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Newfield Reports Fourth Quarter and Full-Year 2009 Financial and Operating Results
HOUSTON, Feb 16, 2010 /PRNewswire via COMTEX/ -- Newfield Exploration Company (NYSE: NFX) today reported its unaudited fourth quarter and full-year 2009 financial and operating results. The press releases reporting our results and our year-end 2009 reserves are available in the investor relations section of our website at http://www.newfield.com. Newfield will be hosting a conference call at 8:30 a.m. (CST) on February 17. To participate in the call, dial 719-457-2088 or listen through the investor relations section of our website at http://www.newfield.com.

Fourth Quarter 2009

For the fourth quarter of 2009, Newfield recorded net income of $113 million, or $0.86 per diluted share (all per share amounts are on a diluted basis). Net income includes the effect of a net unrealized loss on commodity derivatives of $112 million ($73 million after-tax). Without the effect of this item, net income for the fourth quarter of 2009 would have been $186 million, or $1.40 per share.

Revenues in the fourth quarter of 2009 were $414 million. Net cash provided by operating activities before changes in operating assets and liabilities was $442 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 2009 was 65 Bcfe. Natural gas production in the fourth quarter of 2009 was 46 Bcf, an average of nearly 500 MMcf/d. Newfield's oil liftings in the fourth quarter of 2009 were 3.1 MMBbls, or an average of approximately 34,200 BOPD. Capital expenditures in the fourth quarter of 2009 were approximately $478 million.

Full-Year 2009



    For 2009, Newfield recorded a net loss of $542 million, or $4.18 per diluted share. The loss includes the impact of the following items:

        - a $1.3 billion ($854 million after-tax), or $6.49 per share,
          reduction in the carrying value of oil and gas properties due to
          significantly lower gas prices at the end of the first quarter of
          2009 compared to year end 2008. This non-cash adjustment resulted
          from the application of full cost accounting rules. (Using the
          quarter-end natural gas price of $3.63 per MMBtu, the Company's
          total estimated proved reserves were negatively impacted by
          approximately 400 Bcfe. The revision was primarily related to proved
          undeveloped reserves in the Mid-Continent and Rocky Mountain
          regions); and

        - a net unrealized loss on commodity derivatives of $604 million ($387
          million after-tax), or $2.94 per share; and

        - 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, the Company would have reported net
    income in 2009 of $676 million, or $5.13 per share.

    Revenues for 2009 were $1.3 billion. Net cash provided by operating
    activities before changes in operating assets and liabilities was $1.7
    billion. See "Explanation and Reconciliation of Non-GAAP Financial
    Measures" found after the financial statements in this release.

    Newfield's production for the full year of 2009 was 257 Bcfe, an increase
    of 9% over 2008 production volumes. Capital expenditures for 2009 were
    $1.4 billion.

Highlights




        - 2009 Proved Reserves Increase 23% over prior year - Newfield's
          proved reserves at year-end 2009 were 3.6 Tcfe. The Company added
          1.3 Tcfe of new reserves, of which about half were related to recent
          changes in Securities and Exchange Commission (SEC) reserve
          reporting rules expanding proved undeveloped reserve locations
          beyond one offset. The Company replaced approximately 250% of its
          2009 production with the addition of new reserves (excluding the
          impact of the new SEC rules). Approximately 53% of the Company's
          proved reserves were proved developed and 72% were natural gas.

          Proved reserves in Newfield's two largest divisions - the Mid-
          Continent and Rocky Mountains - increased 34% and represent more
          than 80% of the Company's total proved reserves. The Company's
          proved reserve life index is approximately 14 years, reflecting
          continued growth in longer-lived resource plays. A separate release
          was issued today with complete information on proved reserves and
          capital investments in 2009.


        - Company Adds >500,000 Net Acres in Resource Plays - Over the last
          six months, the Company added more than a half-million acres in
          developing resource plays.

          -  TXCO Resources - On February 11, 2010, Newfield purchased a
             package of assets from TXCO Resources, Inc. for $215 million.
             Newfield now owns interests in 300,000 net acres in the Maverick
             Basin of southwest Texas with multiple geologic targets,
             including the Eagle Ford and Pearsall Shale plays. Newfield
             expects to drill about 25 wells on the acreage in 2010.

          -  Blackfeet Nation Venture - In late 2009, Newfield reached an
             agreement with the Blackfeet Nation, adding approximately 156,000
             net acres in the Southern Alberta Basin. Including its existing
             position, Newfield now owns interests in 221,000 net acres in
             Glacier County, Montana. The area is geologically similar to the
             Williston Basin and is prospective in the oil bearing Bakken,
             Three Forks and Lodgepole formations. Newfield expects to drill
             up to 10 operated exploratory wells on the acreage, with the
             first well expected to spud in April 2010.

          -  Marcellus Shale Entry - In October 2009, Newfield signed a joint
             exploration agreement with Hess Corporation and today owns an
             interest in approximately 35,000 net acres in Susquehanna and
             Wayne Counties, Pennsylvania. Newfield expects to drill 6-10
             assessment wells on the acreage, beginning in mid-2010.

        - Mid-Continent Production Grew 18% in 2009; Expected to Grow 20% in
          2010 - Gross production from the Mid-Continent continues to grow and
          is currently more than 500 MMcfe/d, or approximately 320 MMcfe/d
          net. The Company's major plays in the division are the Granite Wash
          and the Woodford Shale.

          -  Continued Success in Granite Wash Horizontal Drilling Program,
             First 12 Wells Average Initial Production of 20 MMcfe/d -
             Newfield continues to run four operated rigs in the Granite Wash.
             All of the rigs are currently drilling in Wheeler County, Texas.
             Newfield has an approximate 75% working interest in Stiles Ranch,
             the Company's largest producing asset in the play. Newfield
             expects to drill about 20 wells in the play in 2010 and to test
             4-6 additional horizons within the Granite Wash section. The
             Company owns interests in approximately 40,000 net acres in the
             play.

             In mid-2009, Newfield announced that its first seven horizontal
             wells in Stiles Ranch had an average gross initial production
             rate of 22 MMcfe/d. In late 2009/early 2010, Newfield completed
             six additional horizontal test wells and the results are listed
             below. The average initial production rate of the first 12
             horizontal wells in the Granite Wash play is 20 MMcfe/d (gross).
             Our 13th well recently commenced production at 13.8 MMcfe/d and
             the rate continues to increase. The six recent wells below were
             completed in the dry gas Atoka formation.



                                  IP Rate    Lateral  Working
                   Well Name     (MMcfe/d)   Length   Interest
                   ---------     ---------   ------   --------

                  D Britt 4-4H      11.4      4,500'      84%
                  ------------      ----      ------     ---
                  D Britt 4-5H      14.8      4,700'      83%
                  ------------      ----      ------     ---
                  Britt 8-4H        17.2      4,300'      66%
                  ----------        ----      ------     ---
                  Britt 8-5H        20.0      4,200'      65%
                  ----------        ----      ------     ---
                  Britt 7-9H        22.7      4,500'      51%
                  ----------        ----      ------     ---
                  Britt 8-6H*       13.8      4,300'      66%
                  -----------       ----      ------     ---

               * commenced production this week and rate continues to increase
                 following recent fracture stimulation

          -  Woodford Shale - Production recently reached a record of 329
             MMcfe/d gross operated (191 MMcfe/d net) and is benefiting from
             the recent completion of wells drilled in late 2009. The Company
             plans to run 6-8 operated rigs in the Woodford in 2010 and to
             drill approximately 50 horizontal wells. The Woodford is expected
             to grow about 25% in 2010.

          -  Focus on Super-Extended Laterals (SXLs) in 2010 - The Company
             expects that about one-third of its 2010 wells in the Woodford
             will be SXLs (lateral lengths greater than 5,000'). Newfield
             expects that its average Woodford lateral length in 2010
             will be approximately 6,000', up from approximately 5,000' in
             2009 and 2006-07 average of less than 2,500'.

             To date, the Company has drilled 11 SXLs with an average lateral
             length of nearly 9,000'. As previously reported, the first five
             SXL wells had average initial production rates of approximately
             10 MMcfe/d gross. The remainder of the SXLs (6) is in various
             stages of completion.

        - Company Expects Monument Butte Production to Grow 15% in 2010 - With
          an increase to five operated rigs, Newfield expects that its
          Monument Butte oil production will grow 15% in 2010. Located in the
          Uinta Basin of Utah, this is the Company's largest oil asset. Gross
          oil production from Monument Butte is about 17,000 BOPD. The
          Monument Butte field area covers approximately 180,000 net acres
          (including 63,000 net Ute Tribal acres). The Company expects to
          drill approximately 275 wells in 2010.

          -  Recent Success on Ute Tribal Acreage Contributing to Monument
             Butte Growth - Over the last year, Newfield has drilled 75 wells
             on Ute Tribal acreage, located north and adjacent to Monument
             Butte. Two of the Company's five operated rigs are running on the
             Ute Tribal acreage where recent drilling has encountered thicker
             Green River formations than previously estimated. Newfield's
             interest on the Ute Tribal acreage is approximately 70%. Several
             of the recent completions are significant "step outs" from
             existing development areas and initial production rates have
             ranged from 100 - 1,500 BOPD (gross). There are more than 1,300
             producing wells in the Monument Butte field. Newfield has drilled
             more than 900 wells since the field was acquired in 2004. The
             average initial gross production rate for a typical Monument
             Butte well has ranged from 65 - 80 BOPD.

        - Three Operated Rigs Planned for 2010 Williston Basin Program -
          Newfield expects to run three operated rigs in the Williston Basin
          throughout 2010. Newfield has approximately 150,000 net acres in
          prospective development areas, located primarily on the Nesson
          Anticline and west of the Nesson. In addition, Newfield owns
          interest in approximately 54,000 net acres in the Elm Coulee field.
          Newfield has drilled 14 successful oil wells in the North Dakota
          portion of the Williston Basin since entering the region in late
          2007. The planned 2010 program will consist of development drilling
          along the Nesson (Westberg and Lost Bear areas) as well as continued
          assessment of areas west of the Nesson. Recent significant drilling
          results include:


                               IP Rate    Lateral  Working
          Well Name            (BOEPD)     Length  Interest
          ---------            -------     ------  --------
      Clear Creek State 1-36H   1,300      3,932'      50%
      -----------------         -----      ------     ---
       Arkadios 1-18H           1,686      4,079'      59%
       --------------           -----      ------     ---
          Manta Ray          Completing    4,043'      99%
          ---------          ----------    ------     ---


        - 2009 Malaysian Oil Production Up 40% over 2008 - Newfield's
          Malaysian production benefited from its PM 323 developments - East
          Belumut and Chermingat. Total liftings from Malaysia in 2009 totaled
          5.3 MMBbls, or 14,500 BOPD net. The Company is currently drilling
          the sixth of seven planned development wells in the East Belumut
          field.

        - Jade Exploration Test Unsuccessful - In early 2010, Newfield drilled
          an unsuccessful wildcat on a fault separated structure northeast of
          its existing Pearl field development, located in the Pearl River
          Mouth Basin, offshore China. The well was drilled for approximately
          $10 million. The Newfield operated Pearl development is underway
          with first production expected in late 2012.

        - Deepwater Gulf of Mexico Update - Newfield has five deepwater
          developments underway in the deepwater Gulf of Mexico which are
          expected to provide significant future production growth. An update
          on each of developments can be found in the @NFX publication. The
          Company expects to participate in the drilling of 2-3 deepwater
          wells in 2010. Highlights from 2009 and recent events in deepwater
          include:

          -  Fastball - Located at Viosca Knoll 1003, Fastball commenced
             production in the fourth quarter of 2009 and is currently
             producing 41 MMcf/d and 3,000 BOPD gross (approximately 60
             MMcfe/d). Newfield operates Fastball with a 66% working interest.

          -  Pyrenees Complex - In the second quarter of 2009, Newfield
             announced a significant operated discovery on its Pyrenees
             prospect, located at Garden Banks 293. Newfield operates the
             development with a 40% working interest. Development of the field
             is underway with first production expected in late 2011. Newfield
             has an 11-block area around Pyrenees with several remaining
             prospects. The Saluki prospect, located at Garden Banks 425, is
             expected to spud in February 2010. Newfield will operate the
             Saluki prospect with a 50% working interest (35% cost interest).

          -  Axe - Newfield expects to participate in the non-operated Axe
             prospect, which is expected to spud in March 2010. Axe is located
             at Desoto Canyon 4, in close proximity to the Company's 2008
             Dalmatian discovery. Dalmatian's development is underway with
             first production expected in 2011. Newfield has a 23% interest in
             Axe and a 37.5% interest in Dalmatian.


2010 Production Guidance

Our production for 2010 is expected to be 278 - 288 Bcfe, an increase of 8 - 12% over 2009. In 2010, we will invest approximately 70% of our budget, or approximately $1 billion, in domestic resource plays. More than one-third of the budget will be directed to oil plays. Production by area is shown in today's @NFX publication.

2010 Capital Budget, Hedging and Liquidity

Newfield's 2010 capital budget is $1.6 billion (including approximately $124 million in capitalized interest and overhead). This budget approximates the Company's estimate of 2010 cash flow from operations and includes approximately $100 million for planned activities on the acreage recently acquired in the Maverick Basin of Texas. The budget excludes our $215 million purchase price for our recent acquisition of assets in the Maverick Basin from TXCO Resources, Inc. As a comparison, Newfield invested $1.4 billion in 2009. Newfield plans to provide a detailed overview of its 2010 investments and activities by area in its conference call on February 17. Following Newfield's recent issuance of senior subordinated notes, Newfield has no outstanding borrowings under its $1.25 billion credit facility.

Approximately 70% of the Company's expected 2010 gas production is hedged at a weighted average minimum price of approximately $6.60 per MMbtu. Approximately 65% of the Company's expected 2010 domestic oil production is hedged at a weighted average minimum price of approximately $108.00 per barrel. Complete details on Newfield's hedge position can be found on the Company's website in the @NFX publication.

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 first quarter 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






    4Q09 Actual Results
                                                      4Q09 Actual
                                            Domestic        Int'l   Total
     Production/Liftings
        Natural gas - Bcf                     45.7            -      45.7
        Oil and condensate - MMBbls            1.7           1.4      3.1
        Total Bcfe                            56.2           8.4     64.6

     Average Realized Prices(Note 1)
        Natural gas - $/Mcf                  $6.72            $-    $6.72
        Oil and condensate - $/Bbl         $102.45        $77.43   $91.31
        Mcf equivalent - $/Mcfe              $8.71        $12.91    $9.27

    Operating Expenses:(Note 2)
      Lease operating
        Recurring ($MM)                      $45.7         $12.1    $57.8
          per/Mcfe                           $0.83         $1.43    $0.91
        Major (workovers, repairs,
         etc.) ($MM)                          $5.4          $3.9     $9.3
          per/Mcfe                           $0.10         $0.47    $0.15

      Production and other taxes ($MM)        $9.3         $15.5    $24.8
         per/Mcfe                            $0.17         $1.84    $0.39

      General and administrative
       (G&A), net ($MM)                      $36.4          $1.8    $38.2
         per/Mcfe                            $0.66         $0.21    $0.60

              Capitalized internal costs
               ($MM)                                               $(18.7)
                 per/Mcfe                                          $(0.29)

    Interest expense ($MM)                                          $30.8
          per/Mcfe                                                  $0.48

    Capitalized interest ($MM)                                     $(12.7)
          per/Mcfe                                                 $(0.20)

    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 $4.21 per Mcf and the
            total oil and condensate average realized price would have been
            $71.29 per barrel.

    Note 2: Recurring lease operating expense includes transportation expense.



    1Q10 Estimates
                                                 1Q10 Estimates
                                    Domestic         Int'l           Total
     Production/Liftings
        Natural gas - Bcf          45.6 - 50.4              -      45.6 - 50.4
        Oil and condensate
         - MMBbls                    1.6 - 1.7      1.3 - 1.4        2.9 - 3.1
        Total Bcfe                 54.9 - 60.7      7.7 - 8.5      62.6 - 69.2

     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)          $54.9 - $60.7  $14.2 - $15.7    $69.1 - $76.4
          per/Mcfe               $1.01 - $1.03  $1.82 - $1.86    $1.11 - $1.13
        Major (workover,
         repairs, etc.) ($MM)     $9.1 - $10.1    $0.4 - $0.5     $9.5 - $10.5
          per/Mcfe               $0.16 - $0.17  $0.04 - $0.05    $0.15 - $0.16

      Production and
       other taxes
       ($MM)(Note)(4)            $17.1 - $18.9  $11.7 - $12.9    $28.8 - $31.8
         per/Mcfe                $0.31 - $0.32  $1.50 - $1.53    $0.46 - $0.47

      General and
       administrative
       (G&A), net ($MM)          $34.2 - $37.8    $1.1 - $1.2    $35.3 - $39.0
         per/Mcfe                $0.63 - $0.64  $0.14 - $0.15    $0.57 - $0.58

              Capitalized
               internal costs
               ($MM)                                           $(19.4 - $21.5)
                per/Mcfe                                       $(0.31 - $0.32)

    Interest expense ($MM)                                       $39.0 - $43.1
          per/Mcfe                                               $0.62 - $0.64

    Capitalized interest ($MM)                                 $(11.5 - $12.7)
          per/Mcfe                                             $(0.18 - $0.19)

    Tax rate (%)(Note 5)                                             35% - 37%

    Income taxes (%)
      Current                                                        14% - 16%
      Deferred                                                       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 80-85% 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 $70/Bbl oil and
            $5.50/MMBtu gas.

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



    CONSOLIDATED STATEMENT OF INCOME
    (Unaudited, in millions,        For the                      For the
     except per share data)    Three Months Ended          Twelve Months Ended
                                  December 31,                 December 31,
                                  ------------                 ------------
                               2009           2008            2009       2008
                               ----           ----            ----       ----

    Oil and gas revenues       $414           $338          $1,338     $2,225
                               ----           ----          ------     ------

    Operating expenses:
      Lease operating            67             81             259        265
      Production and other
       taxes                     25              3              63        157
      Depreciation,
       depletion and
       amortization             147            193             587        697
      General and
       administrative            38             36             144        141
      Ceiling test
        writedown                 -          1,863           1,344      1,863
      Other                       -              4               8          4
                                ---            ---             ---        ---
         Total operating
          expenses              277          2,180           2,405      3,127
                                ---          -----           -----      -----

    Income (loss) from
     operations                 137         (1,842)         (1,067)      (902)

    Other income (expenses):
      Interest expense          (31)           (29)           (126)      (112)
      Capitalized interest       12             17              51         60
      Commodity derivative
       income                    63            655             252        408
      Other                       1              1               5         11
                                ---            ---             ---        ---
         Total other income
          (expenses)             45            644             182        367
                                ---            ---             ---        ---

    Income (loss) before
     income taxes               182         (1,198)           (885)      (535)

    Income tax provision
     (benefit)                   69           (409)           (343)      (162)
                                ---           ----            ----       ----

    Net income (loss)          $113          $(789)          $(542)     $(373)
                               ====          =====           =====      =====

    Income (loss) per share:
    Basic --                  $0.87         $(6.09)         $(4.18)    $(2.88)
                              =====         ======          ======     ======

    Diluted --                $0.86         $(6.09)         $(4.18)    $(2.88)
                              =====         ======          ======     ======

    Weighted average
     number of shares
     outstanding for basic
     income (loss) per share    130            130             130        129
    Weighted average number of
     shares outstanding for
     diluted income (loss) per
     share *                    133            130             130        129

    * Had we recognized net income for the three month period ended December
    31, 2008 and the twelve month periods ended December 31, 2009 and 2008,
    the weighted average number of shares outstanding for the computation of
    diluted earnings per share would have increased by 1 million, 2 million
    and 3 million shares, respectively.



    CONDENSED CONSOLIDATED BALANCE SHEET
    (Unaudited, in millions)


                                                    December 31,  December 31,
                                                        2009          2008
                                                        ----          ----

    ASSETS
    Current assets:
      Cash and cash equivalents                           $78           $24
      Derivative assets                                   269           663
      Other current assets                                546           519
                                                          ---           ---
         Total current assets                             893         1,206

    Property and equipment, net (full cost
     method)                                            5,247         5,758
    Derivative assets                                      19           247
    Other assets                                           95            94
                                                          ---           ---
         Total assets                                  $6,254        $7,305
                                                       ======        ======

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities                                  $873        $1,085
                                                         ----        ------

    Other liabilities                                     142            92
    Long-term debt                                      2,037         2,213
    Deferred taxes                                        434           658
                                                          ---           ---
         Total long-term liabilities                    2,613         2,963
                                                        -----         -----

    Commitments and contingencies                           -             -

    STOCKHOLDERS' EQUITY
    Common stock                                            1             1
    Additional paid-in capital                          1,389         1,335
    Treasury stock                                        (33)          (32)
    Accumulated other comprehensive loss                  (11)          (11)
    Retained earnings                                   1,422         1,964
                                                        -----         -----
      Total stockholders' equity                        2,768         3,257
                                                        -----         -----
      Total liabilities and stockholders' equity       $6,254        $7,305
                                                       ======        ======



    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited, in millions)

                                                             For the
                                                       Twelve Months Ended
                                                           December 31,
                                                           ------------
                                                       2009             2008
                                                       ----             ----
    Cash flows from operating activities:
      Net loss                                        $(542)           $(373)
    Adjustments to reconcile net loss to net cash
     provided by operating activities:
      Depreciation, depletion and amortization          587              697
      Deferred tax benefit                             (391)            (198)
      Stock-based compensation                           28               26
      Ceiling test and other impairments              1,344            1,863
      Commodity derivative income                      (252)            (408)
      Cash receipts (payments) on derivative
       settlements                                      883             (750)
                                                        ---             ----
                                                      1,657              857
      Changes in operating assets and liabilities       (79)              (3)
                                                        ---              ---
          Net cash provided by operating activities   1,578              854
                                                      -----              ---

    Cash flows from investing activities:
      Additions to oil and gas properties and other,
       net                                           (1,376)          (2,301)
      Net redemptions of investments                     20               48
                                                        ---              ---
          Net cash used in investing activities      (1,356)          (2,253)
                                                     ------           ------

    Cash flows from financing activities:
      Net proceeds (repayments) under credit
       arrangements                                    (176)             561
      Net proceeds from issuance of senior
       subordinated notes                                 -              592
      Other                                               8               20
                                                        ---              ---
        Net cash provided by (used in) financing
         activities                                    (168)           1,173
                                                       ----            -----


    Increase (decrease) in cash and cash
     equivalents                                         54             (226)
    Cash and cash equivalents, beginning of period       24              250
                                                        ---              ---

    Cash and cash equivalents, end of period            $78              $24
                                                        ===              ===


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 fourth quarter and full year 2009 stated without the effect of certain items to net income is shown below:



                                                   4Q09             2009
                                                   ----             ----
                                                       (in millions)
    Net income                                     $113            $(542)
       Ceiling test writedown                         -            1,344
       Net unrealized loss on commodity
        derivatives (1)                             112              604
       Income tax adjustment for above items        (39)            (706)
       Tax benefit associated with deferred tax
        assets in Malaysia                            -              (24)
                                                    ---              ---
    Earnings stated without the effect of the
     above items                                   $186             $676
                                                   ====             ====
    ---------------
    (1) The determination of "Net unrealized loss on commodity derivatives"
     for the fourth quarter and full year 2009 is as follows:


                                                   4Q09             2009
                                                   ----             ----
                                                       (in millions)
     Commodity derivative income                    $63             $252
     Cash receipts on derivative settlements       (182)            (883)
     Option premiums associated with
      derivatives settled during the period           7               27
                                                    ---              ---
       Net unrealized loss on commodity
        derivatives                               $(112)           $(604)
                                                  =====            =====


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:




                                                   4Q09             2009
                                                   ----             ----
                                                      (in millions)
    Net cash provided by operating activities      $361           $1,578
       Net change in operating assets and
        liabilities                                  81               79
                                                    ---              ---
    Net cash provided by operating activities
     before changes in operating assets and
     liabilities                                   $442           $1,657
                                                   ====           ======


SOURCE Newfield Exploration Company

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