HOUSTON, July 26 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today announced financial and operating results for the second
quarter of 2006. A conference call to discuss the results is planned for
8:30 a.m. (CDT), Thursday, July 27. To participate in the call, dial
719-457-2657. 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 second quarter of 2006, Newfield reported net income of $94
million, or $0.73 per diluted share (all per share amounts are on a diluted
basis). Earnings for the quarter reflect the following items:
* a $27 million ($17 million after-tax), or $0.13 per share, charge
associated with the early redemption of our 8 3/8% Senior Subordinated
Notes due 2012 (principal amount of $250 million); and
* commodity derivative income of $10 million ($6 million after-tax), or
$0.05 per share, associated with unrealized changes in the fair market
value of open derivative contracts that are not designated for hedge
accounting.
Without the effects of the above items, net income for the quarter
would have been $105 million, or $0.81 per share.
Revenues in the second quarter of 2006 were $390 million. Net cash
provided by operating activities before changes in operating assets and
liabilities was $297 million. See "Explanation and Reconciliation of
Non-GAAP Financial Measures."
By comparison, net income in the second quarter of 2005 was $104
million, or $0.82 per share. Earnings for the quarter included the effects
of a $45 million charge ($30 million after tax), or $0.23 per share,
associated with unrealized changes in the fair market value of open
derivative contracts that are not designated for hedge accounting. Without
the effects of this item, net income for the quarter would have been $134
million, or $1.05 per share. Revenues for the quarter 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.
Newfield's production in the second quarter of 2006 was 58.3 Bcfe,
which reflects the negative impact of 2 Bcfe of deferred production related
to the 2005 hurricanes in the Gulf of Mexico. Production in the second
quarter of 2005 was 67.3 Bcfe. The following tables detail production and
average realized prices for the second quarters of 2006 and 2005.
Quarterly Production (A) 2Q06 2Q05 % Change
United States
Natural gas (Bcf) 48.0 53.3 (10%)
Oil and condensate (MMBbls) 1.5 2.0 (28%)
International
Natural gas (Bcf) --- 0.1 (100%)
Oil and condensate (MMBbls) 0.2 0.3 (9%)
Total
Natural gas (Bcf) 48.0 53.4 (10%)
Oil and condensate (MMBbls) 1.7 2.3 (26%)
Total (Bcfe) 58.3 67.3 (13%)
Average Realized Prices (B) 2Q06 2Q05 % Change
United States
Natural gas (per Mcf) $6.14 $6.41 (4%)
Oil and condensate (per Bbl) $54.15 $43.24 25%
International
Natural gas (per Mcf) --- $5.35 N/M
Oil and condensate (per Bbl) $62.50 $51.95 20%
Total
Natural gas (per Mcf) $6.14 $6.41 (4%)
Oil and condensate (per Bbl) $55.38 $44.28 25%
Total (per Mcfe) $6.68 $6.61 1%
(A) Represents volumes sold regardless of when produced.
(B) Average realized prices include the effects of hedging other than
contracts that are not designated for hedge accounting. Had we
included the effects of these contracts, our average realized price
for total gas would have been $6.97 per Mcf for the second quarter of
2006. There were no gas contracts that were not designated for hedge
accounting that settled in the second quarter of 2005. Our total oil
and condensate average realized price would have been $52.88 per Bbl
and $43.86 per Bbl for the second quarter of 2006 and 2005,
respectively.
Stated on a unit of production basis, Newfield's lease operating
expense in the second quarter of 2006 was $1.14 per Mcfe compared to $0.74
per Mcfe in the second quarter of 2005. Production and other taxes in the
second quarter of 2006 were $0.27 per Mcfe compared to $0.18 per Mcfe in
the same period of 2005. DD&A expense in the second quarter of 2006 was
$2.46 per Mcfe compared to $2.09 per Mcfe in the same period of 2005. G&A
expense in the second quarter of 2006 was $0.48 per Mcfe compared to $0.41
per Mcfe in the same period of 2005. G&A expense in the second quarter of
2006 is net of capitalized direct internal costs of $15 million.
Capitalized direct internal costs were $12 million in the second quarter of
2005.
Capital expenditures in the second quarter of 2006 were $460 million.
Updated Guidance
Newfield expects to produce about 250 Bcfe in 2006, an increase of
about 3% over 2005 production. The Company's previous 2006 guidance range
was 250- 265 Bcfe. Large development projects underway in the U.S. and
overseas should provide production growth of 20-25% in 2007. Newfield
expects to produce 300-320 Bcfe in 2007, in line with earlier guidance.
Newfield also announced today that it has increased its capital budget
for 2006 to $1.9 billion, excluding approximately $180 million in hurricane
repairs (a significant portion of the repairs are covered by insurance
proceeds). Approximately $150 million of the increase is related to higher
activity levels in the Company's Woodford Shale Play, located in the Arkoma
Basin of southeastern Oklahoma. Newfield expects that its horizontal rig
count in the play will nearly double by year-end to 13 operated rigs.
Explanation and Reconciliation of Non-GAAP 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.
Newfield's consolidated statement of income for the second quarters of
2006 and 2005 includes the effects of these items:
- Early redemption premium charge of $27 million associated with the
early redemption of our 8 3/8% Senior Subordinated Notes due 2012.
- Commodity derivative income (expense), which for the second quarter
of 2006 is comprised of $10 million of income associated with
unrealized changes in the fair market value of open derivative
contracts that are not designated for hedge accounting and
$36 million of realized gains relating to the settlement of contracts
that are not designated for hedge accounting. Commodity derivative
expense for the second quarter of 2005 includes $45 million of
unrealized changes in the fair market value of open derivative
contracts that are not designated for hedge accounting and $1 million
of realized losses relating to the settlement of contracts that are
not designated for hedge accounting.
A reconciliation of earnings stated without the effects of certain
items to net income is shown below:
2Q06 2Q05
(in millions)
Net income $94 $104
Early redemption premium 27 ---
Unrealized commodity derivative (income) expense (10) 45
Income tax provision adjustment for above items (6) (15)
Earnings stated without the effect of the above items $105 $134
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:
2Q06 2Q05
(in millions)
Net cash provided by operating activities $351 $356
Net change in operating assets and liabilities (54) (27)
Net cash provided by operating activities
before changes in operating assets and liabilities $297 $329
Third Quarter 2006 Estimates
Natural Gas Production and Pricing
The Company's natural gas production in the third quarter of 2006 is
expected to be 50 - 51 Bcf (543 - 555 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
third quarter of 2006 is expected to be 2.0 - 2.2 million barrels (21,700 -
24,000 BOPD). Newfield expects to produce approximately 3,700 BOPD from its
Malaysian operations. The timing of liftings in Malaysia and the
availability of refining capacity for our Monument Butte oil production 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 $68 - $75 million ($1.10 - $1.20 per Mcfe) in the
third quarter of 2006. Production taxes in the third quarter of 2006 are
expected to be $15 - $17 million ($0.20 - $0.30 per Mcfe). These expenses
vary and are subject to impact from, among other things, production volumes
and commodity prices, 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 2006 is expected to be $33 - $37
million ($0.50 - $0.60 per Mcfe), net of capitalized direct internal costs.
Capitalized direct internal costs are expected to be $16 - $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
third quarter of 2006 is expected to be $20 - $22 million ($0.26 - $0.31
per Mcfe). As of July 26, 2006, Newfield had no outstanding borrowings
under its credit arrangements. Long-term debt consists of four separate
issuances of notes that in the aggregate total $1.2 billion in principal
amount. Capitalized interest for the third 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 third 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 U.S. onshore Gulf Coast, the Anadarko and Arkoma
Basins of the Mid-Continent, the Uinta Basin of the Rocky Mountains and the
Gulf of Mexico. 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 capital activity, 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 return to pre-storm levels. 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, 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.
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 For the
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Oil and gas revenues $390 $446 $821 $859
Operating expenses:
Lease operating 67 50 119 95
Production and other
taxes 15 12 31 23
Depreciation, depletion
and amortization 144 140 275 276
General and
administrative 28 28 58 51
Other 25 --- (5) ---
Total operating
expenses 279 230 478 445
Income from operations 111 216 343 414
Other income (expenses):
Interest expense (24) (19) (42) (37)
Capitalized interest 10 11 22 23
Commodity derivative
income (expense) 46 (46) 52 (155)
Other 4 1 5 1
36 (53) 37 (168)
Income before income
taxes 147 163 380 246
Income tax provision 53 59 137 82
Net income $94 $104 $243 $164
Earnings per share:
Basic $0.74 $0.83 $1.92 $1.32
Diluted $0.73 $0.82 $1.89 $1.29
Weighted average number
of shares outstanding
for basic earnings
per share 127 125 126 125
Weighted average number
of shares outstanding
for diluted earnings
per share 129 128 129 127
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions) June 30, Dec. 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $73 $39
Other current assets 739 501
Total current assets 812 540
Oil and gas properties, net (full cost method) 5,001 4,410
Other assets 66 69
Goodwill 62 62
Total assets $5,941 $5,081
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $819 $670
Other liabilities 269 230
Long-term debt 1,169 870
Asset retirement obligation 223 213
Deferred taxes 813 720
Total long-term liabilities 2,474 2,033
Commitments and contingencies --- ---
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,174 1,186
Treasury stock (31) (27)
Unearned compensation --- (34)
Accumulated other comprehensive loss (35) (44)
Retained earnings 1,539 1,296
Total stockholders' equity 2,648 2,378
Total liabilities and stockholders' equity $5,941 $5,081
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
For the
Six Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net income $243 $164
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 275 276
Deferred taxes 125 43
Stock-based compensation 16 4
Early redemption premium 8 ---
Commodity derivative (income) expense (17) 152
650 639
Changes in operating assets and liabilities 42 (22)
Net cash provided by operating activities 692 617
Cash flows from investing activities:
Net additions to oil and gas properties
and other (838) (514)
Purchases of short-term investments (484) ---
Redemption of short-term investments 352 ---
Net cash used in investing activities (970) (514)
Cash flows from financing activities:
Net proceeds (repayments) under credit
arrangements --- (120)
Proceeds from issuance of Senior
Subordinated Notes 550 ---
Repayment of Senior Subordinated Notes (250) ---
Proceeds from issuances of common stock, net 8 20
Purchases of treasury stock (4) ---
Stock-based compensation excess tax benefit 3 ---
Net cash provided by (used in) financing
activities 307 (100)
Effect of exchange rate changes on cash and
cash equivalents 5 (3)
Increase in cash and cash equivalents 34 ---
Cash and cash equivalents, beginning of period 39 58
Cash and cash equivalents, end of period $73 $58
SOURCE Newfield Exploration Company
 back to top
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,
info@newfield.com
|
