HOUSTON, April 26 /PRNewswire-FirstCall/ -- Newfield Exploration
Company (NYSE: NFX) today announced financial and operating results for the
first quarter of 2006. A conference call to discuss the results is planned
for 8:30 a.m. (CDT), Thursday, April 27. To participate in the call, dial
719-457-2633. A listen-only broadcast also will be provided over the
Internet. Simply go to the Investor Relations section at
http://www.newfield.com .
For the first quarter of 2006, Newfield reported net income of $149
million, or $1.17 per diluted share (all per share amounts are on a diluted
basis). Earnings for the quarter reflect an $8 million gain ($5 million
after-tax), or $0.04 per share, associated with hedge ineffectiveness and
unrealized changes in the fair market value of open derivative contracts
that do not qualify for hedge accounting. Without the effect of this item,
net income for the quarter would have been $144 million, or $1.13 per
share.
Revenues in the first quarter of 2006 were $431 million. Net cash
provided by operating activities before changes in operating assets and
liabilities was $352 million. See "Explanation and Reconciliation of
Non-GAAP Financial Measures."
By comparison, net income in the first quarter of 2005 was $60 million,
or $0.47 per share, and reflected the impact of a $107 million charge ($69
million after-tax), or $0.55 per share, associated with hedge
ineffectiveness and unrealized changes in the fair market value of open
derivative contracts that do not qualify for hedge accounting; and an $8
million benefit, or $0.06 per share, related to a reduction of the
valuation allowance on Newfield's U.K. net operating loss carry forwards
because of a substantial increase in estimated future taxable income as a
result of the Grove discovery in the U.K. North Sea.
Without the effects of these two items, net income for the first
quarter of 2005 would have been $121 million, or $0.96 per share. Revenues
in the first quarter of 2005 were $413 million. Net cash provided by
operating activities before changes in operating assets and liabilities was
$310 million in the first quarter of 2005. See "Explanation and
Reconciliation of Non-GAAP Financial Measures."
Newfield's production in the first quarter of 2006 was 53.9 Bcfe,
reflecting an estimated 8 Bcfe of deferred production related to the 2005
hurricanes in the Gulf of Mexico. Production in the first quarter of 2005
was 64.9 Bcfe. The following tables detail production and average realized
prices for the first quarters of 2006 and 2005.
Quarterly Production (A) 1Q06 1Q05 % Change
United States
Natural gas (Bcf) 44.4 51.2 (13%)
Oil and condensate (MMBbls) 1.5 2.0 (28%)
International
Natural gas (Bcf) --- --- ---
Oil and condensate (MMBbls) 0.1 0.2 (50%)
Total
Natural gas (Bcf) 44.4 51.2 (13%)
Oil and condensate (MMBbls) 1.6 2.3 (30%)
Total (Bcfe) 53.9 64.9 (17%)
Average Realized Prices (B) 1Q06 1Q05 % Change
United States
Natural gas (per Mcf) $7.79 $6.23 25%
Oil and condensate (per Bbl) $51.17 $40.90 25%
International
Natural gas (per Mcf) --- $5.01 N/M
Oil and condensate (per Bbl) $65.79 $43.87 50%
Total
Natural gas (per Mcf) $7.79 $6.22 25%
Oil and condensate (per Bbl) $52.23 $41.20 27%
Total (per Mcfe) $7.96 $6.36 25%
(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 $7.83 per Mcf for the first quarter of 2006.
There were no gas contracts that did not qualify for hedge accounting
that settled in the first quarter of 2005. Our total oil and
condensate average realized price would have been $50.55 per Bbl and
$40.20 per Bbl for the first quarter of 2006 and 2005, respectively.
Stated on a unit of production basis, Newfield's lease operating
expense in the first quarter of 2006 was $0.97 per Mcfe compared to $0.70
per Mcfe in the first quarter of 2005. Production and other taxes in the
first quarter of 2006 were $0.29 per Mcfe compared to $0.17 per Mcfe in the
same period of 2005. DD&A expense in the first quarter of 2006 was $2.43
per Mcfe compared to $2.09 per Mcfe in the same period of 2005. G&A expense
in the first quarter of 2006 was $0.55 per Mcfe compared to $0.35 per Mcfe
in the same period of 2005. G&A expense in the first quarter of 2006 is net
of capitalized direct internal costs of $15 million. Capitalized direct
internal costs were $10 million in the first quarter of 2005.
Capital expenditures in the first quarter of 2006 were $390 million.
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 effects of these items are more
comparable to earnings estimates provided by securities analysts.
Newfield's consolidated statement of income for the first quarters of
2006 and 2005 includes the effects of these items:
-- Commodity derivative income (expense), which for the first quarter of
2006 is comprised of $8 million of income associated with an
unrealized commodity derivative gain resulting from changes in the
fair market value of open derivative contracts that do not qualify for
hedge accounting, hedge ineffectiveness and $2 million of realized
losses related to the settlement of contracts that do not qualify for
hedge accounting. Commodity derivative expense for the first quarter
of 2005 includes $107 million of unrealized commodity derivative
expense resulting from changes in the fair market value of open
derivative contracts that do not qualify for hedge accounting, hedge
ineffectiveness and realized losses of $2 million related to the
settlement of contracts that do not qualify for hedge accounting.
-- Income tax provision for 2005 includes an $8 million benefit related
to a reduction of the valuation allowance on Newfield's U.K. net
operating loss carry forwards because of a substantial increase in
estimated future taxable income as a result of Newfield's Grove
discovery in the U.K. North Sea.
A reconciliation of earnings stated without the effects of certain items
to net income is shown below:
1Q06 1Q05
(in millions)
Net income $149 $60
Less: Unrealized commodity derivative
income (expense) 8 (107)
Plus: Income tax provision adjustment
for above item 3 (38)
Less: Tax benefit related to U.K. net
operating loss valuation allowance --- 8
Earnings stated without the effect of the
above items $144 $121
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:
1Q06 1Q05
(in millions)
Net cash provided by operating activities $340 $261
Net change in operating assets and liabilities 12 49
Net cash provided by operating activities before
changes in operating assets and liabilities $352 $310
Second Quarter 2006 Estimates
Natural Gas Production and Pricing The Company's natural gas production
in the second quarter of 2006 is expected to be 47 - 52 Bcf (517 - 570
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 handling 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 second quarter of 2006 is expected
to be 1.7 - 1.8 million barrels (18,700 - 20,300 BOPD). Newfield expects to
produce approximately 3,000 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 is now averaging
$9 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 $55
- $60 million ($0.95 - $1.00 per Mcfe) in the second quarter of 2006.
Production taxes in the second 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. Newfield expects to record an additional business interruption
insurance benefit of approximately $12 million in the second quarter of
2006. The benefit will be recorded on its income statement as a reduction
to operating expenses.
General and Administrative Expense G&A expense for the second quarter
of 2006 is expected to be $31 - $34 million ($0.50 - $0.60 per Mcfe), net
of capitalized direct internal costs. Capitalized direct internal costs are
expected to be $14 - $16 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 second quarter of 2006 is expected to be $10 - $12 million
($0.18 - $0.20 per Mcfe). As of April 26, 2006, Newfield had no outstanding
borrowings under its credit arrangements. Long-term debt consists of five
separate issuances of notes that in the aggregate total $1.4 billion in
principal amount. The total includes $250 million aggregate principal
amount of the Company's 8 3/8% Senior Subordinated Notes Due 2012, which
have been called for redemption on May 3, 2006. Newfield anticipates that
it will take a charge to second quarter 2006 earnings of approximately $26
million ($17 million after-tax) related to this early redemption of notes.
Following this redemption, long-term debt will total approximately $1.2
billion. 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 second 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. The Company relies on a proven
growth strategy growing reserves through the drilling of a balanced
risk/reward portfolio and select acquisitions. 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 in Malaysia, the U.K. North Sea and China.
**The statements set forth in this release regarding estimated or
anticipated second quarter results 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.
For information, contact:
Investor Relations: Steve Campbell (281) 847-6081
Media Relations: Keith Schmidt (281) 674-2650
Email: info@newfield.com
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in millions, except per share data) For the
Three Months Ended
March 31,
2006 2005
Oil and gas revenues $431 $413
Operating expenses:
Lease operating 52 46
Production and other taxes 16 11
Depreciation, depletion and amortization 131 136
General and administrative 30 23
Business interruption insurance benefit (30) ---
Total operating expenses 199 216
Income from operations 232 197
Other income (expenses):
Interest expense (18) (18)
Capitalized interest 12 12
Commodity derivative income (expense) 6 (109)
Other 1 ---
1 (115)
Income before income taxes 233 82
Income tax provision 84 22
Net income $149 $60
Earnings per share:
Basic $1.18 $0.48
Diluted $1.17 $0.47
Weighted average number of shares outstanding
for basic earnings per share 126 124
Weighted average number of shares outstanding
for diluted earnings per share 128 127
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
March 31, Dec. 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $41 $39
Other current assets 527 501
Total current assets 568 540
Oil and gas properties, net (full cost method) 4,673 4,410
Other assets 60 69
Goodwill 62 62
Total assets $5,363 $5,081
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $719 $670
Other liabilities 258 230
Long-term debt 868 870
Asset retirement obligation 217 213
Deferred taxes 772 720
Total long-term liabilities 2,115 2,033
Commitments and contingencies --- ---
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,159 1,186
Treasury stock (31) (27)
Unearned compensation --- (34)
Accumulated other comprehensive loss (45) (44)
Retained earnings 1,445 1,296
Total stockholders' equity 2,529 2,378
Total liabilities and stockholders' equity $5,363 $5,081
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions) For the
Three Months Ended
March 31,
2006 2005
Cash flows from operating activities:
Net income $149 $60
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 131 136
Deferred taxes 73 6
Stock-based compensation 7 1
Commodity derivative (income) expense (8) 107
352 310
Changes in operating assets and liabilities (12) (49)
Net cash provided by operating activities 340 261
Cash flows from investing activities:
Net additions to oil and gas properties
and other (339) (246)
Net cash used in investing activities (339) (246)
Cash flows from financing activities:
Net proceeds (repayments) under
credit arrangements --- (57)
Proceeds from issuances of common stock, net 2 15
Repurchases of treasury stock (3) ---
Stock-based compensation excess tax benefit 1 ---
Net cash used in financing activities --- (42)
Effect of exchange rate changes on cash
and cash equivalents 1 ---
Increase (decrease) in cash and cash equivalents 2 (27)
Cash and cash equivalents, beginning of period 39 58
Cash and cash equivalents, end of period $41 $31
SOURCE Newfield Exploration Company
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Related links:
http://www.newfield.com
CONTACT:
investor relations, Steve Campbell,
+1-281-847-6081, or media relations, Keith Schmidt,
+1-281-674-2650, both of Newfield Exploration Company, or
info@newfield.com
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