Newfield Reports First Quarter 2010 Results

News provided by

Newfield Exploration Company

Apr 27, 2010, 05:48 ET

HOUSTON, April 27 /PRNewswire-FirstCall/ -- Newfield Exploration Company (NYSE: NFX) today reported its unaudited first quarter 2010 financial results. A separate operational update was released on April 26 and this release and the operational update release are available through the investor relations section of our website at http://www.newfield.com. Newfield will be hosting a conference call at 7:30 a.m. (CDT) on April 28. To participate in the call, dial 719-457-2731 or listen through the investor relations section of our website at http://www.newfield.com.

For the first quarter of 2010, Newfield recorded net income of $244 million, or $1.84 per diluted share (all per share amounts are on a diluted basis). Net income includes the effect of these items:

  • a net unrealized gain on commodity derivatives of $143 million ($91 million after-tax); and
  • an early redemption charge of $10 million ($6 million after-tax) associated with the purchase and payment of approximately $143 million of our $175 million aggregate principal amount of 7 5/8% Senior Notes due 2011 offset by a gain of $2 million ($1 million after-tax) resulting from the termination of the associated interest rate swap.

Without the effect of these items, net income for the first quarter of 2010 would have been $158 million, or $1.19 per share.

Revenues in the first quarter of 2010 were $458 million. Net cash provided by operating activities before changes in operating assets and liabilities was $393 million. See “Explanation and Reconciliation of Non-GAAP Financial Measures” found after the financial statements in this release.

Newfield’s production in the first quarter of 2010 was 67 Bcfe. Natural gas production in the first quarter of 2010 was 48 Bcf, an average of 533 MMcf/d. Newfield’s oil liftings in the first quarter of 2010 were 3.2 MMBbls, an average of approximately 35,550 BOPD. Capital expenditures in the first quarter of 2010 were approximately $360 million, excluding the previously announced $215 million acquisition of properties in the Maverick Basin from TXCO Resources Inc. (closed February 2010).

2010 Outlook

On Monday, Newfield announced that the Company intends to allocate additional capital in 2010 to its ongoing oil activities in the Uinta and Williston Basins. Newfield now expects to invest approximately $700 million in oil projects in 2010, or nearly 45% of its total budget. At current oil prices, Newfield’s growing crude oil volumes are expected to account for approximately 60% of 2010 revenues.

As a result of the re-allocation in expenditures, the Company’s 2010 domestic crude oil production is expected to increase throughout the remainder of 2010 and is expected to be at least 20% above 2009 domestic oil production. Spending reductions in planned gas development programs will offset these new oil investments. Newfield maintains its capital budget of $1.6 billion.

For the full year 2010, Newfield expects that its production will be in the upper half of its previous production guidance of 278 – 288 Bcfe, representing an expected increase of at least 10% over 2009 volumes. An intentional reduction in natural gas volumes in the second half of 2010 should be more than offset by our growing crude oil volumes.

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 second quarter and full year 2010 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



1Q10 Actual Results



1Q10 Actual


Domestic

Int'l

Total

Production/Liftings




   Natural gas – Bcf

48.0

–

48.0

   Oil and condensate – MMBbls

1.8

1.4

3.2

   Total Bcfe

58.6

8.4

67.0





Average Realized Prices (Note 1)




   Natural gas – $/Mcf

$

6.34

$

–

$

6.34

   Oil and condensate – $/Bbl

$

88.38

$

70.50

$

80.45

   Mcf equivalent – $/Mcfe

$

7.91

$

11.75

$

8.40








Operating Expenses: (Note 2)







  Lease operating







   Recurring ($MM)

$

49.9

$

10.0

$

59.9

     per/Mcfe

$

0.87

$

1.20

$

0.91

   Major (workovers, repairs, etc.) ($MM)

$

6.0

$

1.2

$

7.2

     per/Mcfe

$

0.10

$

0.14

$

0.11








Production and other taxes ($MM)

$

15.4

$

9.3

$

24.7

    per/Mcfe

$

0.27

$

1.10

$

0.38








 General and administrative (G&A), net ($MM)

$

35.5

$

0.9

$

36.4

    per/Mcfe

$

0.62

$

0.11

$

0.55








         Capitalized internal costs ($MM)





$

(20.3)

            per/Mcfe





$

(0.31)








Interest expense ($MM)





$

37.7

     per/Mcfe





$

0.57








Capitalized interest ($MM)





$

(12.3)

     per/Mcfe





$

(0.19)








Note 1: 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 $5.04 per Mcf and the total oil and condensate average realized price would have been $69.82 per barrel.


Note 2: Recurring lease operating expense includes transportation expense.





2Q10 & FY10 Estimates



2Q10 & FY10 Estimates


Domestic

Int'l

Total

Production/Liftings

2Q10

FY10

2Q10

FY10

2Q10

FY10

  Natural gas – Bcf

50 – 52

199 – 202

–

–

50 – 52

199 – 202

  Oil and condensate – MMBbls

1.9 – 2.0

8.5 – 8.7

1.4 – 1.5

5.6 – 5.7

3.3 – 3.5

14.1 – 14.4

  Total Bcfe

62 – 64

250 – 254

8 – 9

33 – 34

70 – 73

283 – 288








Average Realized Prices







  Natural gas – $/Mcf

Note 1

Note 1





  Oil and condensate – $/Bbl

Note 2

Note 2

Note 3

Note 3



  Mcf equivalent – $/Mcfe














Operating Expenses:







 Lease operating







   Recurring ($MM)

$35 - $39

$148 - $157

$12 - $14

$43 - $45

$47 - $53

$191 - $202

     per/Mcfe

$0.57 - $0.61

$0.59 - $0.62

$1.43 - $1.48

$1.30 - $1.34

$0.67 - $0.72

$0.67 - $0.72

   Transportation ($MM)

$18 - $20

$70 - $73

-

-

$18 - $20

$70 - $73

     per/Mcfe

$0.25 - $0.27

$0.28 - $0.29

-

-

$0.25 - $0.27

$0.28 - $0.29

   Recurring w/ trans ($MM)

$53 - $59

$218 - $230

$12 - $14

$43 - $45

$65 - $73

$261 - $275

     per/Mcfe

$0.86 - $0.92

$0.87 - $0.92

$1.43 - $1.48

$1.30 - $1.34

$0.93 - $0.99

$0.93 - $0.97

   Major (workovers, etc.) ($MM)

$15 - $20

$34 - $38

$2 - $4

$20 - $22

$17 - $24

$54 - $60

     per/Mcfe

$0.26 - $0.28

$0.14 - $0.15

$0.34 - $0.36

$0.61 - $0.64

$0.27 - $0.29

$0.19 - $0.20








 Production/Taxes ($MM) (Note 4)

$15 - $18

$59 - $72

$15 - $19

$53 - $65

$30 - $37

$112 - $137

    per/Mcfe

$0.25 - $0.26

$0.25 - $0.27

$1.93 - $1.97

$1.73 - $1.76

$0.46 - $0.47

$0.42 - $0.45








 G&A, net ($MM)

$31 - $37

$129 - $143

$1 - $2

$4 - $5

$32 - $39

$133 - $148

   per/Mcfe

$0.54 - $0.55

$0.54 - $0.55

$0.13 - $0.14

$0.12 - $0.13

$0.49 - $0.50

$0.49 - $0.50








   Capitalized internal costs ($MM)





($19 - $23)

($75 - $92)

     per/Mcfe





($0.29 - $0.30)

($0.29 - $0.30)








Interest expense ($MM)





$35 - $43

$137 - $168

     per/Mcfe





$0.54 - $0.55

$0.53 - $0.54








Capitalized interest ($MM)





($11 - $13)

($41 - $51)

     per/Mcfe





($0.16 - $0.17)

($0.15 - $0.16)








Tax rate (%) (Note 5)





35% - 37%

35% - 37%








Income taxes (%)







 Current





14% - 16%

14% - 16%

 Deferred





84% - 86%

84% - 86%








Note 1: The price that we receive for natural gas production from 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.  Realized natural gas prices for our Mid-Continent properties, after basis differentials, transportation and handling charges, typically average 85-90% of the Henry Hub Index.

Note 2: The price we receive for our Gulf Coast oil production typically averages about 90-95% of the NYMEX West Texas Intermediate (WTI) price. The price we receive for our oil production in the Rocky Mountains is currently averaging about $12-$14 per barrel below the WTI price. Oil production from our Mid-Continent properties typically averages 88-92% of the WTI price.

Note 3: Oil sales from our operations in Malaysia typically sell at a slight discount to Tapis, or about 90-95% of WTI. Oil sales from our operations in China typically sell at $4-$6 per barrel less than the WTI price.

Note 4: Guidance for production taxes determined using $75/Bbl oil and $5.00/MMBtu gas.

Note 5: Tax rate applied to earnings excluding unrealized gains or losses on commodity derivatives.




CONSOLIDATED STATEMENT OF INCOME

(Unaudited, in millions, except per share data)

For the

Three Months Ended

March 31,



2010


2009







Oil and gas revenues

$  458


$  262







Operating expenses:





  Lease operating

67


71


  Production and other taxes

25


9


  Depreciation, depletion and amortization

147


159


  General and administrative

36


32


  Ceiling test writedown

—


1,344


  Other

8


2


     Total operating expenses

283


1,617







Income (loss) from operations

175


(1,355)







Other income (expenses):





  Interest expense

(38)


(32)


  Capitalized interest

12


14


  Commodity derivative income

237


278


  Other

2


3


     Total other income (expenses)

213


263







Income (loss) before income taxes

388


(1,092)







Income tax provision (benefit)

144


(398)







Net income (loss)

$  244


$  (694)







Income (loss) per share:





Basic --

$  1.87


$  (5.35)







Diluted --

$  1.84


$  (5.35)







Weighted average number of shares outstanding or basic income (loss) per share

130


130


Weighted average number of shares outstanding for diluted income (loss) per share *

133


130



* Had we recognized net income for the three month period ended March 31, 2009, the weighted average number of shares outstanding for the computation of diluted earnings per share would have increased by 1 million shares




CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, in millions)

March 31,

2010


December 31,

2009





ASSETS




Current assets:




  Cash and cash equivalents

$  112


$  78

  Derivative assets

349


269

  Other current assets

517


546

     Total current assets

978


893





Property and equipment, net (full cost method)

5,671


5,247

Derivative assets

75


19

Other assets

103


95

     Total assets

$  6,827


$  6,254





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities

$  890


$  873

Current debt

32


—

     Total current liabilities

922


873





Other liabilities

159


142

Long-term debt

2,189


2,037

Deferred taxes

537


434

     Total long-term liabilities

2,885


2,613





Commitments and contingencies

—


—





STOCKHOLDERS' EQUITY




Common stock

1


1

Additional paid-in capital

1,410


1,389

Treasury stock

(47)


(33)

Accumulated other comprehensive loss

(10)


(11)

Retained earnings

1,666


1,422

  Total stockholders' equity

3,020


2,768

  Total liabilities and stockholders' equity

$  6,827


$  6,254





CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, in millions)



For the

Three Months Ended

March 31,


2010


2009

Cash flows from operating activities:




  Net income (loss)

$  244


$  (694)

Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:




  Depreciation, depletion and amortization

147


159

  Deferred tax provision (benefit)

131


(403)

  Stock-based compensation

6


8

  Ceiling test writedown

—


1,344

  Commodity derivative income

(237)


(278)

  Cash receipts on derivative settlements

102


211


393


347

  Changes in operating assets and liabilities

21


2

     Net cash provided by operating activities

414


349





Cash flows from investing activities:




  Additions to oil and gas properties and other, net

(340)


(405)

  Acquisitions of oil and gas properties

(217)


(9)

  Redemptions of investments

1


7

     Net cash used in investing activities

(556)


(407)





Cash flows from financing activities:




  Net proceeds (repayments) under credit arrangements

(364)


73

  Net proceeds from issuance of senior subordinated notes

686


—

  Repayment of senior notes

(143)


—

  Other

(3)


(1)

    Net cash provided by financing activities

176


72









Increase in cash and cash equivalents

34


14

Cash and cash equivalents, beginning of period

78


24





Cash and cash equivalents, end of period

$  112


$  38




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 first quarter of 2010 stated without the effect of certain items to net income is shown below:


1Q10


(in millions)

Net income

$  244

  Net unrealized gain on commodity derivatives (1)

(143)

  Early redemption charge

10

  Termination of interest rate swap

(2)

  Income tax adjustment for above items

49

Earnings stated without the effect of the above items

$  158


(1) The determination of "Net unrealized gain on commodity derivatives" for the first quarter of 2010 is as follows:




1Q10


(in millions)

   Commodity derivative income

$  237

   Cash receipts on derivative settlements

(102)

   Option premiums associated with derivatives settled during the period

8

        Net unrealized gain on commodity derivatives

$  143



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:


1Q10


(in millions)

Net cash provided by operating activities

$  414

  Net change in operating assets and liabilities

(21)

Net cash provided by operating activities before changes in operating assets and liabilities

$  393



SOURCE Newfield Exploration Company