HOUSTON, Feb. 8 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today announced financial and operating results for the fourth
quarter and full-year 2005. A conference call to discuss the results is
planned for 8:30 a.m. (CST), Thursday, February 9. To participate in the call,
dial 719-457-2625. A listen-only broadcast also will be provided over the
Internet. Simply go to the Investor Relations section at
http://www.newfield.com .
2005 Highlights:
* Proved reserves increased 12% to 2 trillion cubic feet equivalent.
Diversification is evident with reserves more evenly distributed among
our focus areas: 29% in the Mid-Continent, 23% Onshore Gulf Coast, 20%
Rocky Mountains, 20% Gulf of Mexico and 8% International.
* Added 467 Bcfe of proved reserves, nearly two times 2005 production.
Almost all (96%) of the reserve additions came through the drillbit.
No significant acquisitions were completed in 2005.
* Made several significant exploration discoveries, including Grove in
the U.K. North Sea and Wrigley in the deepwater Gulf of Mexico.
Production from both is expected to commence in the fourth quarter of
2006, adding more than 100 MMcfe/d (gross).
* Gained access to 52,000 acres in three South Texas counties through a
multi-year JV with a major oil company. The first three wells drilled
under the JV were successful and up to 10 additional wells are
expected to be drilled in the remainder of 2006. Plan to drill about
100 wells onshore Texas in 2006.
* Assimilated the Inland acquisition from 2004 and drilled nearly 200
wells in the Monument Butte Field in Utah. Grew production about 25%,
exiting 2005 at more than 10,000 BOPD.
* Began development of four fields offshore Malaysia. Malaysian
production expected to increase from a year-end 2005 rate of 10,000
BOPD gross to more than 45,000 BOPD gross in 2008. In 2006, plan to
drill 10-12 shallow water wells (PM 318, 323) and the first deepwater
well (Block 2C).
* Began development of two fields in China's Bohai Bay. First production
is expected in late 2006.
Fourth Quarter 2005
For the fourth quarter of 2005, Newfield reported net income of
$184 million, or $1.43 per diluted share (all per share amounts are on a
diluted basis). Earnings for the quarter reflect the impact of the following
items:
* A $147 million gain ($95 million after-tax), or $0.74 per share,
associated with unrealized changes in the fair market value of open
derivative contracts that do not qualify for hedge accounting; and
* A $10 million ceiling test writedown, or $0.07 per share, associated
with decreased emphasis on Brazil and other international exploration
efforts in non-core regions.
Without the effect of these items, net income for the quarter would have
been $99 million, or $0.77 per share.
Revenues in the fourth quarter of 2005 were $443 million. Net cash
provided by operating activities before changes in operating assets and
liabilities was $282 million. See "Explanation and Reconciliation of Non-GAAP
Financial Measures."
By comparison, Newfield's net income for the fourth quarter of 2004 was
$90 million, or $0.72 per share. Net income in this period was negatively
affected by a $23 million after-tax charge ($0.18 per share) for the
impairment of the Enserch Garden Banks floating production facility (EGB) and
related pipelines and processing facility and a ceiling test writedown of
$10 million ($0.08 per share) for dry hole expense in the U.K. North Sea.
Without the effect of these items, net income for the fourth quarter of 2004
would have been $123 million, or $0.98 per share. Revenues in the same period
were $437 million. Net cash provided by operating activities before changes in
operating assets and liabilities was $304 million in the fourth quarter of
2004. See "Explanation and Reconciliation of Non-GAAP Financial Measures."
Newfield's production in the fourth quarter of 2005 was 50.3 Bcfe,
reflecting an estimated 16 Bcfe of deferred production related to hurricanes
in the Gulf of Mexico. Production in the fourth quarter of 2004 was 69.5 Bcfe.
The following tables detail production and average realized prices for the
fourth quarters of 2005 and 2004.
Quarterly Production (A) 4Q05 4Q04 % Change
United States
Natural gas (Bcf) 39.5 53.8 (27%)
Oil and condensate (MMBbls) 1.3 2.1 (38%)
International
Natural gas (Bcf) --- 0.1 N/M
Oil and condensate (MMBbls) 0.5 0.5 ---
Total
Natural gas (Bcf) 39.5 53.9 (27%)
Oil and condensate (MMBbls) 1.8 2.6 (31%)
Total (Bcfe) 50.3 69.5 (28%)
Average Realized Prices (B) 4Q05 4Q04 % Change
United States
Natural gas (per Mcf) $8.94 $6.12 46%
Oil and condensate (per Bbl) $45.31 $40.77 11%
International
Natural gas (per Mcf) --- $6.15 N/M
Oil and condensate (per Bbl) $59.37 $42.51 40%
Total
Natural gas (per Mcf) $8.94 $6.12 46%
Oil and condensate (per Bbl) $49.15 $41.08 20%
Total (per Mcfe) $8.78 $6.29 40%
(A) Represents volumes sold regardless of when produced.
(B) Average realized prices include the effects of hedging other than
contracts that do not qualify for hedge accounting. Had we included
the effect of these contracts, our average realized price for total
gas would have been $7.16 per Mcf and $6.11 per Mcf for the fourth
quarter of 2005 and 2004, respectively. Our total oil and condensate
average realized price would have been $46.27 per Bbl and $38.41 per
Bbl for the fourth quarter of 2005 and 2004, respectively.
Stated on a unit of production basis, Newfield's lease operating expense
(LOE) in the fourth quarter of 2005 was $1.09 per Mcfe, compared to LOE of
$0.69 per Mcfe in the fourth quarter of 2004. Production and other taxes in
the fourth quarter of 2005 were $0.45 per Mcfe compared to production and
other taxes of $0.17 per Mcfe in the same period of 2004. DD&A expense in the
fourth quarter of 2005 was $2.34 per Mcfe compared to DD&A expense of $2.04
per Mcfe in the same period of 2004. G&A expense in the fourth quarter of 2005
was $0.56 per Mcfe compared to G&A expense of $0.35 per Mcfe in the same
period of 2004. G&A expense in the fourth quarter of 2005 is net of
capitalized direct internal costs of $11 million. Capitalized direct internal
costs were $9 million in the fourth quarter of 2004.
Capital expenditures in the fourth quarter of 2005 were $364 million.
Full-year 2005
For 2005, Newfield posted net income of $348 million, or $2.73 per share,
on revenues of $1.8 billion. Earnings for 2005 reflect the impact of the
following items:
* A $210 million charge ($137 million after-tax), or $1.07 per share,
associated with unrealized changes in the fair market value of open
derivative contracts that do not qualify for hedge accounting;
* An $8 million benefit, or $0.06 per share, related to a reversal of
the valuation allowance on U.K. net operating loss carryforwards
because of a substantial increase in estimated future taxable income
as a result of the Grove discovery in the U.K. North Sea;
* A $7 million gain ($5 million after-tax), or $0.04 per share, on the
sale of the EGB; and
* A $10 million ceiling test writedown, or $0.07 per share, associated
with decreased emphasis on Brazil and other international exploration
efforts in non-core regions.
Without the effect of these items, net income for 2005 would have been
$482 million, or $3.77 per share.
Net income in 2004 was $312 million, or $2.63 per share, on revenues of
$1.4 billion. Net income, excluding a $23 million after-tax charge ($0.19 per
share) for the impairment of the EGB and a $17 million ceiling test writedown
($0.14 per share) associated with dry hole costs in the North Sea, would have
been $352 million, or $2.97 per share. Net cash provided by operating
activities before changes in operating assets and liabilities was $1.2 billion
in 2005 compared to $965 million in 2004. See Explanation and Reconciliation
of Non-GAAP Financial Measures.
In 2005, Newfield produced 241.6 Bcfe which reflects the deferral of about
22 Bcfe related to hurricanes. Production in 2004 totaled 243.6 Bcfe. The
following tables detail production and average realized prices for 2005 and
2004:
Production (A) 2005 2004 % Change
United States
Natural gas (Bcf) 190.9 197.6 (3%)
Oil and condensate (MMBbls) 7.1 6.7 6%
International
Natural gas (Bcf) 0.1 0.6 (83%)
Oil and condensate (MMBbls) 1.3 0.9 44%
Total
Natural gas (Bcf) 191.0 198.2 (4%)
Oil and condensate (MMBbls) 8.4 7.6 11%
Total (Bcfe) 241.6 243.6 (1%)
Average Realized Prices (B) 2005 2004 % Change
United States
Natural gas (per Mcf) $7.18 $5.40 33%
Oil and condensate (per Bbl) $44.06 $36.61 20%
International
Natural gas (per Mcf) $4.71 $4.38 8%
Oil and condensate (per Bbl) $55.68 $44.26 26%
Total
Natural gas (per Mcf) $7.17 $5.39 33%
Oil and condensate (per Bbl) $45.84 $37.50 22%
Total (per Mcfe) $7.27 $5.55 31%
(A) Represents volumes sold regardless of when produced.
(B) Average realized prices include the effects of hedging other than
contracts that do not qualify for hedge accounting. Had we included
the effect of these contracts, our average realized price for total
gas would have been $6.65 per Mcf and $5.36 per Mcf for 2005 and
2004, respectively. Our total oil and condensate average realized
price would have been $44.36 per Bbl and $35.27 per Bbl for 2005 and
2004, respectively.
LOE in 2005 averaged $0.85 per Mcfe, compared to LOE of $0.62 per Mcfe in
2004. Production taxes in 2005 were $0.26 per Mcfe compared to production
taxes of $0.17 per Mcfe in 2004. DD&A expense in 2005 was $2.15 per Mcfe
compared to DD&A expense of $1.94 per Mcfe in 2004. G&A expense in 2005 was
$0.43 per Mcfe compared to G&A expense of $0.34 per Mcfe in the prior year.
G&A expense in 2005 is net of capitalized direct internal costs of $46 million
compared to $32 million in 2004.
Capital expenditures in 2005 totaled approximately $1.2 billion.
Proved Reserves and Capital Activity
Newfield's total reserves at year-end 2005 were 2.0 Tcfe, an increase of
12% over year-end 2004 reserves. Reserve additions from all sources were
467 Bcfe with only 19 Bcfe (4%) of the total coming from acquisitions. Sales
of reserves in 2005 totaled 8 Bcfe.
Oil and Gas Reserves*
MMBbls Bcf Bcfe
December 31, 2004 90.5 1,241.0 1,783.9
Extensions, discoveries, revisions and
other additions 20.7 324.1 448.0
Purchases of properties 0.3 16.9 18.9
Reserve additions 21.0 341.0 466.9
Sales of properties (0.2) (7.3) (8.3)
Production (9.7) (183.4) (241.6)
December 31, 2005 101.6 1,391.3 2,000.9
*These estimates were prepared by Newfield. As a requirement of
Newfield's credit facility, independent reserve engineers prepare separate
reserve reports with respect to properties holding at least 70% of the present
value of Newfield's proved reserves. For December 31, 2005, the independent
reserve engineers' reports covered properties representing 81% of our proved
reserves, and for such properties the reserves were within 3% of the reserves
Newfield reported for such properties.
Capital Expenditures
(In millions) 2005
Property acquisitions:
Unproved $ 76
Proved 26
Exploration 256
Development 715
Asset retirement cost 44
Capitalized interest 46
Total costs incurred $1,163
2006-07 Production Guidance
The damage to infrastructure, pipelines and processing facilities
continues to impact Newfield's Gulf of Mexico production in early 2006.
Newfield is currently producing about 215 MMcfe/d and has about 80 MMcfe/d of
deliverability off-line. The Company expects that Gulf production of 250
MMcfe/d will be on-line by the end of the first quarter of 2006 and 275
MMcfe/d by mid-year. In addition, 2006 Gulf production will be negatively
impacted by the inability to execute drilling and recompletion programs in the
third and fourth quarters of 2005. Newfield expects that deferrals associated
with hurricanes will be about 15 Bcfe in 2006.
For 2006, Newfield expects its total Company production to be 250-265
Bcfe, an increase of 3-10% over 2005 production. For 2007, Newfield expects
production will be 300-320 Bcfe, an increase of 20-25%.
Explanation and Reconciliation of Non-GAAP Financial Measures
Earnings stated without the effect of certain items is a non-GAAP
financial measure. Earnings without the effects of these items are presented
because the timing and amount of these items cannot be reasonably estimated
and affect the comparability of operating results from period to period. In
addition, earnings without the effect of these items are more comparable to
earnings estimates provided by securities analysts.
Newfield's consolidated statement of income for the fourth quarters of
2005 and 2004 includes the effects of these items:
* Commodity derivative income (expense), which for the fourth quarter of
2005 is comprised of $147 million of income associated with unrealized
commodity derivative gain resulting from changes in the fair market
value of open derivative contracts that do not qualify for hedge
accounting and hedge ineffectiveness and $76 million of realized
losses related to the settlement of certain of those contracts.
Commodity derivative expense for the fourth quarter of 2004 includes
only realized losses of $7 million related to the settlement of
derivative contracts that do not qualify for hedge accounting.
* A $10 million ceiling test writedown associated with the decreased
emphasis on Brazil and other non-core international exploration
efforts during the fourth quarter of 2005 and a $10 million ceiling
test writedown associated with a dry hole in the U.K. North Sea in the
fourth quarter of 2004.
* A $35 million impairment of the EGB and related pipelines and
processing facility in the fourth quarter of 2004.
A reconciliation of earnings stated without the effect of certain items to
net income is shown below:
4Q05 4Q04
(in millions)
Net income $184 $90
Less: Unrealized commodity derivative income 147 ---
Plus: Ceiling test writedowns 10 10
Plus: Impairment of EGB and related assets --- 35
Income tax adjustment for above items 52 (12)
Earnings stated without the effect of the above items $99 $ 123
For 2005 and 2004, Newfield's consolidated statement of income includes
the effects of the following items:
* Commodity derivative income (expense), which in 2005 is comprised of
$210 million of expense associated with unrealized commodity
derivative loss resulting from changes in the fair market value of
open derivative contracts that do not qualify for hedge accounting and
hedge ineffectiveness and $112 million of realized losses related to
the settlement of certain of those contracts. Commodity derivative
expense for 2004 includes only realized losses of $24 million related
to the settlement of derivative contracts that do not qualify for
hedge accounting.
* A $7 million gain on the sale of the EGB in the third quarter of 2005.
* A $35 million impairment of the EGB and related pipelines and
processing facility in the fourth quarter of 2004.
* A $10 million ceiling test writedown in the fourth quarter of 2005
associated with the decreased emphasis on Brazil and other non-core
international exploration efforts.
* A $17 million ceiling test writedown for a dry hole in the U.K. North
Sea in 2004.
* Income tax provision for 2005 includes an $8 million benefit related
to a reversal of the valuation allowance on Newfield's U.K. net
operating loss carryforwards because of a substantial increase in
estimated future taxable income as a result of the Grove discovery in
the U.K. North Sea.
A reconciliation of earnings stated without the effect of certain items to
net income is shown below:
2005 2004
(in millions)
Net income $348 $312
Plus: Unrealized commodity derivative expense 210 ---
Less: Gain on sale of the EGB 7 ---
Plus: Ceiling test writedowns 10 17
Plus: Impairment of the EGB --- 35
Income tax adjustment for above items (71) (12)
Less: Tax benefit related to U.K. net operating loss
carryforward valuation allowance 8 ---
Earnings stated without the effects of the above items $482 $352
Net cash provided by operating activities before changes in operating
assets and liabilities is presented because of its acceptance as an indicator
of an oil and gas exploration and production company's ability to internally
fund exploration and development activities and to service or incur additional
debt. This measure should not be considered as an alternative to net cash
provided by operating activities as defined by generally accepted accounting
principles. A reconciliation of net cash provided by operating activities
before changes in operating assets and liabilities to net cash provided by
operating activities is shown below:
4Q05 4Q04
(in millions)
Net cash provided by operating activities $222 $353
Net change in operating assets and liabilities 60 (49)
Net cash provided by operating activities
before changes in operating assets and liabilities $282 $304
2005 2004
(in millions)
Net cash provided by operating activities $1,109 $997
Net change in operating assets and liabilities 108 (32)
Net cash provided by operating activities
before changes in operating assets and liabilities $1,217 $965
First Quarter 2006 Estimates
Natural Gas Production and Pricing The Company's natural gas production
in the first quarter of 2006 is expected to be 42 - 47 Bcf (465 - 520 MMcf/d).
Based on current prices, Newfield estimates that its realized price for
natural gas production from the Gulf of Mexico and onshore Gulf Coast, after
basis differentials, transportation and handling charges, will average $0.40 -
$0.60 less per MMBtu than the Henry Hub Index. Realized gas prices for the
Company's Mid-Continent properties, after basis differentials, transportation
and handing charges, typically average $0.70 - $0.80 less per MMBtu than the
Henry Hub Index. Hedging gains or losses will affect price realizations.
Crude Oil Production and Pricing The Company's oil production, including
international liftings, in the first quarter of 2006 is expected to be 1.8 -
2.0 million barrels (20,000 - 22,000 BOPD). Newfield expects to produce
approximately 4,200 BOPD from its Malaysian operations. The timing of liftings
in Malaysia may affect total reported production. The price the Company
receives for Gulf Coast production typically averages about $2 per barrel
below the NYMEX West Texas Intermediate (WTI) price. The price the Company
receives for its production in the Rocky Mountains averages about $6 per
barrel below WTI. Oil production from the Mid-Continent typically sells at a
$1.00 - $1.50 per barrel discount to WTI. Oil production from Malaysia
typically sells at Tapis, or about even with WTI. Hedging gains or losses will
affect price realizations.
Lease Operating Expense and Production Taxes LOE is expected to be $47 -
$53 million ($0.87 - $0.96 per Mcfe) in the first quarter of 2006. Production
taxes in the first quarter of 2006 are expected to be $21 - $23 million ($0.37
- $0.42 per Mcfe). These expenses vary and are subject to impact from, among
other things, production volumes and commodity pricing, tax rates, service
costs, the costs of goods and materials and workover activities. The increased
LOE estimate for the first quarter reflects the continued deferral of Gulf of
Mexico production and other costs related to 2005 hurricanes.
General and Administrative Expense G&A expense for the first quarter of
2006 is expected to be $33 - $36 million ($0.60 - $0.66 per Mcfe), net of
capitalized direct internal costs. Capitalized direct internal costs are
expected to be $15 - $17 million. G&A expense includes stock and incentive
compensation expense. Incentive compensation expense depends largely on
adjusted net income (as defined in the Company's incentive compensation plan),
which excludes unrealized gains and losses on commodity derivatives.
Interest Expense The non-capitalized portion of the Company's interest
expense for the first quarter of 2006 is expected to be $5 - $6 million ($0.09
- $0.10 per Mcfe). As of February 8, 2006, Newfield had no outstanding
borrowings under its credit arrangements. The remainder of long-term debt
consists of four separate issuances of notes that in the aggregate total $875
million in principal amount. Capitalized interest for the first quarter of
2006 is expected to be about $11 - $12 million.
Income Taxes Including both current and deferred taxes, the Company
expects its consolidated income tax rate in the first quarter of 2006 to be
about 35 - 39%. About 60-65% of the tax provision is expected to be deferred.
The Company provides information regarding its outstanding hedging
positions in its annual and quarterly reports filed with the SEC and in its
electronic publication -- @NFX. This publication can be found on Newfield's
web page at http://www.newfield.com . Through the web page, you may elect to
receive @NFX through e-mail distribution.
Newfield Exploration Company is an independent crude oil and natural gas
exploration and production company. Newfield's domestic areas of operation
include the Gulf of Mexico, the U.S. onshore Gulf Coast, the Anadarko and
Arkoma Basins of the Mid-Continent and the Uinta Basin of the Rocky Mountains.
The Company has international exploration and development projects underway
offshore Malaysia and China, and in the U.K. North Sea.
**The statements set forth in this release regarding estimated or
anticipated development and drilling plans, capital expenditures and
production volumes are forward looking and are based upon assumptions and
anticipated results that are subject to numerous uncertainties. Actual results
may vary significantly from those anticipated due to many factors. Newfield's
ability to produce oil and gas from the Gulf of Mexico is dependent on
infrastructure (such as host platforms, pipelines and onshore processing
facilities) owned by third parties. Much of this infrastructure was damaged by
Hurricanes Katrina and Rita. As a result, it is difficult to predict when
production will be permitted to resume. Other factors include drilling
results, oil and gas prices, industry conditions, the prices of goods and
services, the availability of drilling rigs and other support services, the
availability of capital resources and labor conditions. In addition, the
drilling of oil and gas wells and the production of hydrocarbons are subject
to governmental regulations and operating risks.
Newfield Exploration Company For information, contact:
363 N. Sam Houston Parkway East, Ste. 2020 Steve Campbell
Houston, TX 77060 (281) 847-6081
http://www.newfield.com info@newfield.com
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in millions, except per share data)
For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Oil and gas revenues $443 $437 $1,762 $1,353
Operating expenses:
Lease operating 55 48 205 152
Production and other taxes 23 12 64 42
Depreciation, depletion
and amortization 118 142 521 472
General and administrative 28 25 104 84
Ceiling test writedown 10 10 10 17
Other (22) 35 (29) 35
Total operating expenses 212 272 875 802
Income from operations 231 165 887 551
Other income (expenses):
Interest expense (18) (18) (72) (58)
Capitalized interest 12 11 46 26
Commodity derivative
income (expense) 71 (7) (322) (24)
Other 1 1 4 4
66 (13) (344) (52)
Income before income taxes 297 152 543 499
Income tax provision 113 62 195 187
Net income $184 $90 $348 $312
Earnings per share:
Basic $1.46 $0.73 $2.78 $2.68
Diluted $1.43 $0.72 $2.73 $2.63
Weighted average number
of shares outstanding for
basic earnings per share 126 124 125 117
Weighted average number of
shares outstanding for
diluted earnings per share 129 126 128 119
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
December 31, December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $39 $58
Other current assets 501 334
Total current assets 540 392
Oil and gas properties, net (full cost method) 4,410 3,775
Other assets 69 95
Goodwill 62 65
Total assets $5,081 $4,327
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $670 $474
Other liabilities 230 99
Long-term debt 870 992
Asset retirement obligation 213 194
Deferred taxes 720 551
Total long-term liabilities 2,033 1,836
Commitments and contingencies --- ---
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,186 1,102
Treasury stock (27) (27)
Unearned compensation (34) (10)
Accumulated other comprehensive income (loss) (44) 3
Retained earnings 1,296 948
Total stockholders' equity 2,378 2,017
Total liabilities and stockholders' equity $5,081 $4,327
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions) For the
Twelve Months Ended
December 31,
2005 2004
Cash flows from operating activities:
Net income $348 $312
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 521 472
Deferred taxes 125 125
Stock compensation 10 4
Gain on sale of EGB (7) ---
Commodity derivative expense 210 ---
Impairment of EGB --- 35
Ceiling test writedown 10 17
1,217 965
Changes in operating assets and liabilities (108) 32
Net cash provided by operating activities 1,109 997
Cash flows from investing activities:
Purchases of businesses, net of cash acquired --- (756)
Net additions to oil and gas properties
and other (1,043) (843)
Proceeds from sale of EGB 7 ---
Net cash used in investing activities (1,036) (1,599)
Cash flows from financing activities:
Net proceeds (repayments) under
credit arrangements (120) 25
Proceeds from issuances of senior
subordinated notes --- 325
Proceeds from issuances of common stock, net 32 297
Repurchases of secured notes --- (3)
Net cash provided by (used in)
financing activities (88) 644
Effect of exchange rate changes on cash
and cash equivalents (4) 1
Increase (decrease) in cash and cash equivalents (19) 43
Cash and cash equivalents, beginning of period 58 15
Cash and cash equivalents, end of period $39 $58
SOURCE Newfield Exploration Company
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Related links:
http://www.newfield.com
CONTACT:
Steve Campbell of Newfield Exploration
Company, +1-281-847-6081, or info@newfield.com
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