HOUSTON, July 25 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today reported second quarter financial and operating results
along with updated production guidance for 2007 and 2008. Newfield will be
hosting its second quarter results conference call at 8:30 a.m. (CDST) on
July 26. To participate in the call dial 719-457-2617 or listen through the
website at http://www.newfield.com.
For the second quarter of 2007, Newfield reported net income of $150
million, or $1.15 per diluted share (all per share amounts are on a diluted
basis). The results reflect the impact of commodity derivative income of
$55 million ($36 million after tax), or $0.28 per share, associated with
unrealized changes in the fair market value of open derivative contracts
that are not designated for hedge accounting.
Without the effect of unrealized commodity derivative income, net
income for the quarter would have been $114 million, or $0.87 per share.
Revenues in the second quarter of 2007 were $528 million. Net cash provided
by operating activities before changes in operating assets and liabilities
was $380 million. See "Explanation and Reconciliation of Non-GAAP Financial
Measures" found after the financial statements in this release.
Newfield's production in the second quarter of 2007 was 71 Bcfe, an
increase of 10% over first quarter 2007 production and 22% above the second
quarter of 2006.
Operational Highlights
-- Seven Seas Prospect Successful -- In early July, Newfield drilled a
successful appraisal well on its Seven Seas prospect on License Area
48-7C in the U.K. North Sea. The well, located approximately
14 kilometers east of the West Sole Fields, was drilled to appraise a
1990s discovery. The Seven Seas well was drilled horizontally within
the reservoir for 3,500 feet and tested at an equipment-limited rate of
47 MMcfe/d. Newfield operates with an 80% interest in this undeveloped
field.
-- Grove Field Commences Production -- On April 25, the Grove Field in the
U.K. North Sea commenced production. The G-1 and G-2 wells have
produced as high as 37 MMcfe/d and 38 MMcfe/d, respectively. The field
is currently producing 36 MMcfe/d (gross). Newfield operates the field
with an 85% interest. Newfield plans to sell all its subsidiaries which
do business in the U.K.
-- Wrigley Field On-Line -- In early July, first production commenced from
Newfield's Wrigley development in the deepwater Gulf of Mexico. Gross
production is currently 40 MMcfe/d and continues to ramp up to an
expected rate of about 60 MMcfe/d. The field is operated by Newfield
with the Company holding a 50% working interest.
-- Abu Field Commences Production -- In May, the Abu Field offshore
Malaysia commenced production. The field is currently producing 10,000
BOPD and is ramping to an expected run rate of 15,000 BOPD (gross). Due
to the timing of oil liftings, reported second quarter 2007 production
includes no Abu volumes. Newfield has a 50% interest in Abu.
-- Stiles/Britt Ranch Reaches Record Production -- In the second quarter,
production from the Stiles/Britt Ranch Field in the Texas Panhandle
reached a record production rate of 74 MMcfe/d (gross). There are five
operated rigs running in the field today. Newfield operates this
growing development with a 95-100% working interest across the field.
-- Val Verde Production Surpasses 100 MMcfe/d -- In the second quarter,
production from the Val Verde Basin of West Texas reached a new high
rate of more than 100 MMcfe/d (gross). Newfield's working interest
across the Val Verde Basin averages approximately 70%.
-- South Texas JV Production Reaches 82 MMcfe/d -- In the second quarter,
production from Newfield's joint venture with Exxon-Mobil in South
Texas reached a new high of 82 MMcfe/d (gross). Newfield's interest in
this joint venture is approximately 50%. Newfield has an inventory of
20 ready-to-drill prospects under this venture and is currently
operating two drilling rigs.
-- Fastball Tests at 60 MMcfe/d -- During the second quarter, Newfield
tested its recent Fastball Prospect, located at Viosca Knoll 1003 in
the deepwater Gulf of Mexico, at 43 MMcf/d and 3,000 BCPD (gross). The
field will be developed as a tie back to existing infrastructure with
first production expected in the first half of 2009. Newfield operates
Fastball with a 66% working interest.
-- Woodford Shale Production at 115 MMcfe/d -- Newfield is currently
completing its first 40-acre pilot with four wells expected to commence
production in August. Newfield has now spud 110 operated horizontal
wells and has an interest in 175 horizontal wells, or 60% of the
industry's 291 horizontal wells drilled in the play to date.
"Our production in the second quarter was strong and provides great
momentum as we move into the remainder of 2007 and into 2008," said David
A. Trice, Newfield Chairman, President and CEO. "The sources of our
production growth are diverse -- we hit new production highs in our
Woodford Shale Play, in the Val Verde Basin and in our South Texas JV.
Although not reflected in our second quarter results, we recently commenced
production from significant new developments offshore Malaysia and in the
deepwater Gulf of Mexico. These fields will add significant volumes in the
second half of 2007 and in 2008.
"Our production guidance for the full year 2007 is well ahead of our
previously provided forecast," continued Trice. "In fact, if you consider
that we expect to divest of approximately 45 Bcfe of production in 2007,
our full-year volumes would have been above our previous full year 2007
guidance of 265 - 279 Bcfe. This is great news and indicates that our
development drilling programs are contributing to growth as expected. We
are in the process of divesting of our assets on the shelf, all of our
assets in the U.K. North Sea, our producing fields in Bohai Bay and select
properties in the Mid-Continent and South Texas. For 2008, we expect to
have at least 10% pro-forma production growth -- or a range of 215 - 230
Bcfe."
2007 Production Guidance
The following table details 2007 estimated production guidance before
planned asset sales and acquisitions, the impact of planned asset sales and
acquisitions on second half 2007 volumes and a revised estimate for 2007.
2H07e 2007e Impact of
1H07a Before Acq. Before Acq. Acq. and Revised
and Sales and Sales Sales on 2007e
2007e (Bcfe)
Domestic:
GOM Shelf (1) 43.4 43 - 44 86 - 87 (37) 48 - 50
GOM
Deepwater(2) 6.9 8 - 9 15 - 16 (1) 14 - 15
Onshore
U.S. (3) 79.4 82 - 90 161 - 169 4 165 - 173
International:
U.K. (4) 0.4 4 - 4.5 4.5 - 5 (3) 1.5 - 2
China (5) 2.7 1.5 - 1.7 4 - 4.5 (1) 3 - 3.5
Malaysia 2.7 5 - 6 8 - 9 n/a 8 - 9
Total 135.5 144 - 155 279 - 291 38 240 - 253
(1) On June 20, the Company announced the sale of its Gulf of Mexico shelf
assets to McMoRan for $1.1 billion, plus the assumption of abandonment
obligations. Guidance assumes the transaction closes in early August
2007.
(2) Reduction relates to deepwater assets included in the sale to McMoRan.
(3) On June 29, the Company closed on its acquisition of Stone Energy
Corporation's Rocky Mountain assets. Guidance includes 7 Bcfe for this
acquisition. Guidance assumes planned producing property sales in
South Texas and the Mid-Continent would occur late in the third
quarter of 2007.
(4) Newfield is marketing all of its subsidiaries that do business in the
U.K. North Sea. Guidance assumes closing would occur late in the third
quarter of 2007.
(5) Newfield is marketing its producing fields in Bohai Bay. Guidance
assumes closing would occur in the fourth quarter of 2007.
Capital Expenditures
During the second quarter, Newfield invested $522 million, excluding
the $577 million acquisition of the Rocky Mountain assets. Year-to-date,
Newfield has invested $1.6 billion, including the acquisition and expects
its full-year capital budget to be approximately $2.1 billion.
Third Quarter 2007 Estimates
The following estimates include the effects of the recent Rocky
Mountain acquisition and the planned sale of the Gulf of Mexico shelf. The
estimates do not include any effects from the other planned dispositions.
Natural Gas Production and Pricing The Company's natural gas production
in the third quarter of 2007 is expected to be 45 - 50 Bcf (489 - 543
MMcf/d). This estimate includes approximately 8 - 10 MMcf/d from the Grove
Field in the U.K North Sea. Realized gas prices for the Company's
Mid-Continent properties, after basis differentials, transportation and
handling charges, typically average 75 - 85% of the Henry Hub Index. 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. Hedging gains or losses will
affect price realizations.
Crude Oil Production and Pricing The Company's oil production,
including international liftings, in the third quarter of 2007 is expected
to be 2.1 - 2.3 million barrels (22,800 - 25,000 BOPD). Newfield expects to
produce approximately 5,500 BOPD net from its Malaysian operations and
approximately 1,500 BOPD net from its China operations. The timing of
liftings in Malaysia and China 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 $13 - $15 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. Oil production from China typically sells at $10 - $12 per barrel
less than WTI. Hedging gains or losses will affect price realizations.
Lease Operating Expense and Production Taxes LOE is expected to be $61
- $68 million ($1.00 - $1.11 per Mcfe) in the third quarter of 2007. This
includes major expense of approximately $14 million. LOE, on a unit of
production basis, is expected to be lower following the sale of the
Company's Gulf of Mexico shelf assets. (As an example, major expense in the
fourth quarter of 2007 is expected to drop to approximately $3 million.)
Production taxes in the third quarter of 2007 are expected to be $32 - $35
million ($0.52 - $0.58 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.
General and Administrative Expense G&A expense for the third quarter of
2007 is expected to be $36 - $40 million ($0.59 - $0.65 per Mcfe), net of
capitalized direct internal costs. Capitalized direct internal costs are
expected to be $16 - $18 million. G&A in the third quarter of 2007 includes
approximately $3 million of transaction-related expenses associated with
the sale of our Gulf of Mexico shelf assets. G&A expense includes incentive
compensation expense, which 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 third quarter of 2007 is expected to be $25 - $29 million
($0.41 - $0.48 per Mcfe). As of July 24, 2007, Newfield had approximately
$1.0 billion outstanding under its credit arrangements. The remainder of
debt consists of four separate issuances of notes that in the aggregate
total $1,175 million in principal amount. Capitalized interest for the
third quarter of 2007 is expected to be about $8 - $9 million.
Income Taxes Including both current and deferred taxes, the Company
expects its consolidated income tax rate in the third quarter of 2007 to be
about 35 - 38%. About 50% of the tax provision is expected to be deferred
in the third quarter.
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 of growing reserves through the drilling of a balanced
risk/reward portfolio and select acquisitions. Newfield's domestic areas of
operation include the U.S. onshore Gulf Coast, the Anadarko and Arkoma
Basins of the Mid-Continent, the Rocky Mountains and the Gulf of Mexico.
The Company has international operations in Malaysia, the U.K. North Sea
and China.
**The statements set forth in this release regarding estimated or
anticipated 2007 and 2008 production volumes, third quarter 2007 results
and the expected timing of development projects and asset sales 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 including 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, the availability of refining capacity for the crude
oil Newfield produces from its Monument Butte Field in Utah 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. Completion of our proposed divestitures is subject to
receiving offers that Newfield considers acceptable.
For information, contact:
Investor Relations: Steve Campbell (281) 847-6081
Media Relations: Keith Schmidt (281) 674-2650
Email: info@newfield.com
PRODUCTION, PRICES AND COSTS
Three Months Ended Percentage
June 30, Increase
2007 2006 (Decrease)
Production (1):
United States:
Natural gas (Bcf) 56.2 48.0 17%
Oil and condensate (MBbls) 1,876 1,462 28%
Total (Bcfe) 67.4 56.8 19%
International:
Natural gas (Bcf) 0.3 - 100%
Oil and condensate (MBbls) 515 253 104%
Total (Bcfe) 3.5 1.5 127%
Total:
Natural gas (Bcf) 56.5 48.0 18%
Oil and condensate (MBbls) 2,391 1,715 39%
Total (Bcfe) 70.9 58.3 22%
Average Realized Prices (2):
United States:
Natural gas (per Mcf) $7.46 $6.97 7%
Oil and condensate (per Bbl) 50.34 51.21 (2%)
International:
Natural gas (per Mcf) $6.91 $- 100%
Oil and condensate (per Bbl) 63.06 62.50 1%
Total:
Natural gas (per Mcf) $7.46 $6.97 7%
Oil and condensate (per Bbl) 53.08 52.88 -
Natural gas equivalent (per Mcfe) 7.74 7.30 6%
Operating Costs (per Mcfe):
Lease Operating:
Recurring $1.03 $1.01 2%
Major expense 0.32 0.13 146%
Production and other taxes 0.29 0.27 7%
Depreciation, depletion and
amortization 2.80 2.46 14%
General and administrative 0.47 0.48 (2%)
Other - 0.43 (100%)
Total operating costs $4.91 $4.78 3%
(1) Represents volumes sold regardless of when produced.
(2) Average realized prices include the effects of hedging contracts,
including hedging contracts that are not designated for hedge
accounting. If the effects of hedging contracts that are not
designated for hedge accounting had not been included, our average
realized price for total gas would have been $6.87 and $6.14 per Mcf
for the second quarter of 2007 and 2006, respectively, and our total
oil and condensate average realized price would have been $57.66 and
$55.38 per Bbl, respectively. Without the effects of any hedging
contracts, our average realized prices for the second quarter of 2007
and 2006 would have been $6.87 and $6.15 per Mcf, respectively, for
gas and $59.29 and $64.67 per Bbl, respectively, for oil.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in millions, except per share data)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Oil and gas revenues $528 $390 $968 $821
Operating expenses:
Lease operating 96 67 208 119
Production and other taxes 20 15 38 31
Depreciation, depletion
and amortization 198 144 378 275
General and administrative 33 28 72 58
Ceiling test writedown - - 47 -
Other - 25 - (5)
Total operating expenses 347 279 743 478
Income from operations 181 111 225 343
Other income (expenses):
Interest expense (28) (24) (51) (42)
Capitalized interest 11 10 22 22
Commodity derivative
income (expense) 77 46 (81) 52
Other 1 4 2 5
61 36 (108) 37
Income before income taxes 242 147 117 380
Income tax provision 92 53 63 137
Net income $150 $94 $54 $243
Earnings per share:
Basic $1.17 $0.74 $0.42 $1.92
Diluted $1.15 $0.73 $0.41 $1.89
Weighted average number
of shares outstanding for
basic earnings per share 127 127 127 126
Weighted average number
of shares outstanding for
diluted earnings per share 130 129 130 129
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
June 30, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $37 $80
Other current assets 704 771
Total current assets 741 851
Oil and gas properties, net (full cost method) 6,812 5,655
Other assets 130 129
Total assets $7,683 $6,635
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $908 $999
Short-term debt 124 124
1,032 1,123
Other liabilities 31 28
Derivative liabilities 181 179
Long-term debt 1,979 1,048
Asset retirement obligation 246 232
Deferred taxes 1,060 963
Total long-term liabilities 3,497 2,450
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,231 1,198
Treasury stock (32) (30)
Accumulated other comprehensive income 13 6
Retained earnings 1,941 1,887
Total stockholders' equity 3,154 3,062
Total liabilities and stockholders' equity $7,683 $6,635
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
For the
Six Months Ended
June 30,
2007 2006
Cash flows from operating activities:
Net income $54 $243
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 378 275
Stock-based compensation 10 16
Ceiling test writedown 47 -
Early redemption premium - 8
Commodity derivative (income) expense
Total (gains) losses 81 (52)
Realized gains 113 35
Deferred taxes 43 125
726 650
Changes in operating assets and liabilities (91) 42
Net cash provided by operating activities 635 692
Cash flows from investing activities:
Acquisition of oil and gas properties (578) -
Additions to oil and gas properties and other (1,073) (1,322)
Redemption of short-term investments 24 352
Net cash used in investing activities (1,627) (970)
Cash flows from financing activities:
Net proceeds (repayments) under
credit arrangements 932 -
Net proceeds (repayments) of senior
subordinated notes - 300
Proceeds from issuances of common stock 13 8
Stock-based compensation excess tax benefit 4 3
Purchases of treasury stock - (4)
Net cash provided by financing activities 949 307
Effect of exchange rate changes on cash and
cash equivalents - 5
Increase (decrease) in cash and cash equivalents (43) 34
Cash and cash equivalents, beginning of period 80 39
Cash and cash equivalents, end of period $37 $73
Explanation and Reconciliation of Non-GAP Financial Measures
Earnings stated without the effects of certain items is a non-GAAP
financial measure. Earnings without the effects of these items are
presented because they 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.
A reconciliation of earnings for the second quarter of 2007 and 2006
stated without the effect of certain items to net income is shown below:
2Q07 2Q06
(in millions)
Net income $150 $94
Unrealized commodity derivative income(1) (55) (10)
Early redemption premium - 27
Income tax adjustment for above items 19 (6)
Earnings stated without the effect of the above items $114 $105
(1) The components of Commodity derivative income as included in
Newfield's Consolidated Statement of Income for the second quarter of
2007 and 2006 are as follows:
2Q07 2Q06
(in millions)
Cash flow hedges:
Hedge ineffectiveness $- $1
Other derivative contracts:
Unrealized gain due to changes in fair market value 55 9
Realized gain on settlement 22 36
Total commodity derivative income $77 $46
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:
2Q07 2Q06
(in millions)
Net cash provided by operating activities $300 $351
Net change in operating assets and liabilities 80 (54)
Net cash provided by operating activities
before changes in operating assets and liabilities $380 $297
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, info@newfield.com, both for Newfield Exploration
Company
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