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Third Quarter 2009
For the third quarter of 2009, Newfield recorded net income of $78 million, or $0.58 per diluted share (all per share amounts are on a diluted basis). Net income includes the effect of the following items:
-- a net unrealized loss on commodity derivatives of $243 million ($155
million after-tax); and
-- the recognition of a $24 million tax benefit, or $0.18 per share,
associated with deferred tax assets in Malaysia.
Without the effect of these items, net income for the third quarter of 2009 would have been $209 million, or $1.58 per share.
Revenues in the third quarter of 2009 were $375 million. Net cash provided by operating activities before changes in operating assets and liabilities was $451 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 2009 was 65.5 Bcfe, an increase of 7% over the third quarter of 2008. Newfield's oil liftings in the third quarter were 3.8 MMBbls, or an average of approximately 41,300 BOPD. This represents a 40% increase over the same period in 2008 and is primarily attributable to the timing of international oil liftings. Natural gas production in the third quarter was 42.5 Bcfe, an average of 462 MMcf/d, and excludes approximately 2.6 Bcfe of voluntary natural gas curtailments due to low natural gas prices. Capital expenditures in the third quarter of 2009 were $285 million.
Highlights
-- Improving Cost Structure - Domestic recurring lease operating expense
for the third quarter of 2009, stated on a unit of production basis, was
$0.81 per Mcfe and reflects lower service costs, reduced water handling
costs due to deferred completions and the ongoing efforts to lower
expenses throughout the Company's core operating regions.
-- Mid-Continent Production Reaches New Highs, Woodford Production up
Nearly 30% - Gross operated production from the Mid-Continent recently
set a new high and is currently 460 MMcfe/d gross, or 323 MMcfe/d net.
Woodford Shale production is 308 MMcfe/d compared to about 240 MMcfe/d
at the end of the second quarter of 2009. Newfield began returning
previously curtailed wells to production during October 2009. Newfield
has a 30 well inventory of uncompleted wells that are expected to be
completed by early 2010.
-- Woodford Shale - The Company has 10 operated rigs running under term
contracts, with three of the remaining rigs rolling off of term
before the end of 2009. Newfield continues to improve upon
efficiency gains in its Woodford development. Some recent examples
are listed below:
-- Increasing Lateral Lengths - Newfield expects that its average
lateral length in 2009 will exceed 5,000 feet. By year-end 2009,
the Company expects to have drilled eight "super extended
lateral" wells with horizontal lengths in excess of 8,000 feet.
Two of the wells drilled to date have lateral lengths greater
than 10,000 feet. Initial production results from the first
super extended laterals are expected in December 2009.
-- Optimizing Fracture Stimulation Operations - The Company is
fracture stimulating its wells with greater efficiency in 2009.
The average number of fracs per day has increased to more than
five on recent pad completions, compared to three fracs per day
in 2008.
-- Company Adds Fourth Operated Rig in Granite Wash Play - Based on the
success of the initial horizontal drilling program in the Granite
Wash, Newfield added a fourth operated rig in October in its Stiles
Ranch field, located in Wheeler County, Texas. In July 2009,
Newfield announced that its first seven horizontal wells in Stiles
Ranch had an average gross initial production rate of 22 MMcfe/d.
Recent well completions have been deferred and the Company expects
to have production results from 6 - 8 additional completions in
early 2010. Newfield has an approximate 80% working interest in
Stiles Ranch.
-- Newfield Enters the Marcellus Shale - On October 14, 2009, Newfield
announced the signing of a joint exploration agreement with Hess
Corporation in the Marcellus Shale play. The agreement covers up to
140,000 gross acres primarily in Susquehanna and Wayne Counties,
Pennsylvania. Newfield will operate the new venture with each company
having a 50 percent interest. The 2009 portion of Newfield's Marcellus
Shale activities will be funded within the Company's existing $1.45
billion capital budget. Drilling operations are not expected to commence
until 2010.
-- Additional Exploration Test Planned Offshore China - In the third
quarter of 2009, the Company announced an oil discovery with its LF 7-1
Pearl prospect, located in the Pearl River Mouth Basin, offshore China.
Prior to year-end 2009, the Company expects to spud its Jade prospect to
test a fault-separated target to the northeast. The Newfield operated
Pearl development is underway with first production expected in late
2012.
-- Deepwater Gulf of Mexico Update - Newfield has seven deepwater
developments underway in the deepwater Gulf of Mexico which are expected
to provide significant future production growth.
-- Fastball - The Fastball development, located at Viosca Knoll 1003,
commenced production on October 19, 2009. Gross production is
expected to ramp up to 40 MMcf/d and 3,200 BOPD. Newfield operates
Fastball with a 66% working interest.
-- Pyrenees - In the second quarter of 2009, Newfield announced a
significant operated discovery on its Pyrenees prospect, located at
Garden Banks 293 in approximately 2,100 feet of water. A recent
sidetrack delineated the downdip limits in the three proven pay
sands seen in the discovery well and provided encouragement for the
exploration potential of both the shallow and deep sand sections on
the feature. Additional drilling is planned for 2010. Newfield
operates the development with a 40% working interest.
-- Company Increasing Monument Butte Operated Rig Count to Five - Based on
increased demand, narrowing price differentials and a shift to oil
investments, Newfield recently added a fourth operated rig in its
Monument Butte oil field, located in the Uinta Basin of Utah. The
Company is planning to add a fifth operated rig in the field in the near
future. Gross oil production from Monument Butte is about 16,000 BOPD. A
five-rig program in the field is expected to grow annual field
production by at least 10%. The Monument Butte field area covers
approximately 180,000 gross acres, substantially all held-by-production.
-- Company to Add Additional Rigs in Williston Basin - Newfield expects to
add up to two additional operated rigs in its Williston Basin
development areas. The Company has been running a one-rig program since
early 2009. Newfield has approximately 200,000 net acres in prospective
development areas, located primarily on the Nesson Anticline and west of
the Nesson. An additional 200,000 net acres are located in northern
Montana where several exploration plays are underway. Newfield has
drilled 12 successful oil wells in the North Dakota portion of the
Williston Basin since entering the region in late 2007. Two wells were
drilled since the second quarter 2009. The first was an exploratory well
in the Big Valley area, covering more than 50,000 net acres in northern
North Dakota. The well recently commenced production and continues to
clean-up following fracture stimulation. Results warrant additional
exploratory drilling to assess this large area. The second well was
drilled in the Catwalk area, which covers 25,300 net acres. Completion
operations on the well are expected to commence next week.
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 an active drilling program and select acquisitions. Newfield's domestic areas of operation include the Mid-Continent, the Rocky Mountains, onshore Texas and the Gulf of Mexico. The Company has international operations in Malaysia and China.
**This release contains forward-looking information. All information other than historical facts included in this release, such as information regarding estimated or anticipated fourth quarter 2009 results, estimated capital expenditures, cash flow, production and cost reductions, drilling and development plans and the timing of activities, is forward-looking information. Although Newfield believes that these expectations are reasonable, this information is based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. 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 refining capacity for the crude oil Newfield produces from its Monument Butte field in Utah, the availability and cost of capital resources, labor conditions and severe weather conditions (such as hurricanes). 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
3Q09 Actual Results
3Q09 Actual
Domestic Int'l Total
Production/Liftings(Note 1)
Natural gas - Bcf 42.5 - 42.5
Oil and condensate - MMBbls 1.7 2.1 3.8
Total Bcfe 52.6 12.9 65.5
Average Realized Prices (Note 2)
Natural gas - $/Mcf $6.88 $- $6.88
Oil and condensate - $/Bbl $102.95 $66.76 $82.61
Mcf equivalent - $/Mcfe $8.87 $11.13 $9.31
Operating Expenses:( Note 3)
Lease operating
Recurring ($MM) $42.5 $15.2 $57.7
per/Mcfe $0.81 $1.18 $0.88
Major (workovers, repairs,
etc.) ($MM) $5.7 $0.7 $6.4
per/Mcfe $0.11 $0.05 $0.10
Production and other taxes ($MM) $4.7 $9.3 $14.0
per/Mcfe $0.09 $0.72 $0.21
General and administrative
(G&A), net ($MM) $38.4 $1.4 $39.8
per/Mcfe $0.73 $0.11 $0.61
Capitalized internal costs
($MM) $(19.3)
per/Mcfe $(0.30)
Interest expense ($MM) $31.7
per/Mcfe $0.48
Capitalized interest ($MM) $(12.5)
per/Mcfe $(0.19)
Note 1: Domestic natural gas production includes voluntary curtailments of
approximately 2.6 Bcfe related to low natural gas prices.
Note 2: Average realized prices include the effects of hedging contracts.
If the effects of these contracts were excluded, the average
realized price for total gas would have been $3.14 per Mcf and the
total oil and condensate average realized price would have been
$62.72 per barrel.
Note 3: Recurring lease operating expense includes transportation expense.
4Q09 Estimates
4Q09 Estimates
Domestic Int'l Total
Production/Liftings
Natural gas - Bcf 44.7 - 45.5 - 44.7 - 45.5
Oil and condensate
- MMBbls 1.7 - 1.8 1.4 - 1.5 3.1 - 3.3
Total Bcfe 54.9 - 56.3 8.4 - 9.0 63.3 - 65.3
Average Realized Prices
Natural gas - $/Mcf Note 1
Oil and condensate
- $/Bbl Note 2 Note 3
Mcf equivalent - $/Mcfe
Operating Expenses:
Lease operating
Recurring ($MM) $34.2 - $37.8 $18.4 - $20.3 $52.6 - $58.1
per/Mcfe $0.62 - $0.67 $2.19 - $2.25 $0.83 - $0.89
Major (workover,
repairs, etc.)
($MM)( Note 4) $13.1 - $14.5 - $13.1 - $14.5
per/Mcfe $0.24 - $0.26 - $0.21 - $0.22
Production and other taxes
($MM)(Note 5) $14.0 - $15.4 $13.3 - $14.7 $27.3 - $30.1
per/Mcfe $0.26 - $0.27 $1.58 - $1.63 $0.43 - $0.46
General and administrative
(G&A), net ($MM) $29.8 - $33.0 $1.4 - $1.5 $31.2 - $34.5
per/Mcfe $0.54 - $0.59 $0.16 - $0.17 $0.49 - $0.53
Capitalized
internal costs
($MM) ($18.5 - $20.4)
per/Mcfe ($0.29 - $0.31)
Interest expense ($MM) $29.0 - $32.0
per/Mcfe $0.46 - $0.49
Capitalized interest
($MM) ($11.0 - $12.1)
per/Mcfe ($0.17 - $0.19)
Tax rate (%)(Note 6) 36 - 38%
Income taxes (%)
Current 14% - 16%
Deferred 84% - 86%
Note 1: Gas prices in the Mid-Continent, after basis differentials,
transportation and handling charges, typically average 75-85% of
the Henry Hub Index. Gas prices in the Gulf of Mexico and onshore
Gulf Coast, after basis differentials, transportation and handling
charges, typically averages $0.25-$0.50 per MMBtu less than the
Henry Hub Index.
Note 2: Oil prices in the Gulf Coast typically average 90-95% of NYMEX WTI
price. Rockies oil prices are currently averaging about $12-$14
per barrel below WTI. Oil production from the Mid-Continent
typically averages 85-90% of WTI.
Note 3: Oil in Malaysia typically sells at a slight discount to Tapis, or
about 90-95% of WTI. Oil production from China typically sells at
$6-$8 per barrel less than WTI.
Note 4: Domestic major expense includes approximately $6 million for well
workover expense and other projects initiated in response to
higher commodity prices and lower service costs.
Note 5: Guidance for production taxes determined using $75/Bbl oil and
$4.50/MMBtu gas.
Note 6: Tax rate applied to earnings excluding unrealized gains or losses
on commodity derivatives.
CONSOLIDATED STATEMENT OF INCOME For the For the
Three Months Ended Nine Months Ended
(Unaudited, in millions, September 30, September 30,
except per share data) ------------------ -----------------
2009 2008 2009 2008
----- ----- ------ -----
Oil and gas revenues $375 $680 $924 $1,887
----- ----- ------ -----
Operating expenses:
Lease operating 64 67 192 184
Production and other taxes 14 51 38 154
Depreciation, depletion and
amortization 144 181 440 504
General and administrative 40 36 106 105
Ceiling test writedown - - 1,344 -
Other 1 - 8 -
----- ----- ------ -----
Total operating expenses 263 335 2,128 947
----- ----- ------ -----
Income (loss) from operations 112 345 (1,204) 940
Other income (expenses):
Interest expense (31) (36) (95) (83)
Capitalized interest 13 16 39 43
Commodity derivative income
(expense) (8) 726 189 (247)
Other (1) 8 4 10
----- ----- ------ -----
Total other income (expenses) (27) 714 137 (277)
----- ----- ------ -----
Income (loss) before income taxes 85 1,059 (1,067) 663
Income tax provision (benefit) 7 335 (412) 247
----- ----- ------ -----
Net income (loss) $78 $724 $(655) $416
===== ===== ====== =====
Income (loss) per share:
Basic -- $0.59 $5.59 $(5.06) $3.22
===== ===== ====== =====
Diluted -- $0.58 $5.48 $(5.06) $3.15
===== ===== ====== =====
Weighted average number of shares
outstanding for basic income
(loss) per share 130 129 129 129
Weighted average number of shares
outstanding for diluted income
(loss) per share * 132 132 129 132
* Had we recognized net income for the nine months ended September 30,
2009, the weighted average number of shares outstanding for the
computation of diluted earnings per share would have increased by
2 million shares.
CONDENSED CONSOLIDATED BALANCE SHEET September 30, December 31,
(Unaudited, in millions) 2009 2008
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $96 $24
Derivative assets 377 663
Other current assets 469 519
------ ------
Total current assets 942 1,206
Property and equipment, net (full cost method) 4,940 5,758
Derivative assets 48 247
Other assets 107 94
------ ------
Total assets $6,037 $7,305
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $805 $1,085
------ ------
Other liabilities 143 92
Long-term debt 2,106 2,213
Deferred taxes 345 658
------ ------
Total long-term liabilities 2,594 2,963
------ ------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 1,375 1,335
Treasury stock (33) (32)
Accumulated other comprehensive loss (14) (11)
Retained earnings 1,309 1,964
------ ------
Total stockholders' equity 2,638 3,257
------ ------
Total liabilities and stockholders' equity $6,037 $7,305
====== ======
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions) For the
Nine Months Ended
September 30,
-----------------
2009 2008
------ ------
Cash flows from operating activities:
Net income (loss) $(655) $416
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 440 504
Deferred tax provision (benefit) (448) 213
Stock-based compensation 22 17
Ceiling test writedown 1,344 -
Commodity derivative (income) expense (189) 247
Cash receipts (payments) on derivative settlements 701 (783)
------ ------
1,215 614
Changes in operating assets and liabilities 2 8
------ ------
Net cash provided by operating activities 1,217 622
------ ------
Cash flows from investing activities:
Additions to oil and gas properties and other, net (1,061) (1,780)
Net redemptions of investments 18 48
------ ------
Net cash used in investing activities (1,043) (1,732)
------ ------
Cash flows from financing activities:
Net proceeds (repayments) under credit arrangements (107) 285
Net proceeds from issuance of senior subordinated notes - 592
Other 5 18
------ ------
Net cash provided by (used in) financing activities (102) 895
------ ------
Increase (decrease) in cash and cash equivalents 72 (215)
Cash and cash equivalents, beginning of period 24 250
------ ------
Cash and cash equivalents, end of period $96 $35
====== ======
Explanation and Reconciliation of Non-GAAP Financial Measures
Earnings Stated Without the Effect of Certain Items
Earnings stated without the effect of certain items is a non-GAAP financial measure. Earnings without the effect of these items are presented because they affect the comparability of operating results from period to period. In addition, earnings without the effect of these items are more comparable to earnings estimates provided by securities analysts.
A reconciliation of earnings for the third quarter of 2009 stated without the effect of certain items to net income is shown below:
3Q09
-------------
(in millions)
Net income $78
Net unrealized loss on commodity derivatives(1) 243
Income tax adjustment for above item (88)
Tax benefit associated with deferred tax assets in
Malaysia (24)
----
Earnings stated without the effect of the above items $209
====
-------------
(1) The determination of "Net unrealized loss on commodity derivatives"
for the third quarter of 2009 is as follows:
3Q09
-------------
(in millions)
Commodity derivative expense $(8)
Cash receipts on derivative settlements (242)
Option premiums associated with derivatives settled
during the period 7
-----
Net unrealized loss on commodity derivatives $(243)
=====
Net Cash Provided by Operating Activities Before Changes in Operating Assets and Liabilities
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:
3Q09
-------------
(in millions)
Net cash provided by operating activities $505
Net change in operating assets and liabilities (54)
----
Net cash provided by operating activities before
changes in operating assets and liabilities $451
====
SOURCE Newfield Exploration Company
http://www.newfield.com
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