorial Guinea sales volumes of3MBbl/d forfirst nine months of 2018due to natural field decline.




|  |                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | higher US onshore sales volumes of 4 MBbl/d (exclusive of 5 MBbl/d from adoption of ASC 606) and 10 MBbl/d(exclusive of 5 MBbl/d from adoption of ASC 606) forthird quarter and first nine months of 2018, respectively, primarily attributable to development activities in the Delaware and DJ Basins;

|  |                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | increases of 37% and 29% in average realized prices forthird quarter and first nine months of 2018, respectively, due to the partial rebalancing of domestic supply and demand factors; and

|  |                                                                                                  
|- | -------------------------------------------------------------------------------------------------
|• | an increase of $8 millionfor thefirst nine months of 2018associated with the adoption of ASC 606;




|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|• | a decrease of $1million forthird quarter 2018associated with the adoption of ASC 606; and

|  |                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower sales volumes of 6 MBbl/d forfirst nine months of 2018due to the divestiture of the Marcellus Shale upstream assets in second quarter 2017.







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|  |                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower sales volumes of 232 MMcf/d for thefirst nine months of 2018due to the divestiture of the Marcellus Shale upstream assets in second quarter 2017;

|  |                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower Gulf of Mexico sales volumes of 20 MMcf/d and 12 MMcf/d forthird quarter and first nine months of 2018, respectively, due to natural field decline as well as the sale of the Gulf of Mexico assets in second quarter 2018;

|  |                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower Israel sales volumes of 44 MMcf/d and 36 MMcf/d forthird quarter and first nine months of 2018, respectively, primarily due to the sale of a 7.5% interest in the Tamar field in second quarter 2018;

|  |                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower sales volumes of 29 MMcf/d and 24 MMcf/d forthird quarter and first nine months of 2018, respectively, from the Alba field, offshore Equatorial Guinea, due to natural field decline and timing of field maintenance; and

|  |                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | decreases in average realized prices for the first half of 2018 due to the impact of increased onshore US supply, as well as wider summer price differentials for both DJ and Delaware Basin volumes;




|  |                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | increase of 4% in average realized prices forthird quarter 2018due to to low natural gas inventory levels and positive developments in the LNG markets signaling a potential increase in global demand;

|  |                                                                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | higher US onshore sales volumes of 12 MMcf/d (exclusive of 31 MMcf/d from adoption of ASC 606) and 63 MMcf/d (exclusive of 31 MMcf/d from adoption of ASC 606) forthird quarter and first nine months of 2018, respectively, primarily attributable to development activities in the Delaware and DJ Basins; and

|  |                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | higher sales volumes related to our remaining working interest in Israel due to increased demand for power as well as conversion of facilities from use of coal to natural gas.
















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(millions, except unit rate)Total per BOE(1)  (2)TotalUnitedStates(2)EasternMediter-   raneanWest AfricaThree Months Ended September 30, 2018Lease Operating Expense(3)$4.37$136$114$7$15Production and Ad Valorem Taxes1.484646——Gathering, Transportation and Processing(4)4.14129129——Other Royalty Expense0.1655——Total Production Expense$10.15$316$294$7$15Total Production Expense per BOE$10.15$12.82$1.90$3.32Three Months Ended September 30, 2017Lease Operating Expense(3)$4.78$152$118$9$25Production and Ad Valorem Taxes0.943030——Gathering, Transportation and Processing(4)4.06129129——Other Royalty Expense0.1655——Total Production Expense$9.94$316$282$9$25Total Production Expense per BOE$9.94$12.58$2.06$5.00Nine Months Ended September 30, 2018Lease Operating Expense(3)$4.54$429$354$19$56Production and Ad Valorem Taxes1.55147147——Gathering, Transportation and Processing(4)4.11389389——Other Royalty Expense0.343232——Total Production Expense$10.54$997$922$19$56Total Production Expense per BOE$10.54$13.22$1.73$4.04Nine Months Ended September 30, 2017Lease Operating Expense(3)$4.12$420$332$23$65Production and Ad Valorem Taxes1.00102102——Gathering, Transportation and Processing(4)4.08416416——Other Royalty Expense0.151515——Total Production Expense$9.35$953$865$23$65Total Production Expense per BOE$9.35$11.76$1.82$4.12


|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Consolidated unit rates exclude sales volumes and expenses attributable to equity method investees.

|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | United States E&P production expense includes charges from our midstream operations that are eliminated on a consolidated basis. SeeItem 1. Financial Statements – Note11. Segment Information.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Lease operating expense includes oil and gas operating costs (labor, fuel, repairs, replacements, saltwater disposal and other related lifting costs) and workover expense.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Upon adoption of ASC 606 on January 1, 2018, we changed the presentation for certain of our gathering, transportation and processing expenses in accordance with the control model under the new standard. As such, we reflected a decrease of $2million for third quarter 2018 and an increase of$5 millionfor first nine months of 2018, respectively, to gathering, transportation and processing expense related to US operations. On a per BOE basis, including the change in production volumes, the presentation change resulted in increases of $1.04/Boe and $0.89/Boe for total production expense forthird quarter and first nine months of 2018, respectively, and decreases of$0.66/Boe and$0.57/Boe for US production expense forthird quarter and first nine months of 2018, respectively. No other geographical locations were affected by the presentation change. Comparative information for the prior period has not been recast and continues to be reported under ASC 605,Revenue Recognition, the accounting standard in effect for the prior period.




|  |                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------
|• | an increase in US production and ad valorem taxes and in US other royalty expense due to higher commodity prices; and

|  |                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | an increase in US lease operating expense, primarily due to increased development activities resulting in added production across each of our US onshore basins;







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|  |                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | decreases in US lease operating and gathering, transportation and processing expenses in the Gulf of Mexico due to lower production caused by natural field decline and the subsequent sale of the assets in second quarter 2018;

|  |                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------
|• | a decrease in lease operating expense in West Africa due to lower production caused by natural field decline; and

|  |                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | decreases in US lease operating and gathering, transportation and processing expenses due to the divestiture of the Marcellus Shale upstream assets in second quarter 2017.










(millions, except unit rate)TotalUnitedStatesEasternMediter-   raneanWestAfricaOther Int'lThree Months Ended September 30, 2018DD&A Expense$456$414$16$25$1Unit Rate per BOE(1)$14.64$18.05$4.34$5.53$—Three Months Ended September 30, 2017DD&A Expense$502$442$18$41$1Unit Rate per BOE(1)$15.79$19.72$4.11$8.19$—Nine Months Ended September 30, 2018DD&A Expense$1,336$1,214$44$77$1Unit Rate per BOE(1)$14.12$17.41$4.00$5.55$—Nine Months Ended September 30, 2017DD&A Expense$1,502$1,326$58$114$4Unit Rate per BOE(1)$14.73$18.02$4.58$7.23$—
  (1)








|  |                                                                                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | year-end 2017 proved reserves additions, primarily in US onshore due to enhanced well design and completion techniques in our horizontal drilling program, in the Tamar field due to well results and geological evaluation, and globally due to positive commodity price revisions;

|  |                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | lower sales volumes in Gulf of Mexico due to natural field decline and classification of the assets as held for sale in first quarter 2018, resulting in the cessation of DD&A expense, together resulting in decreases of $60 million and $169 million forthird quarter and first nine months of 2018, respectively; and

|  |                                                                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | reclassification of a7.5%working interest in the Tamar field, offshore Israel, as assets held for sale at December 31, 2017, resulting in the cessation of DD&A expense and decreases of $4 million and $11 million forthird quarter and first nine months of 2018, respectively;




|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | higher sales volumes in the Delaware Basin, which more than doubled, due to increased development activities subsequent to the Clayton Williams Energy Acquisition in second quarter 2017; and

|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|• | higher sales volumes from the Tamar field, offshore Israel, due to higher domestic demand.







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Item 1. Financial Statements – Note 3. Acquisitions and Divestitures


Item 1. Financial Statements – Note   Item 1. Financial Statements – Note








|  |                                                
|- | -----------------------------------------------
|• | net cash settlement payment of$160 million; and

|  |                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | net non-cash increase of$323 millionin the fair value of our net commodity derivative liability, primarily driven by increases in the forward commodity price curve for crude oil.




|  |                                               
|- | ----------------------------------------------
|• | net cash settlement receipt of$18 million; and

|  |                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | net non-cash increase of$127 millionin the fair value of our net commodity derivative asset, primarily driven by changes in the forward commodity price curves for both crude oil and natural gas.

Item 1. Financial Statements – Note    Item 1. Financial Statements – Note





























|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|• | commenced gathering services on an initial well for a third-party Delaware Basin producer;

|  |                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|• | net proceeds of approximately$248 millionreceived, and gain of$198 millionrecognized, on the sale of our investment in CNX Midstream Partners common units;

|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|• | pre-tax income of $268million, as compared with pre-tax income of $58million forthird quarter 2017; and

|  |                                                                                        
|- | ---------------------------------------------------------------------------------------
|• | capital expenditures of$69 million, as compared with $96 million forthird quarter 2017.







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Three Months Ended September 30,Nine Months Ended September 30,(millions)2018201720182017Midstream Services Revenues – Third Party$21$7$49$12Sales of Purchased Oil46—110—Income from Equity Method Investees10133541Intersegment Revenues9172257198Total Revenues16892451251Operating Costs and Expenses30249666Depreciation and Amortization24106220Gain on Divestitures, Net(198)—(503)—Purchased Oil44—106—Total (Income) Expense(100)34(239)86Income Before Income Taxes$268$58$690$165

















Item 1. Financial Statements – Note 3. Acquisitions and Divestitures











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Three Months Ended September 30,Nine Months Ended September 30,(millions, except unit rate)2018201720182017G&A Expense$107$102$316$304Unit Rate per BOE(1)$3.44$3.21$3.34$2.98


|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Consolidated unit rates exclude sales volumes and expenses attributable to equity method investees.




Item 1. Financial Statements – Note 5. Debt


Item 1. Financial Statements – Note   Item 1. Financial Statements – Note


Three Months Ended September 30,Nine Months Ended September 30,(millions, except unit rate)2018201720182017Interest Expense, Gross$88$100$269$306Capitalized Interest(18)(12)(53)(35)Interest Expense, Net$70$88$216$271Unit Rate per BOE(1)$2.25$2.77$2.28$2.66


|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Consolidated unit rates exclude sales volumes and expenses attributable to equity method investees.

Item 1. Financial Statements - Note


























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|  |                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | acquisition of3.4million shares of Noble Energy stock, for $103million, resulting in year to date repurchases of7.4million shares for $233million, pursuant to the Board of Directors' authorized $750million share repurchase program; and

|  |                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
|• | announcement in October 2018 of a November 2018 dividend of 11 cents per Noble Energy common share, which continues the 10% increase over 2017.




|  |                                                  
|- | -------------------------------------------------
|• | redeemed $379 millionin outstanding senior notes;

|  |                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------
|• | repaid all amounts outstanding under the Revolving Credit Facility and extended its maturity date by two and a half years to March 2023;

|  |                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | amended the Noble Midstream Services Revolving Credit Facility to increase the capacity from$350 millionto$800 millionand extended its maturity date by one and a half years to March 2023; and

|  |                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | entered into the Noble Midstream Services Term Loan Credit Facility and subsequently borrowed$500 million, which was used to repay amounts outstanding under the Noble Midstream Services Revolving Credit Facility.







September 30,December 31,(millions, except percentages)20182017Total Cash(1)$721$713Amount Available to be Borrowed Under Revolving Credit Facility(2)4,0003,770Total Liquidity$4,721$4,483Total Debt(3)$6,676$6,859Noble Energy Share of Equity10,3469,936Ratio of Debt-to-Book Capital(4)39%41%








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|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As ofSeptember 30, 2018, total cash included cash and cash equivalents of $17million related to Noble Midstream Partners and $1 million restricted cash related to Noble Midstream Partners collateral on letters of credit. As ofDecember 31, 2017, total cash included $18million cash of Noble Midstream Partners and $38 million restricted cash related to the Saddle Butte acquisition that closed first quarter 2018.

|    |                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Excludes amounts available to be borrowed under the Noble Midstream Services Revolving Credit Facility and Leviathan Term Loan Facility, which are not available to Noble Energy for general corporate purposes. See discussion below.

|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Total debt includes capital lease obligations and excludes unamortized debt discount/premium and debt issuance costs. SeeItem 1. Financial Statements – Note5. Debt.

|    |                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | We define our ratio of debt-to-book capital as total debt (which includes long-term debt excluding unamortized discount and issuance costs, the current portion of long-term debt, and short-term borrowings) divided by the sum of total debt plus Noble Energy's share of equity.




Item 1. Financial Statements – Note


Item 1. Financial Statements – Note








Item 1. Financial Statements – Note    Item 3. Quantitative and Qualitative Disclosures About Market Risk.























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Item 1. Financial Statements – Note 12. Marcellus Shale Firm Transportation Contracts








Nine Months Ended September 30,(millions)20182017Total Cash Provided By (Used in)Operating Activities$1,776$1,418Investing Activities(1,502)(1,840)Financing Activities(266)(224)Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash$8$(646)








Operating Outlook – 2018 Capital Investment Program














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Item 1. Financial Statements – Consolidated Statements of Cash Flows





Three Months Ended September 30,Nine Months Ended September 30,(millions)2018201720182017Acquisition, Capital and Exploration ExpendituresUnproved Property Acquisition(1) (2)$8$(10)$21$1,816Proved Property Acquisition(1)(3)—(2)—839Exploration and Development6765852,0901,783Midstream(4)6996685342Corporate and Other11113824Total$764$680$2,834$4,804Investment in Equity Method Investee(5)$—$—$—$68Increase in Capital Lease Obligations$9$—$9$—


|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Unproved and Proved property acquisition costs for the three months ended September 30, 2017 included purchase price adjustments related to the Clayton Williams Energy Acquisition.

|    |                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Unproved property acquisition costs for thefirst nine months of 2018relate to leasing activity.  Unproved property acquisition costs for thefirst nine months of 2017included $1.6 billion related to the Clayton Williams Energy Acquisition and $246 million related to the Delaware Basin asset acquisition.

|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Proved property acquisition costs for thefirst nine months of 2017included $724 million of proved properties and $59 million of asset retirement obligations acquired in the Clayton Williams Energy Acquisition and $58 million related to the Delaware Basin asset acquisition.

|    |                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Midstream expenditures forfirst nine months of 2018included$206 millionrelated to the Saddle Butte acquisition. Midstream expenditures for thefirst nine months of 2017included $68 million related to the Clayton Williams Energy Acquisition.

|    |                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Investment in equity method investee for thefirst nine months of 2017represents our contribution to the Advantage Joint Venture, in which Noble Midstream Partners owns a 50% interest.







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Results of Operations - E&P





Item 1. Financial Statements – Note














Item 1. Financial Statements – Note




















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|  |                       
|- | ----------------------
|• | our growth strategies;

|  |                                  
|- | ---------------------------------
|• | our future results of operations;

|  |                                                                                               
|- | ----------------------------------------------------------------------------------------------
|• | our liquidity and ability to finance our exploration, development and acquisitions activities;

|  |                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|• | our ability to satisfy contractual commitments, including utilization or commercialization of firm transportation commitments in the Marcellus Shale;

|  |                                                
|- | -----------------------------------------------
|• | our ability to make and integrate acquisitions;

|  |                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------
|• | our ability to successfully and economically explore for and develop crude oil, natural gas and NGL resources;

|  |                                    
|- | -----------------------------------
|• | anticipated trends in our business;

|  |                                               
|- | ----------------------------------------------
|• | market conditions in the oil and gas industry;

|  |                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | the impact of governmental fiscal regulation, including federal, state, local, and foreign host regulations, and/or terms, such as those involving the protection of the environment or marketing of production, as well as other regulations; and

|  |                     
|- | --------------------
|• | access to resources.































Part I. Financial Information, Item 1. Financial Statements - Note




















---



















PeriodTotal Number ofSharesPurchased(1)AveragePrice PaidPer ShareTotal Number ofShares Purchasedas Part of PubliclyAnnounced Plans orPrograms(2)Approximate DollarValue of Shares thatMay Yet BePurchased Under thePlans or Programs(millions)7/1/2018 - 7/31/201870$37.23—8/1/2018 - 8/31/20181,366,58529.721,366,5339/1/2018 - 9/30/20182,044,59030.282,044,590Total3,411,245$30.053,411,123$517


|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes stock repurchases of122shares during the period relating to common stock received by us from employees for the payment of withholding taxes due on shares of common stock issued under stock-based compensation plans.

|    |                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Duringthird quarter 2018, we repurchased and retired3,411,123shares of common stock at an average purchase price of$30.07per share pursuant to the $750million share repurchase program, authorized by our Board of Directors, which expiresDecember 31, 2020.































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Exhibit NumberExhibit*2.1Agreement and Plan of Merger, dated as of January 13, 2017, by and among Noble Energy, Inc., Wild West Merger Sub Inc., NBL Permian LLC, and Clayton Williams Energy, Inc. (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (Date of Report: January 13, 2017) filed on January 17, 2017 and incorporated herein by reference).2.2Agreement and Plan of Merger, dated as of May 10, 2015, by and among Noble Energy, Inc., Bluebonnet Merger Sub Inc. and Rosetta Resources Inc. (filed as Exhibit 2.1 of the Registrant’s Current Report on Form 8-K (Date of Report: May 10, 2015) filed on May 11, 2015 and incorporated herein by reference).2.3Exchange Agreement, executed October 29, 2016, by and between CNX Gas Company LLC and Noble Energy, Inc. (filed as Exhibit 2.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and incorporated herein by reference).3.1Restated Certificate of Incorporation of Noble Energy Inc., (filed as Exhibit 3.3 to the Registrant’s Current Report on Form 8-K (Date of Report: July 26, 2016) filed on July 28, 2016 and incorporated herein by reference).3.2By-Laws of Noble Energy, Inc. (as amended through January 30, 2018) (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of Report: January 30, 2018) filed on February 1, 2018 and incorporated herein by reference).3.3Certificate of Elimination of the Series A Junior Participating Preferred Stock of Noble Energy, Inc. (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of Report: July 26, 2016) filed on July 28, 2016 and incorporated herein by reference).3.4Certificate of Elimination of the Series B Mandatorily Convertible Preferred Stock of Noble Energy, Inc. (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (Date of Report: July 26, 2016) filed on July 28, 2016 and incorporated herein by reference).10.1Noble Energy, Inc. Short-Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and incorporated herein by reference).12.1Calculation of ratio of earnings to fixed charges, filed herewith.31.1Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241), filed herewith.31.2Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241), filed herewith.32.1Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), furnished herewith.32.2Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), furnished herewith.101.INSInstance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.101.SCHXBRL Schema Document101.CALXBRL Calculation Linkbase Document101.LABXBRL Label Linkbase Document101.PREXBRL Presentation Linkbase Document101.DEFXBRL Definition Linkbase Document








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*Copies of exhibits will be furnished upon prepayment of 25 cents per page. Requests should be addressed to the Executive Vice President and Chief Financial Officer, Noble Energy, Inc., 1001 Noble Energy Way, Houston, Texas 77070.




















NOBLE ENERGY, INC.(Registrant)DateNovember 1, 2018/s/ Kenneth M. FisherKenneth M. FisherExecutive Vice President, Chief Financial Officer