HOUSTON, July 26 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today announced financial and operating results for the second
quarter of 2005. A conference call to discuss the results is planned for
8:30 a.m. (CDT), Wednesday, July 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.newfld.com .
Second Quarter 2005
For the second quarter of 2005, Newfield reported net income of
$104 million, or $0.82 per share (all per share amounts are on a diluted basis
and reflect the two-for-one stock split in May 2005). Earnings for the quarter
include the effect of a $45 million charge ($30 million after tax), or
$0.23 per share, associated with changes in the fair market value of open
three-way collar contracts, which do not qualify for hedge accounting, and
hedge ineffectiveness. Without the effects of this item, net income for the
quarter would have been $134 million, or $1.05 per share. Revenues in the
second quarter of 2005 were $446 million. Net cash provided by operating
activities before changes in operating assets and liabilities was
$329 million. See Explanation and Reconciliation of Non-GAAP Financial
Measures.
By comparison, Newfield's net income for the second quarter of 2004 was
$67 million, or $0.59 per share. Revenues in the same period were
$283 million. Net cash provided by operating activities before changes in
operating assets and liabilities was $185 million in the second quarter of
2004. See Explanation and Reconciliation of Non-GAAP Financial Measures.
Newfield's production in the second quarter of 2005 was 67.3 Bcfe, a 20%
increase over second quarter 2004 production of 56.0 Bcfe. The following
tables detail production and average realized prices for the second quarters
of 2005 and 2004.
Quarterly Production (A) 2Q05 2Q04 % Change
United States
Natural gas (Bcf) 53.3 47.3 13%
Oil and condensate (MMBbls) 2.0 1.4 43%
International
Natural gas (Bcf) 0.1 0.2 (50%)
Oil and condensate (MMBbls) 0.3 --- N/M
Total
Natural gas (Bcf) 53.4 47.5 12%
Oil and condensate (MMBbls) 2.3 1.4 64%
Total (Bcfe) 67.3 56.0 20%
Average Realized Prices (B) 2Q05 2Q04 % Change
United States
Natural gas (per Mcf) $6.41 $4.92 30%
Oil and condensate (per Bbl) $43.24 $34.64 25%
International
Natural gas (per Mcf) $5.35 $3.87 38%
Oil and condensate (per Bbl) $51.95 --- N/M
Total
Natural gas (per Mcf) $6.41 $4.92 30%
Oil and condensate (per Bbl) $44.28 $34.65 28%
Total (per Mcfe) $6.61 $5.05 31%
(A) Represents volumes sold regardless of when produced.
(B) Average realized prices include the effects of hedging other than
our three-way collar contracts, which do not qualify for hedge
accounting under SFAS No. 133. Had we included the effect of these
contracts, our average realized price for total gas would have been
unchanged for the second quarter of 2005 and $4.84 per Mcf for the
second quarter of 2004. Our total oil and condensate average
realized price would have been $43.86 per Bbl and $32.42 per Bbl for
the second quarter of 2005 and 2004, respectively.
Stated on a unit of production basis, Newfield's lease operating expense
(LOE) in the second quarter of 2005 was $0.71 per Mcfe, compared to LOE of
$0.52 per Mcfe in the second quarter of 2004. LOE in the second quarter of
2005 was impacted by $0.11 per Mcfe of well workover expense. Production and
other taxes in the second quarter of 2005 increased to $0.18 per Mcfe compared
to production and other taxes of $0.16 per Mcfe in the same period of 2004.
DD&A expense in the second quarter of 2005 was $2.09 per Mcfe compared to DD&A
expense of $1.88 per Mcfe in the same period of 2004. G&A expense in the
second quarter of 2005 was $0.41 per Mcfe compared to G&A expense of $0.34 per
Mcfe in the same period of 2004. G&A expense in the second quarter of 2005 is
net of capitalized direct internal costs of $12 million. Capitalized direct
internal costs were $9 million in the second quarter of 2004.
Capital expenditures in the second quarter of 2005 were $263 million.
Year-to-Date 2005
For the first six months of 2005, Newfield posted net income of
$164 million, or $1.29 per share, on revenues of $859 million. Earnings for
the first half of 2005 were impacted by two items:
* A $152 million charge ($99 million after tax), or $0.78 per share,
associated with changes in the fair market value of open three-way
collar contracts, which do not qualify for hedge accounting, and hedge
ineffectiveness; 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
carryforwards because of a substantial increase in estimated future
taxable income as a result of Newfield's Grove discovery in the U.K.
North Sea.
Without the effects of these items, net income for the first six months of
2005 would have been $255 million, or $2.01 per share.
By comparison, in the first half of 2004, net income was $145 million, or
$1.28 per share, on revenues of $588 million. Without the effect of unrealized
commodity expense of $10 million ($7 million after tax), net income for the
first half of 2004 would have been $152 million, or $1.33 per share. Net cash
provided by operating activities before changes in operating assets and
liabilities was $639 million in the first half of 2005 compared to
$393 million in the same period of 2004. See Explanation and Reconciliation of
Non-GAAP Financial Measures.
Production volumes for the first half of 2005 increased 17% above the same
period of 2004. The Company produced 132.2 Bcfe in the first six months of
2005 compared to 113.3 Bcfe in the first six months of 2004. The following
tables detail production and average realized prices for the first half of
2005 and 2004:
Production (A) 1H05 1H04 % Change
United States
Natural gas (Bcf) 104.5 95.2 10%
Oil and condensate (MMBbls) 4.1 3.0 37%
International
Natural gas (Bcf) 0.1 0.3 (67%)
Oil and condensate (MMBbls) 0.5 --- N/M
Total
Natural gas (Bcf) 104.6 95.5 10%
Oil and condensate (MMBbls) 4.6 3.0 53%
Total (Bcfe) 132.2 113.3 17%
Average Realized Prices (B) 1H05 1H04 % Change
United States
Natural gas (per Mcf) $6.32 $5.13 23%
Oil and condensate (per Bbl) $42.07 $33.26 26%
International
Natural gas (per Mcf) $5.15 $3.95 30%
Oil and condensate (per Bbl) $48.27 $36.50 32%
Total
Natural gas (per Mcf) $6.32 $5.12 23%
Oil and condensate (per Bbl) $42.76 $33.26 29%
Total (per Mcfe) $6.49 $5.19 25%
(A) Represents volumes sold regardless of when produced.
(B) Average realized prices include the effects of hedging other than
our three-way collar contracts, which do not qualify for hedge
accounting under SFAS No. 133. Had we included the effect of these
contracts, our average realized price for total gas would have been
unchanged for the six months ended June 30, 2005 and $5.08 per Mcf
for the six months ended June 30, 2004. Our total oil and condensate
average realized price would have been $42.05 per Bbl and $31.69 per
Bbl for the six months ended June 30, 2005 and 2004, respectively.
In the first half of 2005, LOE, stated on a unit of production basis,
averaged $0.69 per Mcfe, compared to LOE of $0.52 per Mcfe in the same period
of 2004. Production taxes in the first half of 2005 were $0.18 per Mcfe
compared to production taxes of $0.15 per Mcfe in the same period of 2004.
DD&A expense in the first half of 2005 was $2.09 per Mcfe compared to DD&A
expense of $1.86 per Mcfe in the same period of 2004. G&A expense in the first
half of 2005 was $0.38 per Mcfe compared to G&A expense of $0.33 per Mcfe in
the prior year. G&A expense in the first half of 2005 is net of capitalized
direct internal costs of $22 million compared to $15 million in the first half
of 2004.
Capital expenditures in the first half of 2005 totaled $517 million. For
the full-year 2005, Newfield has increased its capital budget to be about
$1.2 billion, up from its original $950 million budget. The increase in
spending primarily relates to the development of recent discoveries and higher
oilfield service costs.
Explanation and Reconciliation of Non-GAAP Financial Measures
Earnings stated without the effects of certain items, a non-GAAP financial
measure, affect the comparability of operating results. Earnings without the
effects of these items are presented because the timing and amount of these
items cannot be reasonably estimated and because earnings without the effects
of these items are more comparable to earnings estimates provided by
securities analysts.
Our consolidated statement of income includes the effects of these items
as follows:
-- Commodity derivative expense includes $45 million of unrealized
commodity derivative expense for the second quarter of 2005,
resulting from changes in the fair market value of open three-way
collar contracts, which do not qualify for hedge accounting, and
hedge ineffectiveness, and $1 million of realized expenses related to
the monthly settlement of certain of those contracts in the second
quarter of 2005.
A reconciliation of earnings without the effect of unrealized commodity
derivative expense to net income is shown below:
2Q05
(in millions)
Net income $104
Plus: Unrealized commodity derivative expense 45
Less: Income tax benefit adjustment for above item (15)
Earnings stated without the effects of the above items $134
In the first half of 2005 our consolidated statement of income includes
the effects of these items as follows:
-- Commodity derivative expense for the first half of 2005 and 2004
includes $152 million and $10 million, respectively, of unrealized
commodity derivative expense resulting from changes in the fair
market value of open three-way collar contracts, which do not qualify
for hedge accounting, and hedge ineffectiveness, and $3 million and
$8 million of realized expenses related to the monthly settlement of
certain of those contracts in the first half of 2005 and 2004,
respectively.
-- 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 carryforwards 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 without the effects of unrealized commodity
derivative expense and the tax benefit related to reducing the U.K. tax asset
valuation allowance to net income is shown below:
1H05 1H04
(in millions)
Net income $164 $145
Plus: Unrealized commodity derivative expense 152 10
Less: Income tax benefit adjustment for above item (53) (3)
Less: Tax benefit related to U.K. net operating loss
valuation allowance (8) ---
Earnings stated without the effects of the above items $255 $152
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:
2Q05 2Q04
(in millions)
Net cash provided by operating activities $356 $196
Net change in operating assets and liabilities (27) (11)
Net cash provided by operating activities
before changes in operating assets and liabilities $329 $185
1H05 1H04
(in millions)
Net cash provided by operating activities $617 $414
Net change in operating assets and liabilities 22 (21)
Net cash provided by operating activities
before changes in operating assets and liabilities $639 $393
Third Quarter 2005 Estimates
Natural Gas Production and Pricing The Company's natural gas production
in the third quarter of 2005 is expected to be 49 - 54 Bcf (533 - 587 MMcf/d).
The price the Company realizes for natural gas production from the Gulf of
Mexico and onshore Gulf Coast, after basis differentials, transportation and
handling charges, typically averages $0.15 - $0.20 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 third quarter of 2005 is expected to be 2.2 -
2.4 million barrels (24,000 - 26,000 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 $3 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 $46 -
$51 million ($0.71 - $0.80 per Mcfe) in the third quarter of 2005. LOE
guidance for the third quarter of 2005 includes $0.16 per Mcfe of well
workover expense. Production taxes in the third quarter of 2005 are expected
to be $17 - $19 million ($0.27 - $0.29 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
2005 is expected to be $24 - $26 million ($0.36 - $0.40 per Mcfe), net of
capitalized direct internal costs. Capitalized direct internal costs are
expected to be $11 - $13 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 third quarter of 2005 is expected to be $6 - $7 million ($0.08
- $0.10 per Mcfe). As of July 25, 2005, 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 third quarter of 2005 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 third quarter of 2005 to be
about 35 - 39%. About 75% 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.newfld.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 that includes balancing acquisitions with drill bit opportunities.
Newfield's 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 development projects underway
offshore Malaysia, in the U.K. North Sea and in Bohai Bay, China.
**The statements set forth in this release regarding estimated or
anticipated third 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, 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, labor conditions and other factors set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004. 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.newfld.com info@newfld.com
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,
2005 2004 2005 2004
Oil and gas revenues $445.8 $282.7 $858.9 $588.1
Operating expenses:
Lease operating 47.7 28.9 90.9 58.8
Production and
other taxes 12.2 9.1 23.3 17.5
Transportation 1.9 2.0 4.2 3.4
Depreciation, depletion
and amortization 140.5 105.2 276.3 211.1
General and
administrative 27.7 19.0 50.5 37.6
Total operating
expenses 230.0 164.2 445.2 328.4
Income from operations 215.8 118.5 413.7 259.7
Other income (expenses):
Interest expense (18.6) (12.0) (36.6) (24.5)
Capitalized interest 11.4 4.4 22.7 8.3
Commodity derivative
expense (46.3) (5.6) (155.2) (17.8)
Other 1.1 0.4 1.3 1.0
(52.4) (12.8) (167.8) (33.0)
Income before income
taxes 163.4 105.7 245.9 226.7
Income tax provision 59.2 38.3 81.7 81.4
Net income $104.2 $67.4 $164.2 $145.3
Earnings per share:
Basic $0.83 $0.60 $1.32 $1.30
Diluted $0.82 $0.59 $1.29 $1.28
Weighted average number
of shares outstanding
for basic earnings
per share 125.2 112.2 124.8 112.0
Weighted average number
of shares outstanding
for diluted earnings
per share 127.6 114.1 127.1 113.8
CONDENSED CONSOLIDATED
BALANCE SHEET June 30, December 31,
(Unaudited, in millions) 2005 2004
ASSETS
Current assets:
Cash and cash equivalents $58.6 $58.3
Accounts receivable 238.1 247.7
Inventories 18.6 7.8
Derivative assets 9.9 54.5
Deferred taxes 40.0 1.0
Other current assets 39.2 22.3
Total current assets 404.4 391.6
Oil and gas properties, net (full cost method) 4,011.5 3,775.3
Furniture, fixtures and equipment, net 18.1 18.3
Derivative assets 18.7 55.6
Other assets 20.4 21.4
Deferred taxes 8.8 ---
Goodwill 65.3 65.3
Total assets $4,547.2 $4,327.5
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $401.4 $427.0
Derivative liabilities 99.2 47.0
Total current liabilities 500.6 474.0
Other liabilities 26.6 15.8
Derivative liabilities 193.0 83.1
Long-term debt 872.1 992.4
Asset retirement obligation 203.2 194.2
Deferred taxes 607.5 551.1
Total long-term liabilities 1,902.4 1,836.6
Commitments and contingencies --- ---
STOCKHOLDERS' EQUITY
Common stock 1.3 1.3
Additional paid-in capital 1,151.3 1,101.8
Treasury stock (27.8) (27.3)
Unearned compensation (25.6) (9.5)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (1.4) 2.6
Commodity derivatives (65.7) 0.1
Retained earnings 1,112.1 947.9
Total stockholders' equity 2,144.2 2,016.9
Total liabilities and stockholders' equity $4,547.2 $4,327.5
CONDENSED CONSOLIDATED For the
STATEMENT OF CASH FLOWS Six Months Ended
(Unaudited, in millions) June 30,
2005 2004
Cash flows from operating activities:
Net income $164.2 $145.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 276.3 211.1
Deferred taxes 43.3 25.3
Stock compensation 3.7 2.0
Commodity derivative expense 151.9 9.5
639.4 393.2
Changes in operating assets and liabilities (22.5) 21.1
Net cash provided by operating activities 616.9 414.3
Cash flows from investing activities:
Additions to oil and gas properties (522.2) (347.4)
Proceeds from sale of oil and gas properties 10.7 ---
Additions to furniture, fixtures and equipment (2.2) (1.7)
Net cash used in investing activities (513.7) (349.1)
Cash flows from financing activities:
Proceeds from borrowings under credit
arrangements 473.0 385.5
Repayments of borrowings under credit
arrangements (593.0) (446.5)
Repurchases of secured notes --- (2.9)
Proceeds from issuances of common stock 20.2 11.3
Purchases of treasury stock (0.5) (0.4)
Net cash used in financing activities (100.3) (53.0)
Effect of exchange rate changes on cash and
cash equivalents (2.6) 0.3
Increase in cash and cash equivalents 0.3 12.5
Cash and cash equivalents, beginning of period 58.3 15.3
Cash and cash equivalents, end of period $58.6 $27.8
SOURCE Newfield Exploration Company
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Related links:
http://www.newfld.com
CONTACT:
Steve Campbell of Newfield Exploration
Company, +1-281-847-6081, or info@newfld.com
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