HOUSTON, Oct. 24 /PRNewswire-FirstCall/ -- Newfield Exploration Company (NYSE: NFX) today reported third quarter financial and operating results. Newfield will be hosting its third quarter results conference call at 8:30 a.m. (CDST) on October 25. To participate in the call dial 719-457-2680 or listen through the website at http://www.newfield.com.
For the third quarter of 2007, Newfield reported net income of $83 million, or $0.64 per diluted share (all per share amounts are on a diluted basis). The results reflect the impact of commodity derivative expense of $26 million ($17 million after tax), or $0.12 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 expense, net income for the quarter would have been $100 million, or $0.76 per share.
Revenues (including operations in the U.K. North Sea which for financial reporting purposes have been presented as discontinued operations) in the third quarter of 2007 were $424 million. Net cash provided by operating activities before changes in operating assets and liabilities was $288 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.
Newfield's production in the third quarter of 2007 was 61 Bcfe, which includes approximately 1 Bcfe from the U.K. North Sea.
During the third quarter, Newfield invested $477 million. Year-to-date, Newfield has invested $1.5 billion, excluding the $577 million acquisition of Rocky Mountain assets from Stone Energy. Including the acquisition, Newfield expects its full-year 2007 capital expenditures to be approximately $2.5 billion.
Fourth Quarter 2007 Estimates
Natural Gas Production and Pricing The Company's natural gas production in the fourth quarter of 2007 is expected to be 38 - 42 Bcf (415 - 455 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 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. Although Newfield's Rocky Mountains production is primarily oil, the Company does produce approximately 40 MMcfe/d of natural gas in this region. Recent basis differentials have widened dramatically. 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 cover the second half of 2007 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, including international liftings, in the fourth quarter of 2007 is expected to be 1.3 - 1.5 million barrels (14,130 - 16,300 BOPD). Newfield expects to produce approximately 5,200 BOPD (net) from its Malaysian operations. The timing of liftings in Malaysia 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. Hedging gains or losses will affect price realizations.
Lease Operating Expense and Production Taxes LOE is expected to be $40 - $45 million ($0.82 - $0.93 per Mcfe) in the fourth quarter of 2007. With the recent divestiture of the Company's Gulf of Mexico Shelf assets, the major expense portion of LOE is expected to drop significantly. The LOE projection for the fourth quarter includes major expense of approximately $3 million. The drop in LOE per Mcfe will be partially offset by an increase in production taxes per Mcfe now that a significant portion of the Company's production is onshore and subject to severance taxes. Production taxes in the fourth quarter of 2007 are expected to be $32 - $36 million ($0.66 - $0.75 per Mcfe). Approximately one-third of the production taxes are associated with Newfield's Malaysian operations.
General and Administrative Expense G&A expense for the fourth quarter of 2007 is expected to be $46 - $51 million ($0.96 - $1.06 per Mcfe), net of capitalized direct internal costs. Capitalized direct internal costs are expected to be $21 - $23 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. The gain associated with the sale of the U.K. business will increase adjusted net income and result in additional fourth quarter G&A expense of approximately $17 million.
Interest Expense The non-capitalized portion of the Company's interest expense for the fourth quarter of 2007 is expected to be $20 - $22 million ($0.41 - $0.45 per Mcfe). As of October 24, 2007, Newfield had no borrowings outstanding under its credit arrangements. The remainder of debt consists of three separate issuances of notes that in the aggregate total $1.05 billion in principal amount. Capitalized interest for the fourth 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 fourth quarter of 2007 to be about 35 - 38%. About 65% 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 deepwater Gulf of Mexico. The Company has international operations in Malaysia and China.
**The statements set forth in this release regarding estimated or anticipated fourth quarter 2007 results 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.
PRODUCTION, PRICES AND COSTS (1) Three Months Ended Percentage September 30, Increase 2007 2006 (Decrease) Production (2): United States: Natural gas (Bcf) 46.9 51.2 (8%) Oil and condensate (MBbls) 1,669 1,674 -- Total (Bcfe) 56.9 61.2 (7%) International: Natural gas (Bcf) 1.3 -- 100% Oil and condensate (MBbls) 483 225 115% Total (Bcfe) 4.2 1.4 200% Total: Natural gas (Bcf) 48.2 51.2 (6%) Oil and condensate (MBbls) 2,152 1,899 13% Total (Bcfe) 61.1 62.6 (2%) Average Realized Prices (3): United States: Natural gas (per Mcf) $7.52 $7.06 7% Oil and condensate (per Bbl) 53.77 51.09 5% International: Natural gas (per Mcf) $4.43 $-- 100% Oil and condensate (per Bbl) 71.99 66.75 8% Total: Natural gas (per Mcf) $7.44 $7.06 5% Oil and condensate (per Bbl) 57.87 52.95 9% Natural gas equivalent (per Mcfe) 6.92 6.77 2% Operating Costs (per Mcfe): Lease Operating: Recurring $0.87 $0.95 (8%) Major expense(4) 0.20 (0.37) N/M% Production and other taxes 0.41 0.18 128% Depreciation, depletion and amortization 2.71 2.54 7% General and administrative 0.66 0.55 20% Ceiling test writedown -- 0.10 100% Other -- (0.09) (100%) Total operating costs $4.85 $3.86 26% (1) Includes production and operating results related to our 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 had not been included, our average realized price for total gas would have been $5.77 and $6.21 per Mcf for the third quarter of 2007 and 2006, respectively, and our total oil and condensate average realized price would have been $67.12 and $55.70 per Bbl, respectively. Without the effects of any hedging contracts, our average realized prices for the third quarter of 2007 and 2006 would have been $5.77 and $6.19 per Mcf, respectively, for gas and $67.31 and $64.18 per Bbl, respectively, for oil. (4) Third quarter of 2006 includes a $34 million credit or $0.54 per Mcfe resulting from the difference between the proceeds received in the third quarter of 2006 from the settlement of all of our insurance claims related to Hurricanes Katrina and Rita and our actual hurricane related expenses incurred to date.
The following condensed financial statements include the results of operations, financial position and cash flows of our U.K. North Sea business as discontinued operations.
CONSOLIDATED STATEMENT OF INCOME (Unaudited, in millions, except per share data) For the For the Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Oil and gas revenues $419 $425 $1,384 $1,246 Operating expenses: Lease operating 64 36 268 155 Production and other taxes 25 12 63 43 Depreciation, depletion and amortization 162 159 539 434 General and administrative 37 33 107 89 Ceiling test writedown -- 6 -- 6 Other -- (6) -- (11) Total operating expenses 288 240 977 716 Income from operations 131 185 407 530 Other income (expenses): Interest expense (29) (22) (80) (64) Capitalized interest 13 11 35 33 Commodity derivative income (expense) 38 247 (43) 299 Other 1 2 3 7 23 238 (85) 275 Income from continuing operations before income taxes 154 423 322 805 Income tax provision 62 156 125 294 Income from continuing operations 92 267 197 511 Loss from discontinued operations, net of tax (9) (1) (60) (2) Net income $83 $266 $137 $509 Earnings per share: Basic -- Income from continuing operations $0.72 $2.11 $1.54 $4.03 Loss from discontinued operations, net of tax (0.07) (0.01) (0.47) (0.01) $0.65 $2.10 $1.07 $4.02 Diluted -- Income from continuing operations $0.70 $2.07 $1.51 $3.96 Loss from discontinued operations, net of tax (0.06) (0.01) (0.46) (0.01) $0.64 $2.06 $1.05 $3.95 Weighted average number of shares outstanding for basic earnings per share 128 126 127 127 Weighted average number of shares outstanding for diluted earnings per share 131 129 130 129 CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited, in millions) September 30, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $141 $80 Other current assets 585 766 Assets of discontinued operations 11 5 Total current assets 737 851 Oil and gas properties, net (full cost method) 5,547 5,455 Other assets 145 129 Assets of discontinued operations 177 200 Total assets $6,606 $6,635 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $791 $972 Short-term debt 124 124 Liabilities of discontinued operations 14 27 Total current liabilities 929 1,123 Other liabilities 32 28 Derivative liabilities 181 179 Long-term debt 1,049 1,048 Asset retirement obligation 51 225 Deferred taxes 1,098 963 Liabilities of discontinued operations 11 7 Total long-term liabilities 2,422 2,450 Commitments and contingencies -- -- STOCKHOLDERS' EQUITY Common stock 1 1 Additional paid-in capital 1,249 1,198 Treasury stock (31) (30) Accumulated other comprehensive income 12 6 Retained earnings 2,024 1,887 Total stockholders' equity 3,255 3,062 Total liabilities and stockholders' equity $6,606 $6,635 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, in millions) For the Nine Months Ended September 30, 2007 2006 Cash flows from operating activities: Net income $137 $509 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations, net of tax 60 2 Depreciation, depletion and amortization 539 434 Deferred taxes 47 264 Stock-based compensation 18 18 Ceiling test writedown -- 6 Early redemption premium -- 8 Commodity derivative (income) expense Total (gains) losses 43 (299) Realized gains 174 73 1,018 1,015 Changes in operating assets and liabilities (75) 128 Net cash provided by continuing activities 943 1,143 Net cash provided by (used in) discontinued activities (12) 2 Net cash provided by operating activities 931 1,145 Cash flows from investing activities: Acquisition of oil and gas properties (578) -- Additions to oil and gas properties and other (1,539) (1,130) Proceeds from sales of oil and gas properties 1,281 -- Insurance recoveries -- 45 Purchases of short-term investments (43) (541) Redemption of short-term investments 24 511 Net cash used in continuing activities (855) (1,115) Net cash used in discontinued activities (41) (118) Net cash used in investing activities (896) (1,233) Cash flows from financing activities: Net proceeds (repayments) under credit arrangements -- -- Net proceeds (repayments) of senior subordinated notes -- 300 Payments to discontinued operations (38) (121) Proceeds from issuances of common stock 18 9 Stock-based compensation excess tax benefit 8 3 Purchases of treasury stock (1) (3) Net cash provided by (used in) continuing activities (13) 188 Net cash provided by discontinued activities 38 121 Net cash provided by financing activities 25 309 Effect of exchange rate changes on cash and cash equivalents 1 5 Increase in cash and cash equivalents 61 226 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 $141 $265 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 earnings for the third quarter of 2007 and 2006 stated without the effect of certain items to net income is shown below:
3Q07 3Q06 (in millions) Net income $83 $266 Unrealized commodity derivative (income) expense(1) 23 (209) Unrealized commodity derivative expense included in loss from discontinued operations 3 -- Difference between insurance proceeds and actual hurricane related expenses -- (34) Ceiling test writedown -- 6 Income tax adjustment for above items (9) 86 Earnings stated without the effect of the above items $100 $115 (1) The components of Commodity derivative income (expense) as included in Newfield's Consolidated Statement of Income for the third quarter of 2007 and 2006 are as follows: 3Q07 3Q06 (in millions) Cash flow hedges: Hedge ineffectiveness $-- $(1) Other derivative contracts: Unrealized loss on discontinued cash flow hedges (3) -- Unrealized gain (loss) due to changes in fair market value (20) 210 Realized gain on settlement 61 38 Total commodity derivative income $38 $247
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:
3Q07 3Q06 (in millions) Net cash provided by operating activities $297 $453 Net change in operating assets and liabilities (9) (86) Net cash provided by operating activities before changes in operating assets and liabilities $288 $367
SOURCE Newfield Exploration Company 10/24/2007 CONTACT: investor relations, Steve Campbell, +1-281-847-6081or media relations, Keith Schmidt, +1-281-674-2650both of Newfield Exploration Company, email@example.com Web site: http://www.newfield.com (NFX)
CO: Newfield Exploration Company ST: Texas IN: OIL SU: ERN CCA ERP