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Newfield Reports Fourth Quarter and Full-Year 2007 Financial and Operating Results

HOUSTON, Feb. 11 /PRNewswire-FirstCall/ -- Newfield Exploration Company (NYSE: NFX) today reported fourth quarter and full-year 2007 financial and operating results. Newfield will be hosting a conference call at 8:30 a.m. (CST) on February 12. To participate in the call, dial 719-325-4819 or listen through the website at http://www.newfield.com.

Fourth Quarter 2007

For the fourth quarter of 2007, Newfield reported net income of $313 million, or $2.38 per diluted share (all per share amounts are on a diluted basis). The results include income from discontinued operations of $338 million, or $2.57 per share, substantially all of which relates to a gain of $341 million associated with the sale of the Company's U.K. North Sea business for $511 million.

Loss from continuing operations for the fourth quarter of 2007 includes unrealized commodity derivative expense of $151 million ($98 million after-tax), or $0.75 per share, and $17 million ($11 million after-tax), or $0.08 per share, of additional compensation expense under the Company's incentive compensation plan as a result of the sale of the compensation expense under the U.K. North Sea business. Without the effects of these items, income from continuing operations would have been $84 million, or $0.64 per share.

Revenues in the fourth quarter of 2007 were $398 million. Net cash provided by operating activities before changes in operating assets and liabilities was $258 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.

Newfield's production in the fourth quarter of 2007 was 50.3 Bcfe. Capital expenditures in the fourth quarter of 2007 were $577 million.

Full Year 2007

For 2007, Newfield reported net income of $450 million, or $3.44 per share, including income from discontinued operations of $278 million, or $2.12 per share, which includes the gain on sale of the U.K. North Sea business.

Income from continuing operations for 2007 includes unrealized commodity derivative expense of $365 million ($237 million after-tax), or $1.82 per share, and $17 million of additional compensation expense as noted above. Without the effects of these items, income from continuing operations would have been $420 million, or $3.22 per share.

Revenues for 2007 were $1.8 billion. Net cash provided by operating activities before changes in operating assets and liabilities was $1.3 billion. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.

Highlights

  • 2007 Asset Sales Re-shape Portfolio - Asset sales generated $1.8 billion in proceeds for 396 Bcfe of proved reserves. Proceeds were used to reduce debt and fund capital expenditures. The Company had approximately $370 million of cash and short-term investments at year-end 2007. Debt was reduced by $125 million to $1.05 billion.
  • Proved Reserves Increase 10% to 2.5 Tcfe at Year-End 2007 - Newfield added 660 Bcfe through the drillbit and 221 Bcfe through acquisitions. Reserve Life Index increased to 13 years. (See table in this release.)
  • More than 70% of Total Year-End 2007 Reserves in "Resource Plays" - The Mid-Continent and Rocky Mountain divisions now account for more than 70% of proved reserves. Significant increase reflects success of growing Woodford Shale Play, 2007 Rocky Mountain acquisition and ongoing development of giant Monument Butte oil field in northeast Utah.
  • Mid-Continent Division Reaches New Highs - Net production from the Mid-Continent division recently hit a new high of 228 MMcfe/d. The division posted 30% production growth in 2007 and has a 3-year compound annual growth rate of 25%. Proved reserves are more than 1 Tcfe.
  • Woodford Shale Production Reaches 175 MMcfe/d - Newfield's gross operated Woodford Shale production is now 175 MMcfe/d. The Company exited 2006 producing 85 MMcfe/d and 2007 at 165 MMcfe/d. The Company expects to exit 2008 at approximately 250 MMcfe/d, a 50% increase over year-end 2007 levels. Extended lateral completions are demonstrating improved capital efficiency. A complete Woodford Shale update can be found in today's edition of the Company's @NFX publication on the website at http://www.newfield.com.
  • Ongoing Development of Giant Monument Butte Field - Newfield has now drilled more than 50 wells on 20-acre spacing in its 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. The 20-acre infill program's success indicates the potential to drill an additional 1,000-2,500 wells in the field. This is in addition to the 500-1,000 locations remaining on 40-acre spacing. Newfield has drilled 678 wells in the field since acquiring it in 2004.
  • Continued Success on Ute Tribe Acreage - Newfield has now drilled 16 wells on the Ute Tribal acreage, adjacent to the north boundary of the Monument Butte Field. A rig has been dedicated to drilling wells on this acreage, which encompasses 47,000 gross acres.
  • Signing of New Deep Gas Exploration Agreement - Newfield recently signed an agreement with a third party to test deep gas targets below the shallow oil producing zones in its Monument Butte Field. Targets include the Wasatch, Mesa Verde, Blackhawk and Mancos Shale. Drilling is planned for the first half of 2008. The agreement allows for promoted exploratory drilling and progressive earning in approximately 71,000 net acres in which Newfield will retain a greater than 70% interest. Approximately 10,000 net acres in the immediate vicinity of recent deep gas tests were excluded from the agreement. Several Newfield operated wells are planned on this acreage in 2008.
    • Malaysia Oil Volumes to Triple in 2008 - The Abu Field offshore Malaysia has ramped up to a planned production rate of 15,000 BOPD gross. The production deck for the Puteri development has been set and a pipeline will be installed late in the first quarter of 2008. First oil sales of 6,000 - 8,000 BOPD gross are expected in April 2008. The East Belumut and Chermingat Fields are expected to begin production in the second quarter of 2008 and will ramp up to 15,000 BOPD gross.
    • Increased Inventory in Deepwater Gulf of Mexico - Newfield placed high bids on 18 blocks, of which 15 have been awarded to date, in a 2007 lease sale and now has an inventory of prospects that will support the drilling of 4-5 wells a year for the next several years, including 2008. Newfield has two deepwater developments underway that will add initial production volumes in 2008-09.
    • Continued Success Under South Texas JV - Newfield recently drilled its 21st successful well under its joint venture with Exxon-Mobil in South Texas. Production remains above 75 MMcfe/d gross. Newfield's interest in this joint venture is approximately 50%. Newfield has an inventory of 20 ready-to-drill prospects and is currently operating two drilling rigs.

    • Signed 58,000 acre JV South of Sarita Field - Newfield signed a 58,000 acre JV with a private company on prospective Frio acreage south and east of the prolific Sarita Field. Drilling is planned for early 2008.

    2008 Capital Budget

    Planned capital expenditures in 2008 are $1.6 billion. The budget excludes potential acquisitions and approximately $113 million of capitalized interest and overhead. A complete update can be found in the news release headlined "Newfield Exploration Announces 2008 Capital Program."

    Proved Reserves and Capital Activity

    Newfield's total reserves at year-end 2007 were 2.5 Tcfe, an increase of 10% over year-end 2006 reserves. Newfield sold 396 Bcfe of proved reserves during 2007. Net reserve additions from all sources were 869 Bcfe with 221 Bcfe, of the total coming from purchases of properties.

    
    
         Oil and Gas Reserves
    
                                                     MMBbls      Bcf        Bcfe
    
        December 31, 2006                             114       1,586      2,272
          Extensions, discoveries and other
           additions                                   12         583        660
          Purchases of properties                      10         163        221
            Reserve additions                          22         746        881
          Sales of properties                         (13)       (317)      (396)
          Revisions of previous estimates               1         (18)       (12)
          Production                                  (10)       (187)      (249)
        December 31, 2007                             114       1,810      2,496
    
    
    
         Capital Expenditures - Continuing  Operations
    
                                                                          2007
                                                                     (in millions)
        Domestic property acquisitions:
          Unproved                                                          $186
          Proved                                                             476
        Domestic exploration and development (1)                           1,748
        International exploration and development                            241
          Total costs incurred (2)                                        $2,651
    
         (1) Includes approximately $154 million of capital expenditures on
             properties sold in the Gulf of Mexico.
         (2) Includes $21 million of non cash asset retirement costs and $47
             million of capitalized interest.
    
    
    

    First Quarter 2008 Estimates

    Natural Gas Production and Pricing - The Company's natural gas production in the first quarter of 2008 is expected to be 36 - 40 Bcf (400 - 435 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 deepwater Gulf of Mexico and onshore Gulf Coast, after basis differentials, transportation and handling charges, will average $0.40 - $0.60 per MMBtu less than the Henry Hub Index. Although Newfield's Rocky Mountain production is primarily oil, the Company does produce approximately 40 MMcfe/d of natural gas in this region. 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 extend 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 in the first quarter of 2008, including international liftings, is expected to be 2.1 - 2.3 million barrels (23,000 - 25,200 BOPD). Newfield expects to produce approximately 7,400 BOPD net from its Malaysian operations, and 1,400 BOPD net from China. The timing of liftings in Malaysia and China 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. Oil production from China typically sells at $10 - $12 per barrel less than WTI. Hedging gains or losses will affect price realizations.

    Lease Operating Expense and Production Taxes - LOE is expected to be $58 - $65 million ($1.14 - $1.27 per Mcfe) in the first quarter of 2008. Production taxes in the first quarter of 2008 are expected to be $36 - $40 million ($0.71- $0.78 per Mcfe). Production taxes on an Mcfe basis have increased now that a significant portion of the Company's production is onshore and subject to severance taxes. In addition, higher oil production in Malaysia increases production taxes. Approximately 40% of the production taxes are associated with Malaysian operations.

    General and Administrative Expense - G&A expense for the first quarter of 2008 is expected to be $33 - $36 million ($0.65 - $0.71 per Mcfe), net of capitalized direct internal costs (expected to be $14 - $16 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.

    Interest Expense - The non-capitalized portion of the Company's interest expense for the first quarter of 2008 is expected to be $17 - $19 million ($0.33 - $0.37 per Mcfe). As of February 11, 2008, Newfield had no borrowings outstanding under its credit arrangements. The remainder of debt consists of public debt that in the aggregate totals $1.05 billion in principal amount. Capitalized interest for the first quarter of 2008 is expected to be about $12 - $13 million.

    Income Taxes - Including both current and deferred taxes, the Company expects its consolidated income tax rate in the first quarter of 2008 to be about 36 - 39%. About 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 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 Gulf of Mexico. The Company has international operations in Malaysia and China.

    **The statements set forth in this release regarding estimated or anticipated first quarter 2008 results, the timing of drilling plans and initial production from wells or fields 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.

    For information, contact: Investor Relations: Steve Campbell (281) 847-6081 Media Relations: Keith Schmidt (281) 674-2650 Email: info@newfield.com

        PRODUCTION, PRICES AND COSTS(1)          Three Months Ended     Percentage
                                                     December 31,        Increase
                                                   2007       2006      (Decrease)
        Production (2):
        United States:
          Natural gas (Bcf)                         37.9       55.2        (31%)
          Oil and condensate (MBbls)               1,216      1,609        (24%)
          Total (Bcfe)                              45.2       64.9        (30%)
        International:
          Natural gas (Bcf)                            -          -          -
          Oil and condensate (MBbls)                 857        504         70%
          Total (Bcfe)                               5.1        3.0         70%
        Total:
          Natural gas (Bcf)                         37.9       55.2        (31%)
          Oil and condensate (MBbls)               2,073      2,113         (2%)
          Total (Bcfe)                              50.3       67.9        (26%)
    
        Average Realized Prices (3):
        United States:
          Natural gas (per Mcf)                    $7.22      $7.08          2%
          Oil and condensate (per Bbl)             49.94      45.01         11%
        International:
          Natural gas (per Mcf)                      $ -        $ -          -
          Oil and condensate (per Bbl)             79.51      46.90         70%
        Total:
          Natural gas (per Mcf)                    $7.22      $7.08          2%
          Oil and condensate (per Bbl)             62.15      45.46         37%
          Natural gas equivalent (per Mcfe)         8.00       7.18         11%
    
        Operating Costs (per Mcfe):
        Lease Operating:
          Recurring                                $0.91      $1.07        (15%)
          Major expense (4)                            -       0.73       (100%)
        Production and other taxes                  0.75       0.27        178%
        Depreciation, depletion and  amortization   2.85       2.80          2%
        General and administrative                  0.94       0.45        109%
            Total operating costs                  $5.45      $5.32          2%
    
        (1) Includes production and operating results from Newfield's 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 were excluded, the average realized
            price for total gas would have been $6.11 and $5.92 per Mcf for the
            fourth quarter of 2007 and 2006, respectively, and the total oil and
            condensate average realized price would have been $79.78 and $46.37
            per Bbl, respectively.  Without the effects of any hedging contracts,
            the average realized prices for the fourth quarter of 2007 and 2006
            would have been $6.11 and $5.87 per Mcf, respectively, for gas and
            $79.78 and $50.35 per Bbl, respectively, for oil.
        (4) Includes a $50 million charge, or $0.73 per Mcfe, due to the timing of
            expenditures related to hurricane repairs.
    
    
    
        PRODUCTION, PRICES AND COSTS (1)         Twelve Months Ended    Percentage
                                                     December 31,        Increase
                                                   2007       2006      (Decrease)
        Production (2):
        United States:
          Natural gas (Bcf)                        192.8      198.7         (3%)
          Oil and condensate (MBbls)               6,501      6,218          5%
          Total (Bcfe)                             231.8      236.0         (2%)
        International:
          Natural gas (Bcf)                          1.6          -        100%
          Oil and condensate (MBbls)               2,259      1,097        106%
          Total (Bcfe)                              15.2        6.6        130%
        Total:
          Natural gas (Bcf)                        194.4      198.7         (2%)
          Oil and condensate (MBbls)               8,760      7,315         20%
          Total (Bcfe)                             247.0      242.6          2%
    
        Average Realized Prices (3):
        United States:
          Natural gas (per Mcf)                    $7.62      $7.22          6%
          Oil and condensate (per Bbl)             50.11      49.13          2%
        International:
          Natural gas (per Mcf)                    $4.96        $ -        100%
          Oil and condensate (per Bbl)             69.21      56.58         22%
        Total:
          Natural gas (per Mcf)                    $7.60      $7.22          5%
          Oil and condensate (per Bbl)             55.04      50.25         10%
          Natural gas equivalent (per Mcfe)         7.93       7.43          7%
    
        Operating Costs (per Mcfe):
        Lease Operating:
          Recurring                                $1.08      $1.07          1%
          Major expense (4)                         0.21       0.07        200%
        Production and other taxes                  0.41       0.25         64%
        Depreciation, depletion and amortization    2.78       2.57          8%
        General and administrative                  0.65       0.51         27%
        Ceiling test writedown                         -       0.03       (100%)
        Other                                          -      (0.04)      (100%)
            Total operating costs                  $5.13      $4.46         15%
    
        (1) Includes production and operating results from Newfield's 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 were excluded, the average realized
            price for total gas would have been $6.32 and $6.47 per Mcf for 2007
            and 2006, respectively, and the total oil and condensate average
            realized price would have been $63.35 and $52.18 per Bbl,
            respectively.  Without the effects of any hedging contracts, the
            average realized prices for 2007 and 2006 would have been $6.32 and
            $6.42 per Mcf, respectively, for gas and $64.12 and $59.13 per Bbl,
            respectively, for oil.
        (4) The year 2007 includes a $52 million charge, or $0.21 per Mcfe, of
            hurricane related repair expenses. The year 2006 includes a
            $17 million charge, or $0.07 per Mcfe, of actual hurricane related
            repair expenses in excess of the proceeds from the settlement of all
            of Newfield's insurance claims.
    
    
    
        CONSOLIDATED STATEMENT OF INCOME       For the             For the
        (Unaudited, in millions,          Three Months Ended  Twelve Months Ended
         except per share data)              December 31,         December 31,
                                           2007      2006       2007       2006
    
        Oil and gas revenues               $398      $427      $1,783     $1,673
    
        Operating expenses:
          Lease operating                    46       121         314        276
          Production and other taxes         38        18         101         61
          Depreciation, depletion
           and amortization                 143       190         682        624
          General and administrative         47        29         155        118
          Ceiling test writedown              -         -           -          6
          Other                               -         -           -        (11)
            Total operating expenses        274       358       1,252      1,074
    
        Income from operations              124        69         531        599
    
        Other income (expenses):
          Interest expense                  (22)      (22)       (102)       (87)
          Capitalized interest               12        11          47         44
          Commodity derivative income
           (expense)                       (145)       90        (188)       389
          Other                               4         3           6         11
                                           (151)       82        (237)       357
    
        Income (loss) from continuing
         operations before income taxes     (27)      151         294        956
    
    
        Income tax provision (benefit)       (2)       51         122        346
    
        Income (loss) from continuing
         operations                         (25)      100         172        610
        Income (loss) from discontinued
         operations, net of tax             338       (18)        278        (19)
        Net income                         $313       $82        $450       $591
    
        Earnings per share:
        Basic --
        Income (loss) from continuing
         operations                      $(0.20)    $0.79       $1.35      $4.82
        Income (loss) from discontinued
         operations, net of tax            2.63     (0.14)       2.17      (0.15)
                                          $2.43     $0.65       $3.52      $4.67
        Diluted --
        Income (loss) from continuing
         operations                      $(0.19)    $0.77       $1.32      $4.73
        Income (loss) from discontinued
         operations, net of tax            2.57     (0.13)       2.12      (0.15)
                                          $2.38     $0.64       $3.44      $4.58
    
        Weighted average number of shares
         outstanding for basic earnings
         per share                          128       127         128        127
        Weighted average number of shares
         outstanding for diluted earnings
         per share                          131       130         131        129
    
    
    
        CONDENSED CONSOLIDATED BALANCE SHEET           December 31,   December 31,
        (Unaudited, in millions)                          2007           2006
    
        ASSETS
        Current assets:
          Cash and cash equivalents                       $250           $80
          Short-term investments                           120            10
          Other current assets                             557           756
          Assets of discontinued operations                  -             5
            Total current assets                           927           851
    
        Oil and gas properties, net (full cost method)   5,923         5,455
        Other assets                                       136           129
        Assets of discontinued operations                    -           200
            Total assets                                $6,986        $6,635
    
        LIABILITIES AND STOCKHOLDERS' EQUITY
        Current liabilities                               $929          $972
        Short-term debt                                      -           124
        Liabilities of discontinued operations               -            27
            Total current liabilities                      929         1,123
    
        Other liabilities                                   18            28
        Derivative liabilities                             248           179
        Long-term debt                                   1,050         1,048
        Asset retirement obligation                         56           225
        Deferred taxes                                   1,104           963
        Liabilities of discontinued operations               -             7
            Total long-term liabilities                  2,476         2,450
    
        Commitments and contingencies                        -             -
    
        STOCKHOLDERS' EQUITY
        Common stock                                         1             1
        Additional paid-in capital                       1,278         1,198
        Treasury stock                                     (32)          (30)
        Accumulated other comprehensive income (loss)       (3)            6
        Retained earnings                                2,337         1,887
          Total stockholders' equity                     3,581         3,062
          Total liabilities and stockholders' equity    $6,986        $6,635
    
    
    
        CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS         For the
        (Unaudited, in millions)                          Twelve Months Ended
                                                              December 31,
                                                           2007         2006
        Cash flows from operating activities:
          Net income                                      $450          $591
        Adjustments to reconcile net income to net cash
         provided by operating activities:
          (Income) loss from discontinued operations,
            net of tax                                    (278)           19
          Depreciation, depletion and amortization          82           624
          Deferred taxes                                    30           316
          Stock-based compensation                          23            18
          Ceiling test writedown                             -             6
          Early redemption premium                           -             8
          Commodity derivative (income) expense
            Total (gains) losses                           188          (389)
            Realized gains                                 180           135
                                                         1,275         1,328
          Changes in operating assets and liabilities     (109)           64
          Net cash provided by continuing activities     1,166         1,392
          Net cash used in discontinued activities         (12)           (8)
            Net cash provided by operating activities    1,154         1,384
    
        Cash flows from investing activities:
          Additions to oil and gas properties and other (1,943)       (1,580)
          Acquisition of oil and gas properties           (658)            -
          Proceeds from sales of oil and gas properties  1,344             7
          Insurance recoveries                               -            45
          Proceeds from sale of UK subsidiaries,
           net of cash                                     491             -
          Purchases of short-term investments             (271)         (714)
          Redemption of short-term investments             172           690
          Net cash used in continuing activities          (865)       (1,552)
          Net cash used in discontinued activities         (41)         (110)
            Net cash used in investing activities         (906)       (1,662)
    
        Cash flows from financing activities:
          Net proceeds under credit arrangements             -             -
          Repayment of senior notes                       (125)            -
          Proceeds from issuance of senior subordinated
           notes                                             -           550
          Repayment of senior subordinated notes             -          (250)
          Payments to discontinued operations              (38)         (143)
          Proceeds from issuances of common stock           32            15
          Stock-based compensation excess tax benefit       14             5
          Purchases of treasury stock                        -            (3)
          Net cash provided by (used in) continuing
           activities                                     (117)          174
          Net cash provided by discontinued activities      38           143
            Net cash provided by (used in) financing
             activities                                    (79)          317
    
        Effect of exchange rate changes on cash and cash
         equivalents                                         1             2
    
        Increase in cash and cash equivalents              170            41
        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          $250           $80
    
    
    
        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 income from continuing operations for the fourth
    quarter of 2007 stated without the effects of listed items to net income is
    shown below:
    
    
    
                                                                    (in millions)
        Net income                                                      $313
          Unrealized commodity derivative expense(1)                     151
          G&A expense under incentive compensation plan
           related to the sale of U.K. North Sea business                 17
          Income tax adjustment for above items                          (59)
          Income from discontinued operations                           (338)
        Income from continuing operations stated without the effects
         of the above items                                              $84
    
        (1) The components of "Commodity derivative income (expense)" as included
            in Newfield's Consolidated Statement of Income for fourth quarter of
            2007 are as follows:
    
    
    
                                                                    (in millions)
            Unrealized loss due to changes in fair market value        $(151)
            Realized gain on settlement                                    6
              Total commodity derivative expense                       $(145)
    

    A reconciliation of income from continuing operations for 2007 stated without the effects of listed items to net income is shown below:

    
    
                                                                    (in millions)
        Net income                                                      $450
          Unrealized commodity derivative expense (1)                    365
          G&A expense under incentive compensation plan
           related to the sale of U.K. North Sea business                 17
          Income tax adjustment for above items                         (134)
          Income from discontinued operations                           (278)
        Income from continuing operations stated without the effects
         of  the above items                                            $420
    
    
        (1) The components of "Commodity derivative income (expense)" as included
            in Newfield's Consolidated Statement of Income for 2007 are as
            follows:
    
    
    
                                                                   (in millions)
            Unrealized loss due to changes in fair market value        $(365)
            Realized gain on settlement                                  177
              Total commodity derivative expense                       $(188)
    
    

    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 GAAP. 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:

    
    
                                                                        4Q07
                                                                    (in millions)
        Net cash provided by operating activities                       $223
          Net change in operating assets and liabilities                  35
        Net cash provided by operating activities
         before changes in operating assets and liabilities             $258
    
    
                                                                        2007
                                                                    (in millions)
        Net cash provided by operating activities                     $1,154
          Net change in operating assets and liabilities                 109
          Net cash used in discontinued operations                        12
        Net cash provided by operating activities
         before changes in operating assets and liabilities           $1,275
    

    SOURCE Newfield Exploration Company 02/11/2008 CONTACT: investors, Steve Campbell, +1-281-847-6081 or media, Keith Schmidt, +1-281-674-2650info@newfield.com, both of Newfield Exploration Company Web site: http://www.newfield.com (NFX)

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