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 at September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and shareholders’ equity for such periods. Certain prior-period amounts have been reclassified to conform to the current-period presentation. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

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 ended December 31, 2014.

Consolidation Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries. 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.

Pension Plan In third quarter 2015, we completed the process of terminating our noncontributory, tax-qualified defined benefit pension plan through the purchase of annuities for the remaining participants. As a result, we expensed all remaining unamortized prior service costs and actuarial losses from accumulated other comprehensive loss (AOCL). For the nine months ended September 30, 2015, we have expensed $88 million related to the termination of the plan. As of September 30, 2015, we have $16 million remaining in AOCL related to our non-qualified defined benefit plan.

Equity Offerings On March 3, 2015, we closed an underwritten public offering of 21 million shares of common stock, par value $0.01 per share, at a price of $47.50 per share. In addition, on March 25, 2015, we completed the issuance of an additional 3.15 million shares of common stock, par value $0.01 per share, in connection with the exercise of the option of the underwriters to purchase additional shares of common stock. The aggregate net proceeds of the offerings were approximately $1.1 billion (after deducting underwriting discounts and commissions and offering expenses). We used approximately $150 million of the net proceeds to repay outstanding indebtedness under our revolving credit facility and the remainder was used for general corporate purposes, including the funding of our capital investment program.

On July 20, 2015, we issued approximately 41 million shares of common stock in exchange for all outstanding shares of Rosetta Resources Inc. (Rosetta) using a ratio of 0.542 of a share of Noble Energy common stock for each share of Rosetta common stock. See Note 3. Rosetta Merger.

Increase in Authorized Shares On April 28, 2015, our stockholders approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of our common stock from 500 million to 1 billion.

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.

Update on Core Area – Israel The Israeli government has developed a framework (Framework) to support the development of offshore natural gas reserves and natural gas exports. After a public hearing process, the Framework was approved by the Israeli Cabinet and Knesset. Enactment of the Framework provides that certain antitrust matters will be resolved. Authority resides with the Minister of Economy to provide the stipulated exemption related to these antitrust matters. Legal challenges may still be brought against the Framework in the Israeli courts. We continue to monitor this effort and if necessary, we are prepared to defend our legal rights to our Israel assets to the fullest extent in both Israel and international venues.

The Framework requires divestiture of Tanin and Karish, and we, therefore, continue to hold these assets for sale. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview for further discussion.

Recently Issued Accounting Standards In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-11 (ASU 2015-11): Simplifying the Measurement of Inventory, effective for annual and interim periods beginning after December 15, 2016. ASU 2015-11 changes the inventory measurement principle for entities using the first-in, first out (FIFO) or average cost methods. For entities utilizing one of these methods, the inventory measurement principle will change from lower of cost or market to the lower of cost and net realizable value. We follow the average cost method and are currently evaluating the provisions of ASU 2015-11 and assessing the impact, if any, it may have on our financial position and results of operations.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03 (ASU 2015-03): Simplifying the Presentation of Debt Issuance Costs, effective for annual and interim periods beginning after December 15, 2015. ASU 2015-03 requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. It is effective retrospectively for all prior periods presented in the financial statements beginning in the first quarter 2016 and is only expected to impact the presentation of our consolidated balance sheet. In August 2015, the FASB issued ASU 2015-15 to specifically address the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU 2015-15 allows entities to defer and present debt issuance costs related to line-of-credit arrangements as an asset and amortize the costs ratably over the term of the line-of-credit arrangement. As of September 30, 2015 and December 31, 2014, we had $49 million and $50 million of capitalized, unamortized debt issuance costs, respectively, included in other long-term assets in our consolidated balance sheet.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU 2015-02): Consolidation - Amendments to the Consolidation Analysis, effective for annual and interim periods beginning after December 15, 2015. ASU 2015-02 changes the guidance as to whether an entity is a variable interest entity (VIE) or a voting interest entity and how related parties are considered in the VIE model. We are currently evaluating the provisions of ASU 2015-02 and assessing the impact, if any, it may have on our financial position and results of operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. Initially, the amendments in ASU 2014-09 were effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application was not permitted. In August 2015, the FASB agreed to give companies an extra year to comply with the new standard. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We are currently evaluating the provisions of ASU 2014-09 and awaiting implementation guidance to determine the impact, if any, it may have on our financial position and results of operations.

Statements of Operations Information Other statements of operations information is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(millions)	2015			2014			2015			2014
Production Expense
Lease Operating Expense	$	133		$	132		$	419		$	424
Production and Ad Valorem Taxes	28			44			89			146
Transportation and Gathering Expense	74			40			185			119
Total	$	235		$	216		$	693		$	689
Other Operating (Income) Expense, Net
Midstream Gathering and Processing (Income) Expense, Net	$	4		$	1		$	10		$	8
Corporate Restructuring Expense ⁽¹⁾	21			—			39			—
Stacked Drilling Rig Expense ⁽²⁾	13			—			20			—
Pension Plan Expense⁽³⁾	67			—			88			—
Rosetta Merger Expenses⁽⁴⁾	71			—			73			—
Gain on Divestitures	—			(30		)	—			(72		)
Other, Net	6			10			22			33
Total	$	182		$	(19	)	$	252		$	(31	)
Other Non-Operating (Income) Expense, Net
Deferred Compensation (Income) Expense ⁽⁵⁾	$	(13	)	$	(12	)	(19		)	$	—
Other (Income) Expense, Net	1			(1		)	(1		)	1
Total	$	(12	)	$	(13	)	$	(20	)	$	1


⁽¹⁾	Amount represents expenses associated with the relocation of our personnel. The expenses primarily include the relocation of our Ardmore, Oklahoma office, as well as the consolidation of our Houston personnel to our corporate headquarters in Houston.


⁽²⁾	Amount represents the day rate cost associated with drilling rigs under contract, but not currently being utilized in our US onshore drilling programs.


⁽³⁾	Amount includes the expensing of the actuarial loss from AOCL related to the termination and re-measurement of our defined benefit pension plan.


⁽⁴⁾	Amount represents expenses associated with the completion of the Rosetta Merger. See Note 3. Rosetta Merger.


⁽⁵⁾	Amounts represent decreases in the fair value of shares of our common stock held in a rabbi trust.

Balance Sheet Information Other balance sheet information is as follows:



(millions)	September 30, 2015			December 31, 2014
Accounts Receivable, Net
Commodity Sales	$	284		$	405
Joint Interest Billings	166			297
Other	140			171
Allowance for Doubtful Accounts	(19		)	(16		)
Total	$	571		$	857
Other Current Assets
Inventories, Materials and Supplies	$	116		$	81
Inventories, Crude Oil	28			24
Assets Held for Sale⁽¹⁾	78			180
Prepaid Expenses and Other Current Assets	59			40
Total	$	281		$	325
Other Noncurrent Assets
Investments in Unconsolidated Subsidiaries	$	427		$	325
Mutual Fund Investments	106			111
Commodity Derivative Assets	104			180
Other Assets	104			99
Total	$	741		$	715
Other Current Liabilities
Production and Ad Valorem Taxes	$	165		$	110
Income Taxes Payable	60			180
Deferred Income Taxes, Current	86			158
Accrued Benefit Costs, Current	30			125
Asset Retirement Obligations	141			81
Interest Payable	119			70
Current Portion of Capital Lease Obligations	57			68
Other	137			152
Total	$	795		$	944
Other Noncurrent Liabilities
Deferred Compensation Liabilities	$	229		$	218
Asset Retirement Obligations	746			670
Accrued Benefit Costs	17			24
Other	112			175
Total	$	1,104		$	1,087

⁽¹⁾Assets held for sale at September 30, 2015 include our Tanin and Karish natural gas discoveries, offshore Israel. See Update on Core Area – Israel, above.