HOUSTON, Oct. 25 /PRNewswire-FirstCall/ -- Newfield Exploration Company
(NYSE: NFX) today announced financial and operating results for the third
quarter of 2006. A conference call to discuss the results is planned for
8:30 a.m. (CDT), Thursday, October 26. 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 third quarter of 2006, Newfield reported net income of $266
million, or $2.06 per diluted share (all per share amounts are on a diluted
basis). Earnings for the quarter reflect the following items:
* commodity derivative income of $209 million ($135 million after-tax),
or $1.05 per share, associated with unrealized changes in the fair
market value of open derivative contracts that are not designated for
hedge accounting;
* a $34 million credit to lease operating expense ($22 million after-
tax), or $0.17 per share, 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; and
* a $6 million ceiling test writedown, or $0.05 per share, associated
with ceasing our exploration efforts in Brazil.
Without the effects of the above items, net income for the quarter
would have been $115 million, or $0.89 per share.
Revenues in the third quarter of 2006 were $425 million. Net cash
provided by operating activities before changes in operating assets and
liabilities was $367 million. See "Explanation and Reconciliation of
Non-GAAP Financial Measures."
By comparison, Newfield reported a net loss of $0.2 million in the
third quarter of 2005. The loss for this period reflected the following
items:
* a $205 million charge ($133 million after tax), or $1.04 per share,
associated with unrealized changes in the fair market value of open
derivative contracts that are not designated for hedge accounting; and
* a $7 million gain ($5 million after-tax), or $0.04 per share on the
sale of the Enserch Garden Banks floating production facility (EGB).
Without the effects of these items, net income for the third quarter of
2005 would have been $128 million, or $1.00 per share. Revenues for the
third quarter of 2005 were $460 million. Net cash provided by operating
activities before changes in operating assets and liabilities was $296
million. See Explanation and Reconciliation of Non-GAAP Financial Measures.
Newfield's production in the third quarter of 2006 was 62.6 Bcfe, an
increase of 6% compared to the third quarter of 2005. The following tables
detail production and average realized prices for the third quarters of
2006 and 2005.
Quarterly Production (A) 3Q06 3Q05 % Change
United States
Natural gas (Bcf) 51.2 46.8 9%
Oil and condensate (MMBbls) 1.7 1.8 (5%)
International
Natural gas (Bcf) --- --- ---
Oil and condensate (MMBbls) 0.2 0.3 (24%)
Total
Natural gas (Bcf) 51.2 46.8 9%
Oil and condensate (MMBbls) 1.9 2.1 (8%)
Total (Bcfe) 62.6 59.2 6%
Average Realized Prices (B) 3Q06 3Q05 % Change
United States
Natural gas (per Mcf) $6.21 $7.60 (18%)
Oil and condensate (per Bbl) $54.21 $47.73 14%
International
Natural gas (per Mcf) --- --- ---
Oil and condensate (per Bbl) $66.75 $62.27 7%
Total
Natural gas (per Mcf) $6.21 $7.60 (18%)
Oil and condensate (per Bbl) $55.70 $49.83 12%
Total (per Mcfe) $6.77 $7.75 (13%)
(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 $7.06 per Mcf and $6.97 per Mcf for the
third quarter of 2006 and 2005, respectively. Our total oil and
condensate average realized price would have been $52.95 per Bbl and
$47.83 per Bbl for the third quarter of 2006 and 2005, respectively.
Without the effects of hedging, our average realized prices for the
third quarter of 2006 would have been $6.19 per Mcf and $64.18 per
barrel.
Stated on a unit of production basis, Newfield's lease operating
expense in the third quarter of 2006 was $0.58 per Mcfe compared to $0.92
per Mcfe in the third quarter of 2005. Lease operating expenses for the
third quarter of 2006 include a credit of $34 million, 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. Production and other taxes in the third quarter of 2006
were $0.18 per Mcfe compared to $0.30 per Mcfe in the same period of 2005.
DD&A expense in the third quarter of 2006 was $2.54 per Mcfe compared to
$2.14 per Mcfe in the same period of 2005. G&A expense in the third quarter
of 2006 was $0.55 per Mcfe compared to $0.43 per Mcfe in the same period of
2005. G&A expense in the third quarters of 2006 and 2005 is net of
capitalized direct internal costs of $12 million.
Capital expenditures in the third quarter of 2006 were $496 million.
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 third quarters of
2006 and 2005 includes the effects of these items:
* commodity derivative income for the third quarter of 2006 is comprised
of $209 million of income associated with unrealized changes in the
fair market value of open derivative contracts that are not designated
for hedge accounting and $38 million of realized gains relating to the
settlement of contracts that are not designated for hedge accounting.
Commodity derivative expense for the third quarter of 2005 includes a
$205 million loss associated with unrealized changes in the fair
market value of open derivative contracts that were not designated for
hedge accounting and $33 million of realized losses relating to the
settlement of contracts that were not designated for hedge accounting.
* a $34 million credit to LOE in the third quarter of 2006 resulting
from the difference between the insurance proceeds received and our
actual hurricane related expenses incurred to date.
* a $6 million ceiling test writedown in the third quarter of 2006
associated with ceasing our exploration efforts in Brazil.
* a $7 million gain on the sale of the EGB in the third quarter of 2005.
A reconciliation of earnings stated without the effects of certain items
to net income is shown below:
3Q06 3Q05
(in millions)
Net income $266 $---
Unrealized commodity derivative (income) expense (209) 205
Difference between insurance proceeds and actual
hurricane related expenses (34) ---
Ceiling test writedown 6 ---
Gain on sale of EGB --- (7)
Income tax provision adjustment for above items 86 (70)
Earnings stated without the effect of the
above items $115 $128
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:
3Q06 3Q05
(in millions)
Net cash provided by operating activities $453 $270
Net change in operating assets and liabilities (86) 26
Net cash provided by operating activities
before changes in operating assets and liabilities $367 $296
Fourth Quarter 2006 Estimates
Natural Gas Production and Pricing The Company's natural gas production
in the fourth quarter of 2006 is expected to be 53 - 55 Bcf (582 - 587
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 production, 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 fourth quarter of 2006 is expected
to be 2.3 - 2.5 million barrels (26,100 - 26,300 BOPD). Newfield expects to
produce approximately 5,400 BOPD from its international operations offshore
Malaysia and China. The timing of international liftings 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 $11 - $13 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 our operations in
Malaysia typically sells at a $3.75 - $4.25 discount to Tapis Blend.
Initial oil production from our operations in China is expected to sell for
a $15 - $18 per barrel discount to WTI. Hedging gains or losses will affect
price realizations.
Lease Operating Expense and Production Taxes LOE in the fourth quarter
is expected to be $106 - $118 million, which includes approximately $40
million of continuing hurricane related expenses resulting from the 2005
storms. A substantial portion of this amount ($34 million) was received and
recorded as a reduction to LOE in the third quarter of 2006. Excluding
these charges, LOE is expected to be $1.01 - $1.11 per Mcfe in the fourth
quarter of 2006. Production and other taxes in the fourth quarter of 2006
are expected to be $21 - $23 million ($0.31 - $0.35 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 fourth quarter
of 2006 is expected to be $33 - $37 million ($0.49 - $0.54 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 fourth quarter of 2006 is expected to be $21 - $23 million
($0.31 - $0.35 per Mcfe). As of October 24, 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 fourth
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 fourth quarter of 2006 to
be about 35 - 39%. About 65-70% 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 fourth 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.
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,
2006 2005 2006 2005
Oil and gas revenues $425 $460 $1,246 $1,319
Operating expenses:
Lease operating 36 55 155 150
Production and other taxes 12 18 43 41
Depreciation, depletion and
amortization 159 127 434 403
Ceiling test writedown 6 --- 6 ---
General and administrative 34 25 92 76
Other (6) (7) (11) (7)
Total operating expenses 241 218 719 663
Income from operations 184 242 527 656
Other income (expenses):
Interest expense (23) (17) (65) (54)
Capitalized interest 11 11 33 34
Commodity derivative income
(expense) 247 (238) 299 (393)
Other 2 2 7 3
237 (242) 274 (410)
Income before income taxes 421 --- 801 246
Income tax provision 155 --- 292 82
Net income $266 $--- $509 $164
Earnings per share:
Basic $2.10 $--- $4.02 $1.31
Diluted $2.06 $--- $3.95 $1.29
Weighted average number of shares
outstanding for basic earnings
per share 126 126 127 125
Weighted average number of shares
outstanding for diluted earnings
per share 129 126 129 128
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
September 30, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $265 $39
Other current assets 739 501
Total current assets 1,004 540
Oil and gas properties, net (full cost method) 5,272 4,410
Other assets 69 69
Goodwill 62 62
Total assets $6,407 $5,081
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $937 $670
Other liabilities 215 230
Long-term debt 1,171 870
Asset retirement obligation 223 213
Deferred taxes 915 720
Total long-term liabilities 2,524 2,033
Commitments and contingencies --- ---
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,182 1,186
Treasury stock (31) (27)
Unearned compensation --- (34)
Accumulated other comprehensive loss (11) (44)
Retained earnings 1,805 1,296
Total stockholders' equity 2,946 2,378
Total liabilities and stockholders' equity $6,407 $5,081
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
For the
Nine Months Ended
September 30,
2006 2005
Cash flows from operating activities:
Net income $509 $164
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 434 403
Deferred taxes 262 14
Stock-based compensation 23 5
Early redemption on senior subordinated notes 8 ---
Ceiling test writedown 6 ---
Gain on sale of floating production system --- (7)
Unrealized commodity derivative
(income) expense (226) 357
1,016 936
Changes in operating assets and liabilities 129 (49)
Net cash provided by operating activities 1,145 887
Cash flows from investing activities:
Net additions to oil and gas properties
and other (1,248) (766)
Purchases of short-term investments (541) ---
Redemption of short-term investments 511 ---
Insurance recoveries 45 ---
Proceeds from sale of oil and gas properties --- 11
Proceeds from sale of floating production
system --- 7
Net cash used in investing activities (1,233) (748)
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 9 28
Stock-based compensation excess tax benefit 3 ---
Purchases of treasury stock (3) ---
Net cash provided by (used in) financing
activities 309 (92)
Effect of exchange rate changes on cash
and cash equivalents 5 (3)
Increase in cash and cash equivalents 226 44
Cash and cash equivalents, beginning of period 39 58
Cash and cash equivalents, end of period $265 $102
For information, contact:
Investor Relations: Steve Campbell (281) 847-6081
Media Relations: Keith Schmidt (281) 674-2650
Email: info@newfield.com
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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