HOUSTON, Oct. 24 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today reported third quarter financial and operating results.
Newfield will be hosting its third quarter results conference call at 8:30
a.m. (CDST) on October 25. To participate in the call dial 719-457-2680 or
listen through the website at http://www.newfield.com.
For the third quarter of 2007, Newfield reported net income of $83
million, or $0.64 per diluted share (all per share amounts are on a diluted
basis). The results reflect the impact of commodity derivative expense of
$26 million ($17 million after tax), or $0.12 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 expense, net income for the quarter would
have been $100 million, or $0.76 per share.
Revenues (including operations in the U.K. North Sea which for
financial reporting purposes have been presented as discontinued
operations) in the third quarter of 2007 were $424 million. Net cash
provided by operating activities before changes in operating assets and
liabilities was $288 million. See "Explanation and Reconciliation of
Non-GAAP Financial Measures" found after the financial statements in this
release.
Newfield's production in the third quarter of 2007 was 61 Bcfe, which
includes approximately 1 Bcfe from the U.K. North Sea.
Highlights
-- Proceeds from 2007 Asset Sales Surpass $1.8 billion - Year-to-date,
asset sales have generated $1.8 billion in proceeds for approximately
420 Bcfe of year-end 2006 proved reserves. Approximately $1.3 billion
of the sales were related to domestic assets, the largest of which was
the sale of the Company's Gulf of Mexico shelf assets for $1.1 billion.
These sales reduced the full cost pool and the associated domestic DD&A
rate. The sale of the U.K. will be recognized as a gain on sale of more
than $300 million in the fourth quarter of 2007. In October, Newfield
used sales proceeds to repay the $125 million in notes associated with
its first senior notes issuance done in 1997. Long-term debt is now
$1,050 million.
-- 20-acre Infill Drilling at Monument Butte Exceeds Expectations -
Newfield has now drilled nearly 50 wells on 20-acre spacing in its
giant Monument Butte Field, located in the Uinta Basin of the Rocky
Mountains. Initial production from the 20-acre wells is nearly triple
the 2004 acquisition planning model with wells averaging as much as
160 BOPD. Estimated ultimate recoveries of reserves are up 50% to
approximately 70,000 barrels per well.
-- Initial Drilling Successful on Ute Tribe Acreage - Newfield recently
completed its first successful well on the Ute Indian Tribe acreage.
The well came on-line at 180 BOPD. A rig is now dedicated to drilling
wells on this acreage, which encompasses 47,000 acres adjacent to the
north boundary of the Monument Butte Field.
-- Woodford Shale Production Surpasses 150 MMcfe/d - Newfield's gross
operated Woodford Shale production recently reached 150 MMcfe/d, up
from 115 MMcfe/d at the end of the second quarter of 2007. Newfield has
now spud 134 operated horizontal wells and has an interest in
222 horizontal wells, or 59% of the industry's 375 horizontal wells
drilled in the play to date. Our net interest in the play averages
approximately 65% in our core areas.
-- Newfield Was High-Bidder on 18 Blocks in Recent GOM Lease Sale -
Newfield placed high bids on 18 blocks in the most recent lease sale in
the Gulf of Mexico. If all bids are awarded by the MMS, Newfield's net
investment in the lease sale will be $35 million. Newfield now controls
an inventory of deepwater prospects that will allow the Company to
drill 3-4 wells per year for the next several years.
-- Malaysia Developments on Schedule - In May, the Abu Field offshore
Malaysia commenced production and is currently producing 13,000 BOPD
(gross). An additional well is being completed with production expected
to ramp to 15,000 BOPD (gross) by year-end. The production deck for the
Puteri development has been set and a rig is on location for the well
tiebacks. First oil sales of 6,000 - 8,000 BOPD gross are expected in
early 2008. The East Belumut and Chermingat Fields are expected to
begin production in the second quarter of 2008 and will ramp to
15,000 BOPD (gross). Annual Malaysian production is expected to triple
in 2008 compared to 2007.
-- Continued Success Under South Texas JV - Newfield recently drilled its
19th successful well under its joint venture with Exxon-Mobil in South
Texas. Production remains above 50 MMcfe/d (gross). Newfield's interest
in this joint venture is approximately 50%. The most recent well, the
SKE B-90, had more than 700' of net gas pay and completion is underway.
Newfield has an inventory of 20 ready-to-drill prospects and is
currently operating two drilling rigs.
Capital Expenditures
During the third quarter, Newfield invested $477 million. Year-to-date,
Newfield has invested $1.5 billion, excluding the $577 million acquisition
of Rocky Mountain assets from Stone Energy. Including the acquisition,
Newfield expects its full-year 2007 capital expenditures to be
approximately $2.5 billion.
Fourth Quarter 2007 Estimates
Natural Gas Production and Pricing The Company's natural gas production
in the fourth quarter of 2007 is expected to be 38 - 42 Bcf (415 - 455
MMcf/d). 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. Although Newfield's Rocky Mountains production is
primarily oil, the Company does produce approximately 40 MMcfe/d of natural
gas in this region. Recent basis differentials have widened dramatically.
Newfield hedged the basis differential associated with 50% of the expected
production from the proved producing fields acquired from Stone Energy in
the second quarter of 2007. The basis hedges cover the second half of 2007
through 2012 at a weighted average hedged differential of $(1.18) per Mcf.
Hedging gains or losses will affect price realizations.
Crude Oil Production and Pricing The Company's oil production,
including international liftings, in the fourth quarter of 2007 is expected
to be 1.3 - 1.5 million barrels (14,130 - 16,300 BOPD). Newfield expects to
produce approximately 5,200 BOPD (net) 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 $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. Hedging gains or losses will affect price realizations.
Lease Operating Expense and Production Taxes LOE is expected to be $40
- $45 million ($0.82 - $0.93 per Mcfe) in the fourth quarter of 2007. With
the recent divestiture of the Company's Gulf of Mexico Shelf assets, the
major expense portion of LOE is expected to drop significantly. The LOE
projection for the fourth quarter includes major expense of approximately
$3 million. The drop in LOE per Mcfe will be partially offset by an
increase in production taxes per Mcfe now that a significant portion of the
Company's production is onshore and subject to severance taxes. Production
taxes in the fourth quarter of 2007 are expected to be $32 - $36 million
($0.66 - $0.75 per Mcfe). Approximately one-third of the production taxes
are associated with Newfield's Malaysian operations.
General and Administrative Expense G&A expense for the fourth quarter
of 2007 is expected to be $46 - $51 million ($0.96 - $1.06 per Mcfe), net
of capitalized direct internal costs. Capitalized direct internal costs are
expected to be $21 - $23 million. 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. The gain associated
with the sale of the U.K. business will increase adjusted net income and
result in additional fourth quarter G&A expense of approximately $17
million.
Interest Expense The non-capitalized portion of the Company's interest
expense for the fourth quarter of 2007 is expected to be $20 - $22 million
($0.41 - $0.45 per Mcfe). As of October 24, 2007, Newfield had no
borrowings outstanding under its credit arrangements. The remainder of debt
consists of three separate issuances of notes that in the aggregate total
$1.05 billion in principal amount. Capitalized interest for the fourth
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 fourth quarter of 2007 to
be about 35 - 38%. About 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 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 deepwater Gulf of
Mexico. The Company has international operations in Malaysia and China.
**The statements set forth in this release regarding estimated or
anticipated fourth quarter 2007 results and future regional 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, 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.
PRODUCTION, PRICES AND COSTS (1) Three Months Ended Percentage
September 30, Increase
2007 2006 (Decrease)
Production (2):
United States:
Natural gas (Bcf) 46.9 51.2 (8%)
Oil and condensate (MBbls) 1,669 1,674 --
Total (Bcfe) 56.9 61.2 (7%)
International:
Natural gas (Bcf) 1.3 -- 100%
Oil and condensate (MBbls) 483 225 115%
Total (Bcfe) 4.2 1.4 200%
Total:
Natural gas (Bcf) 48.2 51.2 (6%)
Oil and condensate (MBbls) 2,152 1,899 13%
Total (Bcfe) 61.1 62.6 (2%)
Average Realized Prices (3):
United States:
Natural gas (per Mcf) $7.52 $7.06 7%
Oil and condensate (per Bbl) 53.77 51.09 5%
International:
Natural gas (per Mcf) $4.43 $-- 100%
Oil and condensate (per Bbl) 71.99 66.75 8%
Total:
Natural gas (per Mcf) $7.44 $7.06 5%
Oil and condensate (per Bbl) 57.87 52.95 9%
Natural gas equivalent (per Mcfe) 6.92 6.77 2%
Operating Costs (per Mcfe):
Lease Operating:
Recurring $0.87 $0.95 (8%)
Major expense(4) 0.20 (0.37) N/M%
Production and other taxes 0.41 0.18 128%
Depreciation, depletion and
amortization 2.71 2.54 7%
General and administrative 0.66 0.55 20%
Ceiling test writedown -- 0.10 100%
Other -- (0.09) (100%)
Total operating costs $4.85 $3.86 26%
(1) Includes production and operating results related to our U.K. North
Sea business which for financial reporting purposes has been
presented as discontinued operations in accordance with GAAP.
(2) Represents volumes sold regardless of when produced.
(3) 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 $5.77 and $6.21 per Mcf
for the third quarter of 2007 and 2006, respectively, and our
total oil and condensate average realized price would have been
$67.12 and $55.70 per Bbl, respectively. Without the effects of any
hedging contracts, our average realized prices for the third quarter
of 2007 and 2006 would have been $5.77 and $6.19 per Mcf,
respectively, for gas and $67.31 and $64.18 per Bbl, respectively,
for oil.
(4) Third quarter of 2006 includes a $34 million credit or $0.54 per Mcfe
resulting from the difference between the proceeds received in the
third quarter of 2006 from the settlement of all of our insurance
claims related to Hurricanes Katrina and Rita and our actual
hurricane related expenses incurred to date.
The following condensed financial statements include the results of
operations, financial position and cash flows of our U.K. North Sea
business as discontinued operations.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in millions, except
per share data)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Oil and gas revenues $419 $425 $1,384 $1,246
Operating expenses:
Lease operating 64 36 268 155
Production and other
taxes 25 12 63 43
Depreciation, depletion
and amortization 162 159 539 434
General and
administrative 37 33 107 89
Ceiling test writedown -- 6 -- 6
Other -- (6) -- (11)
Total operating
expenses 288 240 977 716
Income from operations 131 185 407 530
Other income (expenses):
Interest expense (29) (22) (80) (64)
Capitalized interest 13 11 35 33
Commodity derivative
income (expense) 38 247 (43) 299
Other 1 2 3 7
23 238 (85) 275
Income from continuing
operations before income
taxes 154 423 322 805
Income tax provision 62 156 125 294
Income from continuing
operations 92 267 197 511
Loss from discontinued
operations, net of tax (9) (1) (60) (2)
Net income $83 $266 $137 $509
Earnings per share:
Basic --
Income from continuing
operations $0.72 $2.11 $1.54 $4.03
Loss from discontinued
operations, net of tax (0.07) (0.01) (0.47) (0.01)
$0.65 $2.10 $1.07 $4.02
Diluted --
Income from continuing
operations $0.70 $2.07 $1.51 $3.96
Loss from discontinued
operations, net of tax (0.06) (0.01) (0.46) (0.01)
$0.64 $2.06 $1.05 $3.95
Weighted average
number of shares
outstanding for basic
earnings per share 128 126 127 127
Weighted average
number of shares
outstanding for diluted
earnings per share 131 129 130 129
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
September 30, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $141 $80
Other current assets 585 766
Assets of discontinued operations 11 5
Total current assets 737 851
Oil and gas properties, net (full cost method) 5,547 5,455
Other assets 145 129
Assets of discontinued operations 177 200
Total assets $6,606 $6,635
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $791 $972
Short-term debt 124 124
Liabilities of discontinued operations 14 27
Total current liabilities 929 1,123
Other liabilities 32 28
Derivative liabilities 181 179
Long-term debt 1,049 1,048
Asset retirement obligation 51 225
Deferred taxes 1,098 963
Liabilities of discontinued operations 11 7
Total long-term liabilities 2,422 2,450
Commitments and contingencies -- --
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,249 1,198
Treasury stock (31) (30)
Accumulated other comprehensive income 12 6
Retained earnings 2,024 1,887
Total stockholders' equity 3,255 3,062
Total liabilities and stockholders' equity $6,606 $6,635
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions) For the
Nine Months Ended
September 30,
2007 2006
Cash flows from operating activities:
Net income $137 $509
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations, net of tax 60 2
Depreciation, depletion and amortization 539 434
Deferred taxes 47 264
Stock-based compensation 18 18
Ceiling test writedown -- 6
Early redemption premium -- 8
Commodity derivative (income) expense
Total (gains) losses 43 (299)
Realized gains 174 73
1,018 1,015
Changes in operating assets and liabilities (75) 128
Net cash provided by continuing activities 943 1,143
Net cash provided by (used in) discontinued
activities (12) 2
Net cash provided by operating activities 931 1,145
Cash flows from investing activities:
Acquisition of oil and gas properties (578) --
Additions to oil and gas properties and other (1,539) (1,130)
Proceeds from sales of oil and gas properties 1,281 --
Insurance recoveries -- 45
Purchases of short-term investments (43) (541)
Redemption of short-term investments 24 511
Net cash used in continuing activities (855) (1,115)
Net cash used in discontinued activities (41) (118)
Net cash used in investing activities (896) (1,233)
Cash flows from financing activities:
Net proceeds (repayments) under credit
arrangements -- --
Net proceeds (repayments) of senior subordinated
notes -- 300
Payments to discontinued operations (38) (121)
Proceeds from issuances of common stock 18 9
Stock-based compensation excess tax benefit 8 3
Purchases of treasury stock (1) (3)
Net cash provided by (used in) continuing
activities (13) 188
Net cash provided by discontinued activities 38 121
Net cash provided by financing activities 25 309
Effect of exchange rate changes on cash and cash
equivalents 1 5
Increase in cash and cash equivalents 61 226
Cash and cash equivalents from continuing
operations, beginning of period 52 38
Cash and cash equivalents from discontinued
operations, beginning of period 28 1
Cash and cash equivalents, end of period $141 $265
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.
A reconciliation of earnings for the third quarter of 2007 and 2006
stated without the effect of certain items to net income is shown below:
3Q07 3Q06
(in millions)
Net income $83 $266
Unrealized commodity derivative (income) expense(1) 23 (209)
Unrealized commodity derivative expense included
in loss from discontinued operations 3 --
Difference between insurance proceeds and actual
hurricane related expenses -- (34)
Ceiling test writedown -- 6
Income tax adjustment for above items (9) 86
Earnings stated without the effect of the above
items $100 $115
(1) The components of Commodity derivative income (expense) as included
in Newfield's Consolidated Statement of Income for the third quarter
of 2007 and 2006 are as follows:
3Q07 3Q06
(in millions)
Cash flow hedges:
Hedge ineffectiveness $-- $(1)
Other derivative contracts:
Unrealized loss on discontinued cash flow hedges (3) --
Unrealized gain (loss) due to changes in fair
market value (20) 210
Realized gain on settlement 61 38
Total commodity derivative income $38 $247
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:
3Q07 3Q06
(in millions)
Net cash provided by operating activities $297 $453
Net change in operating assets and liabilities (9) (86)
Net cash provided by operating activities before
changes in operating assets and liabilities $288 $367
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,
info@newfield.com
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