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Newfield Reports Second Quarter 2007 Financial and Operating Results Company Updates Production Guidance

HOUSTON, July 25 /PRNewswire-FirstCall/ -- Newfield Exploration Company (NYSE: NFX) today reported second quarter financial and operating results along with updated production guidance for 2007 and 2008. Newfield will be hosting its second quarter results conference call at 8:30 a.m. (CDST) on July 26. To participate in the call dial 719-457-2617 or listen through the website at http://www.newfield.com.

For the second quarter of 2007, Newfield reported net income of $150 million, or $1.15 per diluted share (all per share amounts are on a diluted basis). The results reflect the impact of commodity derivative income of $55 million ($36 million after tax), or $0.28 per share, associated with unrealized changes in the fair market value of open derivative contracts that are not designated for hedge accounting.

Without the effect of unrealized commodity derivative income, net income for the quarter would have been $114 million, or $0.87 per share. Revenues in the second quarter of 2007 were $528 million. Net cash provided by operating activities before changes in operating assets and liabilities was $380 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.

Newfield's production in the second quarter of 2007 was 71 Bcfe, an increase of 10% over first quarter 2007 production and 22% above the second quarter of 2006.

    Operational Highlights
    -- Seven Seas Prospect Successful -- In early July, Newfield drilled a
       successful appraisal well on its Seven Seas prospect on License Area
       48-7C in the U.K. North Sea. The well, located approximately
       14 kilometers east of the West Sole Fields, was drilled to appraise a
       1990s discovery. The Seven Seas well was drilled horizontally within
       the reservoir for 3,500 feet and tested at an equipment-limited rate of
       47 MMcfe/d. Newfield operates with an 80% interest in this undeveloped
       field.
    -- Grove Field Commences Production -- On April 25, the Grove Field in the
       U.K. North Sea commenced production. The G-1 and G-2 wells have
       produced as high as 37 MMcfe/d and 38 MMcfe/d, respectively. The field
       is currently producing 36 MMcfe/d (gross). Newfield operates the field
       with an 85% interest. Newfield plans to sell all its subsidiaries which
       do business in the U.K.
    -- Wrigley Field On-Line -- In early July, first production commenced from
       Newfield's Wrigley development in the deepwater Gulf of Mexico. Gross
       production is currently 40 MMcfe/d and continues to ramp up to an
       expected rate of about 60 MMcfe/d. The field is operated by Newfield
       with the Company holding a 50% working interest.
    -- Abu Field Commences Production -- In May, the Abu Field offshore
       Malaysia commenced production. The field is currently producing 10,000
       BOPD and is ramping to an expected run rate of 15,000 BOPD (gross). Due
       to the timing of oil liftings, reported second quarter 2007 production
       includes no Abu volumes. Newfield has a 50% interest in Abu.
    -- Stiles/Britt Ranch Reaches Record Production -- In the second quarter,
       production from the Stiles/Britt Ranch Field in the Texas Panhandle
       reached a record production rate of 74 MMcfe/d (gross). There are five
       operated rigs running in the field today. Newfield operates this
       growing development with a 95-100% working interest across the field.
    -- Val Verde Production Surpasses 100 MMcfe/d -- In the second quarter,
       production from the Val Verde Basin of West Texas reached a new high
       rate of more than 100 MMcfe/d (gross). Newfield's working interest
       across the Val Verde Basin averages approximately 70%.
    -- South Texas JV Production Reaches 82 MMcfe/d -- In the second quarter,
       production from Newfield's joint venture with Exxon-Mobil in South
       Texas reached a new high of 82 MMcfe/d (gross). Newfield's interest in
       this joint venture is approximately 50%. Newfield has an inventory of
       20 ready-to-drill prospects under this venture and is currently
       operating two drilling rigs.
    -- Fastball Tests at 60 MMcfe/d -- During the second quarter, Newfield
       tested its recent Fastball Prospect, located at Viosca Knoll 1003 in
       the deepwater Gulf of Mexico, at 43 MMcf/d and 3,000 BCPD (gross). The
       field will be developed as a tie back to existing infrastructure with
       first production expected in the first half of 2009. Newfield operates
       Fastball with a 66% working interest.
    -- Woodford Shale Production at 115 MMcfe/d -- Newfield is currently
       completing its first 40-acre pilot with four wells expected to commence
       production in August. Newfield has now spud 110 operated horizontal
       wells and has an interest in 175 horizontal wells, or 60% of the
       industry's 291 horizontal wells drilled in the play to date.

"Our production in the second quarter was strong and provides great momentum as we move into the remainder of 2007 and into 2008," said David A. Trice, Newfield Chairman, President and CEO. "The sources of our production growth are diverse -- we hit new production highs in our Woodford Shale Play, in the Val Verde Basin and in our South Texas JV. Although not reflected in our second quarter results, we recently commenced production from significant new developments offshore Malaysia and in the deepwater Gulf of Mexico. These fields will add significant volumes in the second half of 2007 and in 2008.

"Our production guidance for the full year 2007 is well ahead of our previously provided forecast," continued Trice. "In fact, if you consider that we expect to divest of approximately 45 Bcfe of production in 2007, our full-year volumes would have been above our previous full year 2007 guidance of 265 - 279 Bcfe. This is great news and indicates that our development drilling programs are contributing to growth as expected. We are in the process of divesting of our assets on the shelf, all of our assets in the U.K. North Sea, our producing fields in Bohai Bay and select properties in the Mid-Continent and South Texas. For 2008, we expect to have at least 10% pro-forma production growth -- or a range of 215 - 230 Bcfe."

2007 Production Guidance

The following table details 2007 estimated production guidance before planned asset sales and acquisitions, the impact of planned asset sales and acquisitions on second half 2007 volumes and a revised estimate for 2007.



                           2H07e        2007e       Impact of
                   1H07a   Before Acq.  Before Acq. Acq. and      Revised
                           and Sales    and Sales   Sales on      2007e
                                                    2007e         (Bcfe)
    Domestic:

    GOM Shelf (1)  43.4    43 - 44      86 - 87       (37)       48 - 50

    GOM
    Deepwater(2)    6.9     8 - 9       15 - 16        (1)       14 - 15
    Onshore
     U.S. (3)      79.4    82 - 90     161 - 169        4       165 - 173
    International:
    U.K. (4)        0.4     4 - 4.5    4.5 - 5         (3)      1.5 - 2
    China (5)       2.7   1.5 - 1.7      4 - 4.5       (1)        3 - 3.5
    Malaysia        2.7     5 - 6        8 - 9         n/a        8 - 9

    Total         135.5   144 - 155    279 - 291        38      240 - 253

    (1) On June 20, the Company announced the sale of its Gulf of Mexico shelf
        assets to McMoRan for $1.1 billion, plus the assumption of abandonment
        obligations. Guidance assumes the transaction closes in early August
        2007.
    (2) Reduction relates to deepwater assets included in the sale to McMoRan.
    (3) On June 29, the Company closed on its acquisition of Stone Energy
        Corporation's Rocky Mountain assets. Guidance includes 7 Bcfe for this
        acquisition. Guidance assumes planned producing property sales in
        South Texas and the Mid-Continent would occur late in the third
        quarter of 2007.
    (4) Newfield is marketing all of its subsidiaries that do business in the
        U.K. North Sea. Guidance assumes closing would occur late in the third
        quarter of 2007.
    (5) Newfield is marketing its producing fields in Bohai Bay. Guidance
        assumes closing would occur in the fourth quarter of 2007.


    Capital Expenditures

During the second quarter, Newfield invested $522 million, excluding the $577 million acquisition of the Rocky Mountain assets. Year-to-date, Newfield has invested $1.6 billion, including the acquisition and expects its full-year capital budget to be approximately $2.1 billion.

Third Quarter 2007 Estimates

The following estimates include the effects of the recent Rocky Mountain acquisition and the planned sale of the Gulf of Mexico shelf. The estimates do not include any effects from the other planned dispositions.

Natural Gas Production and Pricing The Company's natural gas production in the third quarter of 2007 is expected to be 45 - 50 Bcf (489 - 543 MMcf/d). This estimate includes approximately 8 - 10 MMcf/d from the Grove Field in the U.K North Sea. 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 Gulf of Mexico and onshore Gulf Coast, after basis differentials, transportation and handling charges, will average $0.40 - $0.60 less per MMBtu than the Henry Hub Index. Hedging gains or losses will affect price realizations.

Crude Oil Production and Pricing The Company's oil production, including international liftings, in the third quarter of 2007 is expected to be 2.1 - 2.3 million barrels (22,800 - 25,000 BOPD). Newfield expects to produce approximately 5,500 BOPD net from its Malaysian operations and approximately 1,500 BOPD net from its China operations. 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 $61 - $68 million ($1.00 - $1.11 per Mcfe) in the third quarter of 2007. This includes major expense of approximately $14 million. LOE, on a unit of production basis, is expected to be lower following the sale of the Company's Gulf of Mexico shelf assets. (As an example, major expense in the fourth quarter of 2007 is expected to drop to approximately $3 million.) Production taxes in the third quarter of 2007 are expected to be $32 - $35 million ($0.52 - $0.58 per Mcfe). These expenses vary and are subject to impact from, among other things, production volumes and commodity pricing, tax rates, service costs, the costs of goods and materials and workover activities.

General and Administrative Expense G&A expense for the third quarter of 2007 is expected to be $36 - $40 million ($0.59 - $0.65 per Mcfe), net of capitalized direct internal costs. Capitalized direct internal costs are expected to be $16 - $18 million. G&A in the third quarter of 2007 includes approximately $3 million of transaction-related expenses associated with the sale of our Gulf of Mexico shelf assets. 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 third quarter of 2007 is expected to be $25 - $29 million ($0.41 - $0.48 per Mcfe). As of July 24, 2007, Newfield had approximately $1.0 billion outstanding under its credit arrangements. The remainder of debt consists of four separate issuances of notes that in the aggregate total $1,175 million in principal amount. Capitalized interest for the third quarter of 2007 is expected to be about $8 - $9 million.

Income Taxes Including both current and deferred taxes, the Company expects its consolidated income tax rate in the third quarter of 2007 to be about 35 - 38%. About 50% of the tax provision is expected to be deferred in the third quarter.

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, the U.K. North Sea and China.

**The statements set forth in this release regarding estimated or anticipated 2007 and 2008 production volumes, third quarter 2007 results and the expected timing of development projects and asset sales 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. Completion of our proposed divestitures is subject to receiving offers that Newfield considers acceptable.

    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
                                          Three Months Ended       Percentage
                                               June 30,             Increase
                                         2007            2006      (Decrease)
    Production (1):
    United States:
      Natural gas (Bcf)                  56.2            48.0           17%
      Oil and condensate (MBbls)        1,876           1,462           28%
      Total (Bcfe)                       67.4            56.8           19%
    International:
      Natural gas (Bcf)                   0.3               -          100%
      Oil and condensate (MBbls)          515             253          104%
      Total (Bcfe)                        3.5             1.5          127%
    Total:
      Natural gas (Bcf)                  56.5            48.0           18%
      Oil and condensate (MBbls)        2,391           1,715           39%
      Total (Bcfe)                       70.9            58.3           22%

    Average Realized Prices (2):
    United States:
      Natural gas (per Mcf)             $7.46           $6.97            7%
      Oil and condensate (per Bbl)      50.34           51.21           (2%)
    International:
      Natural gas (per Mcf)             $6.91              $-          100%
      Oil and condensate (per Bbl)      63.06           62.50            1%
    Total:
      Natural gas (per Mcf)             $7.46           $6.97            7%
      Oil and condensate (per Bbl)      53.08           52.88             -
      Natural gas equivalent (per Mcfe)  7.74            7.30            6%

    Operating Costs (per Mcfe):
    Lease Operating:
      Recurring                         $1.03           $1.01            2%
      Major expense                      0.32            0.13          146%
    Production and other taxes           0.29            0.27            7%
    Depreciation, depletion and
     amortization                        2.80            2.46           14%
    General and administrative           0.47            0.48           (2%)
    Other                                   -            0.43         (100%)
        Total operating costs           $4.91           $4.78            3%


    (1) Represents volumes sold regardless of when produced.
    (2) 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 had not been included, our average
        realized price for total gas would have been $6.87 and $6.14 per Mcf
        for the second quarter of 2007 and 2006, respectively, and our total
        oil and condensate average realized price would have been $57.66 and
        $55.38 per Bbl, respectively.  Without the effects of any hedging
        contracts, our average realized prices for the second quarter of 2007
        and 2006 would have been $6.87 and $6.15 per Mcf, respectively, for
        gas and $59.29 and $64.67 per Bbl, respectively, for oil.



    CONSOLIDATED STATEMENT OF INCOME
    (Unaudited, in millions, except per share data)

                                       For the                  For the
                                 Three Months Ended         Six Months Ended
                                       June 30,                 June 30,
                                  2007         2006         2007         2006

    Oil and gas revenues          $528         $390         $968         $821

    Operating expenses:
      Lease operating               96           67          208          119
      Production and other taxes    20           15           38           31
      Depreciation, depletion
       and amortization            198          144          378          275
      General and administrative    33           28           72           58
      Ceiling test writedown         -            -           47            -
      Other                          -           25            -           (5)
        Total operating expenses   347          279          743          478

    Income from operations         181          111          225          343

    Other income (expenses):
      Interest expense             (28)         (24)         (51)         (42)
      Capitalized interest          11           10           22           22
      Commodity derivative
       income (expense)             77           46          (81)          52
      Other                          1            4            2            5
                                    61           36         (108)          37

    Income before income taxes     242          147          117          380

    Income tax provision            92           53           63          137

    Net income                    $150          $94          $54         $243

    Earnings per share:
      Basic                      $1.17        $0.74        $0.42        $1.92

      Diluted                    $1.15        $0.73        $0.41        $1.89

    Weighted average number
     of shares outstanding for
     basic earnings per share      127          127          127          126
    Weighted average number
     of shares outstanding for
     diluted earnings per share    130          129          130          129



    CONDENSED CONSOLIDATED BALANCE SHEET
    (Unaudited, in millions)
                                                     June 30,    December 31,
                                                       2007            2006
    ASSETS
    Current assets:
      Cash and cash equivalents                          $37            $80
      Other current assets                               704            771
        Total current assets                             741            851

    Oil and gas properties, net (full cost method)     6,812          5,655
    Other assets                                         130            129
        Total assets                                  $7,683         $6,635

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities                                 $908           $999
    Short-term debt                                      124            124
                                                       1,032          1,123

    Other liabilities                                     31             28
    Derivative liabilities                               181            179
    Long-term debt                                     1,979          1,048
    Asset retirement obligation                          246            232
    Deferred taxes                                     1,060            963
        Total long-term liabilities                    3,497          2,450

    Commitments and contingencies                          -              -

    STOCKHOLDERS' EQUITY
    Common stock                                           1              1
    Additional paid-in capital                         1,231          1,198
    Treasury stock                                       (32)           (30)
    Accumulated other comprehensive income                13              6
    Retained earnings                                  1,941          1,887
      Total stockholders' equity                       3,154          3,062
      Total liabilities and stockholders' equity      $7,683         $6,635



    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited, in millions)
                                                                For the
                                                            Six Months Ended
                                                                June 30,
                                                          2007           2006
    Cash flows from operating activities:
      Net income                                           $54           $243
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation, depletion and amortization             378            275
      Stock-based compensation                              10             16
      Ceiling test writedown                                47              -
      Early redemption premium                               -              8
      Commodity derivative (income) expense
        Total (gains) losses                                81            (52)
        Realized gains                                     113             35
      Deferred taxes                                        43            125
                                                           726            650
    Changes in operating assets and liabilities            (91)            42
      Net cash provided by operating activities            635            692

    Cash flows from investing activities:
      Acquisition of oil and gas properties               (578)             -
      Additions to oil and gas properties and other     (1,073)        (1,322)
      Redemption of short-term investments                  24            352
        Net cash used in investing activities           (1,627)          (970)

    Cash flows from financing activities:
      Net proceeds (repayments) under
       credit arrangements                                 932              -
      Net proceeds (repayments) of senior
       subordinated notes                                    -            300
      Proceeds from issuances of common stock               13              8
      Stock-based compensation excess tax benefit            4              3
      Purchases of treasury stock                            -             (4)
        Net cash provided by financing activities          949            307

    Effect of exchange rate changes on cash and
     cash equivalents                                        -              5

    Increase (decrease) in cash and cash equivalents       (43)            34
    Cash and cash equivalents, beginning of period          80             39

    Cash and cash equivalents, end of period               $37            $73



    Explanation and Reconciliation of Non-GAP 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 earnings for the second quarter of 2007 and 2006 stated without the effect of certain items to net income is shown below:

                                                           2Q07         2Q06
                                                             (in millions)

    Net income                                             $150          $94
      Unrealized commodity derivative income(1)             (55)         (10)
      Early redemption premium                                -           27
      Income tax adjustment for above items                  19           (6)
    Earnings stated without the effect of the above items  $114         $105

    (1) The components of Commodity derivative income as included in
        Newfield's Consolidated Statement of Income for the second quarter of
        2007 and 2006 are as follows:

                                                           2Q07         2Q06
                                                             (in millions)
    Cash flow hedges:
      Hedge ineffectiveness                                  $-           $1
    Other derivative contracts:
      Unrealized gain due to changes in fair market value    55            9
      Realized gain on settlement                            22           36
        Total commodity derivative income                   $77          $46

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:

                                                           2Q07         2Q06
                                                             (in millions)

    Net cash provided by operating activities              $300         $351
      Net change in operating assets and liabilities         80          (54)
    Net cash provided by operating activities
     before changes in operating assets and liabilities    $380         $297
SOURCE  Newfield Exploration Company
    -0-                             07/25/2007
    /CONTACT:  Investor Relations, Steve Campbell, +1-281-847-6081, or Media
Relations, Keith Schmidt, +1-281-674-2650, info@newfield.com, both for
Newfield Exploration Company/
    /Web site:  http://www.newfield.com /
    (NFX)

CO:  Newfield Exploration Company
ST:  Texas
IN:  OIL
SU:  ERN CCA ERP

SM-AA
-- LAW164 --
0317 07/25/2007 17:40 EDT http://www.prnewswire.com
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