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Newfield Reports Third Quarter Results

HOUSTON, Oct. 30 -- Newfield Exploration Company (NYSE: NFX) today announced financial and operating results for the third quarter and first nine months of 2002. Summaries of the Company's most recent operating activity and current hedging positions are available at www.newfld.com under the publication @NFX.

Third Quarter 2002

For the third quarter of 2002, Newfield reported net income of $18.4 million, or $0.41 per share (all per share amounts are on a diluted basis), stated before the effect of a non-cash charge related to SFAS 133. Stated after the effect of the non-cash charge, net income for the third quarter of 2002 was $9.4 million, or $0.21 per share. This compares to net income in the third quarter of 2001 of $35.8 million, or $0.76 per share, stated before the effect of a non-cash gain related to SFAS 133. Stated with the effect of the gain, earnings for the third quarter of 2001 were $43.0 million, or $0.91 per share. Revenues in the third quarter of 2002 were $152.6 million compared to $183.3 million in the same period of 2001. Operating cash flow before changes in working capital for the third quarter of 2002 was $86.2 million, or $1.92 per share, compared to $129.9 million, or $2.69 per share, in the same period of 2001. Operating cash flow in the third quarter of 2002 was negatively impacted by lower realized natural gas prices and higher current taxes.

Tropical Storm Isidore adversely impacted financial and operating results in the third quarter of 2002. Newfield was forced to shut-in a total of approximately 1.5 billion cubic feet equivalent (Bcfe) of production in the Gulf of Mexico in late September.

Newfield's total production for the third quarter of 2002 was 44.2 Bcfe, or 481 million cubic feet equivalent per day (MMcfe/d). Production in the third quarter declined 3% over the third quarter of 2001 primarily due to lower oil production and weather-related shut-ins in the Gulf of Mexico. Production in the third quarter of 2001 was 45.7 Bcfe, or 497 MMcfe/d. The following tables detail quarterly production and average realized prices:

    Production
                                                3Q02     3Q01    % Change
    United States
       Natural gas (Bcf)                        34.8     35.0      (1%)
         Natural gas (MMcf/d)                    378      381      (1%)
       Oil and condensate production
        (MMBbls)                                1.18     1.42     (17%)
         Oil and condensate production
          (BOPD)                              12,877   15,414     (17%)
    Australia
       Oil and condensate liftings (MMBbls)    0.388    0.359       8%
         Oil and condensate liftings (BOPD)    4,219    3,908       8%
    Total
       Natural gas (Bcf)                        34.8     35.0      (1%)
       Oil and condensate (MMBbls)              1.57     1.78     (12%)
       Total (Bcfe)                             44.2     45.7      (3%)

    Average Realized Prices*
                                                3Q02     3Q01    % Change
    United States
       Natural gas (per Mcf)                   $3.19    $3.94     (19%)
       Oil and condensate (per Bbl)           $24.84   $24.52       1%
    Australia
       Oil and condensate liftings (per Bbl)  $27.39   $25.40       8%
    Total
       Natural gas (per Mcf)                   $3.19    $3.94     (19%)
       Oil and condensate (per Bbl)           $25.47   $24.70       3%
       Total per Mcfe                          $3.41    $3.98     (14%)

    * Prices shown are net of transportation expense and after hedging.  The
      Company has not entered into hedging transactions specifically relating
      to Australian production.


Newfield's LOE in the third quarter of 2002, stated on a unit of production basis, was $0.57 per thousand cubic feet equivalent (Mcfe). This compares to $0.66 per Mcfe in the third quarter of 2001. LOE was higher in the third quarter of 2001 primarily because of a one-time $5.5 million charge related to workover expense on a Gulf of Mexico well. DD&A expense for the third quarter of 2002 was $1.64 per Mcfe compared to $1.63 per Mcfe in the same period of 2001. Newfield's general and administrative expense (including stock compensation) in the third quarter of 2002 was $0.31 per Mcfe compared to $0.27 per Mcfe in the third quarter of 2001. Higher G&A expense per unit reflects lower production in the third quarter of 2002 and the Company's growing workforce. Net interest expense decreased slightly to $0.13 per Mcfe compared to $0.14 per Mcfe in the third quarter of 2001.

Year-to-Date 2002

For the first nine months of 2002, Newfield reported net income of $58.5 million, or $1.29 per share, stated before the effect of a non-cash charge related to SFAS 133. Stated after the effect of the non-cash charge, net income for the first nine months of 2002 was $42.0 million, or $0.93 per share. This compares to net income in the first nine months of 2001 of $152.9 million, or $3.21 per share, stated before the effect of a non-cash gain related to SFAS 133. Stated with the effect of the gain, earnings for the first nine months of 2001 were $158.1 million, or $3.32 per share.

Revenues for the first nine months of 2002 were $462.3 million. For the same period of 2001, they were $593.3 million. Operating cash flow before changes in working capital decreased to $282.6 million, or $6.29 per share, in the first three quarters of 2002 compared to $415.6 million, or $8.57 per share, in the same period of 2001. The decreases reflect lower commodity prices and, in the case of operating cash flow, higher current taxes.

     Year-to-Date 2002 Production
     For the Nine Months Ended September 30

                                          YTD 09/02    YTD 09/01     % Change
    United States
       Natural gas (Bcf)                     106.5        101.3         5%
         Natural gas (MMcf/d)                  390          371         5%
       Oil and condensate production
        (MMBbls)                              3.86         4.03        (4%)
         Oil and condensate production
          (BOPD)                            14,150       14,775        (4%)
    Australia
       Oil and condensate liftings
        (MMBbls)                             0.964        0.941         2%
         Oil and condensate liftings
          (BOPD)                             3,531        3,447         2%
    Total
       Natural gas (Bcf)                     106.5        101.3         5%
       Oil and condensate (MMBbls)            4.83         4.97        (3%)
       Total (Bcfe)                          135.5        131.1         3%

    Average Realized Prices*
    For the Nine Months Ended September 30

                                          YTD 09/02    YTD 09/01    % Change
    United States
       Natural gas (per Mcf)                 $3.22        $4.59       (30%)
       Oil and condensate (per Bbl)         $23.52       $24.55        (4%)
    Australia
       Oil and condensate liftings
        (per Bbl)                           $25.24       $26.58        (5%)
    Total
       Natural gas (per Mcf)                 $3.22        $4.59       (30%)
       Oil and condensate (per Bbl)         $23.86       $24.93        (4%)
       Total per Mcfe                        $3.38        $4.49       (25%)

    * Prices shown are net of transportation expense and after hedging. The
      Company has not entered into hedging transactions specifically relating
      to Australian production.


For the first nine months of 2002, the Company's LOE averaged $0.54 per Mcfe compared to $0.56 per Mcfe in the first nine months of 2001. DD&A expense in the first three quarters of 2002 was $1.63 per Mcfe compared to $1.58 per Mcfe in the same period of 2001. Year-to-date, G&A expense per Mcfe (including stock compensation) averaged $0.29 compared to $0.27 in the same period of last year.

Capital expenditures through the end of the third quarter were $247 million. For the full-year 2002, Newfield expects to invest about $340 million, excluding the pending acquisition of EEX Corporation.

Tables with third quarter and year-to-date 2002 and comparative 2001 summary financial information are below.

Fourth Quarter 2002 Estimates

Below are estimates of certain significant operating and financial data for the fourth quarter of 2002. Although the Company believes the expectations reflected in this forward-looking information are reasonable, such expectations are based upon assumptions and anticipated results that are subject to numerous uncertainties. THE INFORMATION RELATED TO NEWFIELD'S FOURTH QUARTER EXPECTATIONS DOES NOT INCLUDE THE EFFECT OF THE COMPANY'S PENDING ACQUISITION OF EEX CORPORATION, WHICH IS EXPECTED TO CLOSE IN LATE NOVEMBER 2002. Please see the discussion regarding forward-looking information at the end of this release.

Natural gas production and pricing Newfield's natural gas production in the fourth quarter of 2002 is expected to be 34 -- 35 Bcf (370 - 380 MMcf/d). The price received by the Company for its natural gas production from the Gulf of Mexico and onshore Gulf Coast has typically tracked the Henry Hub Index. Gas from the Company's Mid-Continent properties has typically sold at a discount of $0.12 -- $0.15 per Mcfe to Henry Hub. Hedging gains or losses will affect price realizations.

Crude oil production and pricing Consolidated oil production in the fourth quarter of 2002 is expected to be 1.5 -- 1.6 million barrels (16,300 -- 17,400 BOPD). Australian oil production during the fourth quarter is expected to be 240 -- 250 thousand barrels (2,600 -- 2,700 BOPD). The oil volume estimate for the Company's Australian production reflects production downtime associated with annual maintenance on the production facilities and the timing of expected liftings. Both events will impact reported production and revenues for the fourth quarter of 2002. The price the Company receives from its Gulf Coast production has typically averaged about $2 below the NYMEX West Texas Intermediate price. Oil production from the Mid-Continent has typically sold at a $1.00 -- $1.50 per barrel discount to West Texas Intermediate (WTI). Australian crude oil sales are based on the Tapis Benchmark, which has historically been comparable to WTI. Hedging gains or losses will affect price realizations.

For the full-year 2002, the Company expects to produce about 180 Bcfe, an increase of 3% over 2001 production. Due to recent storms in the Gulf of Mexico, the Company was forced to shut-in a total of about 4 Bcfe of production.

Lease Operating Expense and Production and Other Taxes Newfield's LOE, including domestic production and severance taxes and resource rent tax in Australia, is expected to be $31 -- $35 million in the fourth quarter of 2002 ($0.72 - $0.79 per Mcfe). The Company's domestic LOE, including taxes, is expected to be $0.62 -- $0.68 per Mcfe in the fourth quarter of 2002. This estimate includes severance taxes of $0.10 -- $0.12 per Mcfe. LOE varies and is 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 Newfield's G&A expense for the fourth quarter of 2002 is expected to be $12.3 -- $13.6 million ($0.28 -- $0.32 per Mcfe). This estimate includes accrual of performance-based pay.

Interest Expense The non-capitalized portion of the Company's interest expense for the fourth quarter of 2002 is expected to be $6 -- $7 million ($0.14 -- $0.16 per Mcfe), including a $2.3 million payment on its convertible trust preferred securities. Current borrowings under Newfield's bank facilities are about $45 million. The remainder of long-term debt consists of two separate issuances of senior notes that in the aggregate total $300 million. Capitalized interest for the fourth quarter of 2002 is expected to be about $2.2 million. The proceeds from the Company's recent $250 million senior subordinated notes offering are being held in escrow pending the closing of the EEX acquisition, and no interest expense with respect to the notes will be accrued prior to closing.

Income Taxes Including both current and deferred taxes, the Company expects its consolidated income tax rate in the fourth quarter of 2002 to be about 35%. Current taxes for the full-year 2002 are expected to be about $44 million. The Company expects that the entire tax expense in the fourth quarter will be current.

KEY FACTS RELATING TO EEX ACQUISITION:

The following is some preliminary guidance on the impact of the EEX acquisition. Additional guidance will be given following the close of this transaction.

    -- The S-4 registration statement was declared effective on October 10 and
       proxies were mailed to EEX shareholders.  EEX shareholders will vote on
       the transaction November 26.
    -- Newfield is planning to drill about 35 development wells and
       8-10 exploration wells on EEX's acreage in 2003.
    -- Newfield expects to reduce EEX's 2003 ongoing G&A expense by at least
       50% versus 2002.
    -- Newfield expects to invest $70-75 million in 2003 on the properties
       acquired from EEX.  This is double the current investment level on
       these properties. Areas of significant activity are expected to
       include:

       -- The Monte Christo Field: (EEX 20-40% working interest)  The Company
          is planning to participate in a five-well development program.  One
          exploration well is also planned.
       -- Fashing: (EEX 49% working interest)  This is a mature field
          discovered in the 1950's with cumulative production of more than
          1.5 Tcfe.  Newfield is planning to drill seven development wells in
          the field next year, work to lower field reservoir pressure and
          increase reserve recovery, and analyze the field's geology for
          exploration/exploitation drilling potential.
       -- Dinn Ranch:  (Joint operatorship, 35-50% EEX working interest)
          Significant discoveries were made in this field over the last two
          years.  Current gross production capacity is about 80 MMcf/d and an
          active development drilling program is planned for 2003.
       -- Vaquillas Ranch: (EEX working interest 100%)  Newfield is planning
          to drill at least three development wells in the field in 2003.  In
          addition, a field study is also planned to identify additional
          drilling opportunities.
       -- The Val Verde Basin: (EEX operated, working interest varies between
          45-100%)  The Company plans to focus efforts on the Val Verde Basin
          of southwest Texas.  Newfield is planning to drill at least one
          exploration well and at least five development wells and invest in
          new seismic acquisition and processing.

The Company provides information regarding its outstanding hedging positions in its annual report and quarterly reports filed with the SEC and in its electronic publication -- @NFX. This publication can be found on the Company's web page at http://www.newfld.com . Through the web page, interested persons may elect to receive @NFX through e-mail distribution.

Newfield Exploration is an independent crude oil and natural gas exploration and production company. The Company has a solid asset base of producing properties and exploration and development drilling opportunities in the Gulf of Mexico, along the U.S. Onshore Gulf Coast, in the Anadarko and Permian Basins, offshore Australia and in China's Bohai Bay. Newfield balances its drilling program with acquisitions in select areas in the U.S. and overseas.

  • Certain of the statements set forth in this release regarding estimated or anticipated fourth quarter 2002 results, drilling and operating plans, capital spending and yearly production volumes are forward-looking and 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 and the availability of capital resources, labor conditions and other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2001. In addition, the drilling of oil and gas wells and the production of hydrocarbons are subject to governmental regulations and operating risks.
  • Newfield Exploration Company For information, contact:
  • 363 N. Sam Houston Parkway East, Ste. 2020 Steve Campbell
  • Houston, TX 77060 (281) 847-6081
  • http://www.newfld.com info@newfld.com
    CONSOLIDATED STATEMENT OF INCOME
    (Unaudited, in thousands,
     except per share data)          For the                  For the
                               Three Months Ended        Nine Months Ended
                                  September 30,            September 30,
                                 2002        2001        2002        2001
    Oil and gas revenues      $152,610    $183,259    $462,260    $593,332

    Operating expenses:
        Lease operating         25,065      30,245      73,824      73,819
        Transportation           1,730       1,325       4,377       4,150
        Production and
         other taxes             5,635       3,311      12,906      15,892
        Depreciation,
         depletion and
         amortization           72,294      74,259     221,528     206,982
        General and
         administrative         13,045      11,406      37,018      33,332
        Stock compensation         731         729       2,066       2,027
            Total operating
             expenses          118,500     121,275     351,719     336,202

    Income from operations      34,110      61,984     110,541     257,130

    Other income (expense):
        Interest expense        (7,049)     (6,897)    (21,397)    (20,520)
        Capitalized interest     2,280       2,354       6,553       6,508
        Dividends on preferred
         securities of
          Newfield Financial
           Trust I              (2,336)     (2,336)     (7,008)     (7,008)
        Unrealized commodity
         derivative income
         (expense) *           (13,952)     11,101     (25,477)     15,262
        Other                    1,346         316       1,915       1,458
                               (19,711)      4,538     (45,414)     (4,300)

    Income before income taxes  14,399      66,522      65,127     252,830

    Income tax provision         5,028      23,546      23,160      89,972
    Income before cumulative
     effect of change in
     accounting principle        9,371      42,976      41,967     162,858

    Cumulative effect of
     change in accounting
     principle*                    ---         ---         ---      (4,794)
    Net income                $  9,371   $  42,976   $  41,967    $158,064

    Earnings per share:
      Basic
        Income before
         cumulative effect
         of change in
         accounting principle $   0.21   $    0.97   $    0.95    $   3.67
        Cumulative effect of
         change in accounting
         principle*                ---         ---         ---       (0.11)
        Net income            $   0.21   $    0.97   $    0.95    $   3.56
      Diluted
        Income before
         cumulative effect
         of change in
         accounting principle $   0.21   $    0.91   $    0.93    $   3.42
        Cumulative effect
         of change in
         accounting principle*     ---         ---         ---       (0.10)
        Net income            $   0.21   $    0.91   $    0.93    $   3.32

    Weighted average shares
     outstanding for basic
     earnings per share         44,420      44,219      44,337      44,344

    Weighted average shares
     outstanding for diluted
     earnings per share         44,905      48,798      44,910      49,014

    * Associated with SFAS 133.


        PRODUCTION DATA
                                     For the                 For the
                                Three Months Ended      Nine Months Ended
                                   September 30,           September 30,
                                 2002        2001        2002        2001
    Average daily production:
      Oil and condensate
       (Bbls)                   17,096      19,322      17,681      18,222
      Gas (Mcf)                  378.0       381.0       390.0       371.0
    Average realized price: *
      Oil and condensate
       (Bbls)                  $ 25.47     $ 24.70     $ 23.86     $ 24.93
      Gas (Mcf)                $  3.19     $  3.94     $  3.22     $  4.59

    * Prices shown are net of transportation expense and after hedging.


    CONSOLIDATED BALANCE SHEET
    (Unaudited, in thousands
     of dollars)                     September 30,         December 31,
                                         2002                  2001

    ASSETS
    Current assets:
      Cash & cash equivalents       $   23,694            $   26,610
      Accounts receivable,
       oil and gas                      88,936                92,644
      Inventories                        7,776                 7,332
      Commodity derivatives *            6,712                79,012
      Other current assets              16,276                25,006
      Deferred taxes                     2,329                   ---
         Total current assets          145,723               230,604

    Oil and gas properties,
     net (full cost method)          1,430,486             1,408,579
    Furniture, fixtures and
     equipment, net                      6,748                 6,807
    Commodity derivatives *                663                 7,409
    Other assets                         9,156                 9,972
         Total assets               $1,592,776            $1,663,371

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Accounts payable and
     accrued liabilities            $  128,073            $  131,386
    Advances from joint owners             173                    10
    Commodity derivatives *             19,768                 4,217
    Deferred taxes                         ---                29,418
         Total current liabilities     148,014               165,031

    Other liabilities                    8,493                 6,288
    Commodity derivatives *              2,596                 1,813
    Long-term debt                     360,665               428,631
    Deferred taxes                     203,578               207,880
         Total long-term liabilities   575,332               644,612

    Company-obligated, mandatorily
     redeemable, convertible
     preferred securities of
     Newfield Financial Trust I        143,750               143,750

    STOCKHOLDERS' EQUITY
      Common stock                         453                   449
      Additional paid-in capital       373,429               364,734
      Treasury stock                   (26,161)              (25,794)
      Unearned compensation             (6,965)               (7,845)
      Accumulated other
       comprehensive income (loss)
         Foreign currency
          translation adjustment        (6,053)               (8,918)
         Commodity derivatives *       (13,406)               24,936
      Retained earnings                404,383               362,416
         Total stockholders' equity    725,680               709,978
         Total liabilities and
          stockholders' equity      $1,592,776            $1,663,371

    * Associated with SFAS 133.


    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited, in thousands of dollars)
                                       For the                For the
                                  Three Months Ended      Nine Months Ended
                                     September 30,           September 30,
                                    2002       2001        2002        2001
    Cash flows from
     operating activities:
      Net income                $   9,371  $  42,976   $  41,967   $ 158,064
      Depreciation,
       depletion and
       amortization                72,294     74,259     221,528     206,982
      Deferred taxes              (10,122)    23,073      (8,412)     59,011
      Stock compensation              731        729       2,066       2,027
      Unrealized commodity
       derivative *                13,952    (11,101)     25,477     (15,262)
      Cumulative effect of
       change in accounting
       principle*                     ---        ---         ---       4,794
                                   86,226    129,936     282,626     415,616
      Changes in assets
       and liabilities             12,711    (19,387)     12,739      47,475
        Net cash provided
         by operating
         activities                98,937    110,549     295,365     463,091
    Cash flows from
     investing activities:
      Acquisition, net of
       cash acquired                  ---        ---         ---    (264,089)
      Additions to oil and
       gas properties             (68,603)  (161,968)   (233,586)   (417,806)
      Additions to furniture,
       fixtures and equipment        (692)    (1,432)     (2,249)     (3,468)
        Net cash used in
         investing activities     (69,295)  (163,400)   (235,835)   (685,363)
    Cash flows from
     financing activities:
      Proceeds from borrowings    229,000    258,000     490,000   1,110,000
      Repayments of borrowings   (244,000)  (216,000)   (558,000) (1,025,000)
      Proceeds from issuance
       of senior notes                ---        ---         ---     174,879
      Proceeds from issuances
       of common stock              1,001        442       5,830       1,795
      Purchases of treasury
       stock                          (30)    (8,316)       (366)    (25,352)
        Net cash provided by
         (used in) financing
         activities               (14,029)    34,126     (62,536)    236,322
    Effect of exchange rate
     changes on cash and cash
     equivalents                      424        131          90         694

    Increase (decrease) in cash
     and cash equivalents          16,037    (18,594)     (2,916)     14,744
    Cash and cash equivalents,
     beginning of period            7,657     51,789      26,610      18,451

    Cash and cash equivalents,
     end of period              $  23,694  $  33,195   $  23,694   $  33,195

    * Associated with SFAS 133.

Source: Newfield Exploration Company

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