Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2017
OR
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to                     .

Commission File Number: 1-12534

NEWFIELD EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware
72-1133047
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)

4 Waterway Square Place
Suite 100
The Woodlands, Texas 77380
(Address and Zip Code of principal executive offices)

(281) 210-5100
(Registrant’s telephone number, including area code)
     
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ     
Accelerated filer ¨   
Non-accelerated filer ¨     
Smaller reporting company ¨
Emerging growth company ¨
(Do not check if a smaller reporting company)
     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ¨ No þ

As of October 26, 2017, there were 199,618,755 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
 
 
 
 
 



TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




ii


NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(In millions, except share data)
(Unaudited)
 
 
September 30, 
 2017
 
December 31, 
 2016
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
428

 
$
555

Short-term investments
 

 
25

Accounts receivable, net
 
277

 
232

Inventories
 
18

 
16

Derivative assets
 
10

 
75

Other current assets
 
103

 
46

Total current assets
 
836

 
949

Oil and gas properties, net — full cost method ($1,198 and $1,238 were excluded from amortization at September 30, 2017 and December 31, 2016, respectively)
 
3,670

 
3,140

Other property and equipment, net
 
169

 
167

Long-term investments
 
24

 
19

Restricted cash
 
36

 
25

Other assets
 
9

 
12

Total assets
 
$
4,744

 
$
4,312

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 

 
 

Accounts payable
 
$
88

 
$
33

Accrued liabilities
 
543

 
498

Advances from joint owners
 
61

 
54

Asset retirement obligations
 
2

 
2

Derivative liabilities
 
18

 
97

Total current liabilities
 
712

 
684

Other liabilities
 
71

 
63

Derivative liabilities
 
5

 
3

Long-term debt
 
2,433

 
2,431

Asset retirement obligations
 
158

 
154

Deferred taxes
 
64

 
39

Total long-term liabilities
 
2,731

 
2,690

Commitments and contingencies (Note 11)
 
 
 
 
Stockholders' equity:
 
 

 
 

Preferred stock ($0.01 par value, 5,000,000 shares authorized; no shares issued)
 

 

Common stock ($0.01 par value, 300,000,000 shares authorized at September 30, 2017 and December 31, 2016; 201,249,143 and 200,150,392 shares issued at September 30, 2017 and December 31, 2016, respectively)
 
2

 
2

Additional paid-in capital
 
3,291

 
3,247

Treasury stock (at cost, 1,639,265 and 1,195,809 shares at September 30, 2017 and December 31, 2016, respectively)
 
(58
)
 
(44
)
Accumulated other comprehensive income (loss)
 
(1
)
 
(2
)
Retained earnings (deficit)
 
(1,933
)
 
(2,265
)
Total stockholders' equity
 
1,301

 
938

Total liabilities and stockholders' equity
 
$
4,744

 
$
4,312


The accompanying notes to consolidated financial statements are an integral part of this statement.

1


NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Oil, gas and NGL revenues
 
$
439

 
$
392

 
$
1,258

 
$
1,057

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 
 
 

Lease operating
 
53

 
60

 
167

 
183

Transportation and processing
 
80

 
71

 
223

 
200

Production and other taxes
 
16

 
13

 
43

 
34

Depreciation, depletion and amortization
 
124

 
120

 
340

 
457

General and administrative
 
53

 
65

 
151

 
167

Ceiling test and other impairments
 

 

 

 
1,028

Other
 
1

 
18

 
2

 
19

Total operating expenses
 
327

 
347

 
926

 
2,088

Income (loss) from operations
 
112

 
45

 
332

 
(1,031
)
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 

 
 

 
 
 
 
Interest expense
 
(37
)
 
(37
)
 
(112
)
 
(116
)
Capitalized interest
 
15

 
15

 
46

 
35

Commodity derivative income (expense)
 
(23
)
 
28

 
58

 
(122
)
Other, net
 
1

 
1

 
5

 
2

Total other income (expense)
 
(44
)
 
7

 
(3
)
 
(201
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
68

 
52

 
329

 
(1,232
)
 
 
 
 
 
 
 
 
 
Income tax provision (benefit):
 
 

 
 

 
 
 
 
Current
 
(28
)
 
(1
)
 
(28
)
 
3

Deferred
 
9

 
5

 
25

 
8

Total income tax provision (benefit)
 
(19
)
 
4

 
(3
)
 
11

Net income (loss)
 
$
87

 
$
48

 
$
332

 
$
(1,243
)
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 

 
 

 
 
 
 
Basic
 
$
0.44

 
$
0.24

 
$
1.67

 
$
(6.50
)
Diluted
 
$
0.44

 
$
0.24

 
$
1.66

 
$
(6.50
)
Weighted-average number of shares outstanding for basic earnings (loss) per share
 
199

 
199

 
199

 
191

Weighted-average number of shares outstanding for diluted earnings (loss) per share
 
200

 
200

 
200

 
191

 
 
 
 
 
 
 
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
$
87

 
$
48

 
$
332

 
$
(1,243
)
Other comprehensive income (loss), net of tax
 

 

 
1

 

Comprehensive income (loss)
 
$
87

 
$
48

 
$
333

 
$
(1,243
)

The accompanying notes to consolidated financial statements are an integral part of this statement.

2


NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
 
 
Nine Months Ended
 
 
September 30,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
Net income (loss)
 
$
332

 
$
(1,243
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 

 
 

Depreciation, depletion and amortization
 
340

 
457

Deferred tax provision (benefit)
 
25

 
8

Stock-based compensation
 
25

 
14

Unrealized (gain) loss on derivative contracts
 
(12
)
 
307

Ceiling test and other impairments
 

 
1,028

Other, net
 
10

 
10

Changes in operating assets and liabilities:
 
 

 
 

(Increase) decrease in accounts receivable
 
(45
)
 
43

Increase (decrease) in accounts payable and accrued liabilities
 
21

 
(65
)
Other items, net
 
(56
)
 
28

Net cash provided by (used in) operating activities
 
640

 
587

Cash flows from investing activities:
 
 

 
 

Additions to oil and gas properties
 
(825
)
 
(692
)
Acquisitions of oil and gas properties
 
(10
)
 
(497
)
Proceeds from sales of oil and gas properties
 
74

 
399

Additions to other property and equipment
 
(18
)
 
(14
)
Redemptions of investments
 
50

 

Purchases of investments
 
(25
)
 
(25
)
Net cash provided by (used in) investing activities
 
(754
)
 
(829
)
Cash flows from financing activities:
 
 

 
 

Proceeds from borrowings under credit arrangements
 

 
536

Repayments of borrowings under credit arrangements
 

 
(575
)
Proceeds from issuances of common stock, net
 
2

 
777

Purchases of treasury stock, net
 
(14
)
 
(22
)
Other
 
(1
)
 
(1
)
Net cash provided by (used in) financing activities
 
(13
)
 
715

Increase (decrease) in cash and cash equivalents
 
(127
)
 
473

Cash and cash equivalents, beginning of period
 
555

 
5

Cash and cash equivalents, end of period
 
$
428

 
$
478


The accompanying notes to consolidated financial statements are an integral part of this statement.

3


NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
Additional
Paid-in
Capital
 
Retained Earnings
(Deficit)
 
Accumulated
Other
 Comprehensive
Income (Loss)
 
 Total
Stockholders' Equity
 
Common Stock
 
Treasury Stock
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance, December 31, 2016
200.2

 
$
2

 
(1.2
)
 
$
(44
)
 
$
3,247

 
$
(2,265
)
 
$
(2
)
 
$
938

Issuances of common stock
1.0

 

 
 
 
 
 
2

 
 
 
 
 
2

Stock-based compensation
 
 
 
 
 
 
 
 
42

 
 
 
 
 
42

Treasury stock, net
 
 
 
 
(0.4
)
 
(14
)
 

 
 
 
 
 
(14
)
Net income (loss)
 
 
 
 
 
 
 
 
 
 
332

 
 
 
332

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
 
1

 
1

Balance, September 30, 2017
201.2

 
$
2

 
(1.6
)
 
$
(58
)
 
$
3,291

 
$
(1,933
)
 
$
(1
)
 
$
1,301


The accompanying notes to consolidated financial statements are an integral part of this statement.

4



NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.      Organization and Summary of Significant Accounting Policies
   
Organization and Principles of Consolidation
     
We are an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids (NGLs). Our U.S. operations are onshore and focus primarily on large scale, liquids-rich resource plays in the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota and the Uinta Basin of Utah. In addition, we have oil assets offshore China.

Our consolidated financial statements include the accounts of Newfield Exploration Company, a Delaware corporation, and its subsidiaries. We proportionately consolidate our interests in oil and natural gas exploration and production joint ventures and partnerships in accordance with industry practice. All significant intercompany balances and transactions have been eliminated. Unless otherwise specified or the context otherwise requires, all references in these notes to "Newfield," "we," "us," "our" or the "Company" are to Newfield Exploration Company and its subsidiaries.

These unaudited consolidated financial statements reflect, in the opinion of our management, all adjustments, consisting only of normal and recurring adjustments, necessary to fairly state our financial position as of, and results of operations, for the periods presented. These financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Interim period results are not necessarily indicative of results of operations or cash flows for a full year.

These consolidated financial statements and notes should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.
  
Risks and Uncertainties

As an independent oil and natural gas producer, our revenue, profitability and future rate of growth are substantially dependent on prevailing prices for oil, natural gas and NGLs. Historically, the energy markets have been very volatile, and there can be no assurance that commodity prices will not be subject to wide fluctuations in the future. A substantial or extended decline in commodity prices could have a material adverse effect on our financial position, results of operations, cash flows, access to capital and on the quantities of oil, natural gas and NGL reserves that we can economically produce. Other risks and uncertainties that could affect us in a volatile commodity price environment include, but are not limited to, counterparty credit risk for our receivables, responsibility for decommissioning liabilities for offshore interests we no longer own, inability to access credit markets, regulatory risks and our ability to meet financial ratios and covenants in our financing agreements.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the financial statements; the reported amounts of revenues and expenses during the reporting period; and the quantities and values of proved oil, natural gas and NGL reserves used in calculating depletion and assessing impairment of our oil and gas properties. Actual results could differ significantly from these estimates. Our most significant estimates are associated with the quantities of proved oil, natural gas and NGL reserves, the timing and amount of transfers of our unevaluated properties into our amortizable full cost pool, the recoverability of our deferred tax assets and the fair value of our derivative contracts.


5

Table of Contents
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

New Accounting Requirements

In November 2016, the Financial Accounting Standards Board (FASB) issued guidance regarding the classification and presentation of changes in restricted cash on the statement of cash flows. The guidance requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents using a retrospective approach. The guidance is effective for interim and annual periods beginning after December 15, 2017. Adoption of this standard will impact our cash flow from operations in periods with changes in restricted cash.

In May 2014, the FASB issued guidance regarding the accounting for revenue from contracts with customers. The guidance is effective for interim and annual periods beginning after December 15, 2017 and may be applied retrospectively or using a modified retrospective approach to adjust retained earnings (deficit). We will adopt the guidance in the first quarter of 2018 using the modified retrospective approach to adjust retained earnings (deficit). We implemented a process to evaluate our current revenue recognition policies to the new requirements for each of our revenue categories. While we have not identified any material differences in the amount and timing of revenue recognition for the categories we have reviewed to date, our evaluation is not complete, and we have not concluded on the overall impacts of adopting the new requirements.

In January 2016, the FASB issued guidance regarding several broad topics related to the recognition and measurement of financial assets and liabilities. The guidance is effective for interim and annual periods beginning after December 15, 2017. We do not expect this guidance to have a material impact on our financial statements.

In February 2016, the FASB issued guidance regarding the accounting for leases. The guidance requires recognition of most leases on the balance sheet. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our financial statements.

2.    Accounts Receivable

Accounts receivable consisted of the following:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
Revenue
 
$
171

 
$
163

Joint interest
 
91

 
53

Other
 
31

 
32

Reserve for doubtful accounts
 
(16
)
 
(16
)
Total accounts receivable, net
 
$
277

 
$
232


3.      Inventories
     
Inventories primarily consist of tubular goods and well equipment held for use in our oil and natural gas operations, and oil produced but not sold in our China operations. Inventories are carried at the lower of cost or net realizable value. At September 30, 2017, we had no crude oil inventory in China due to the shut-in of production in our Pearl field and the lifting of remaining barrels in August 2017. At December 31, 2016, the crude oil inventory from our China operations consisted of approximately 11,500 barrels.

4.      Derivative Financial Instruments
     
Commodity Derivative Instruments
     
We utilize derivative strategies that consist of either a single derivative instrument or a combination of instruments to manage the variability in cash flows associated with the forecasted sale of our future domestic oil and natural gas production. While the use of derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements,

6

Table of Contents
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

their use also may limit future income from favorable commodity price movements. Our derivative strategies are outlined in our Annual Report on Form 10-K for the year ended December 31, 2016.

Our oil and gas derivative contracts are settled based upon reported prices on the NYMEX. The estimated fair value of these contracts is based upon various factors, including closing exchange prices on the NYMEX, over-the-counter quotations, estimated volatility, non-performance risk adjustments using counterparty rates of default and time to maturity. The calculation of the fair value of options requires the use of an option-pricing model. See Note 5, "Fair Value Measurements."

At September 30, 2017, we had outstanding derivative positions as set forth in the tables below.

Crude Oil
 
 
 
 
NYMEX Contract Price Per Bbl
 
 
 
 
 
 
 
 
 
 
 
 
Collars
 
Estimated Fair Value
Asset (Liability)
Period and Type of Instrument
 
Volume in MBbls
 
Swaps
(Weighted Average)
 
Purchased Calls (Weighted Average)(2)
 
Sold Puts
(Weighted Average)
(1)
 
Floors
(Weighted Average)
 
Ceilings
(Weighted Average)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
2017:
 
 

 
 

 
 
 
 

 
 

 
 

 
 

Fixed-price swaps
 
2,852

 
$
47.52

 
$

 
$

 
$

 
$

 
$
(13
)
Fixed-price swaps with sold puts:
 
1,012

 
 
 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
 
 
88.01

 

 

 

 

 
36

Sold puts
 
 
 

 

 
73.09

 

 

 
(22
)
  Purchased calls
 
1,012

 

 
73.09

 

 

 

 

2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-price swaps
 
2,190

 
50.04

 

 

 

 

 
(4
)
Collars with sold puts:
 
11,307

 
 
 
 
 
 
 
 
 
 
 
 
Collars
 
 
 

 

 

 
47.16

 
55.97

 
1

Sold puts
 
 
 

 

 
38.48

 

 

 
(9
)
2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collars with sold puts:
 
5,824

 
 
 
 
 
 
 
 
 
 
 
 
Collars
 
 
 

 

 

 
50.00

 
56.34

 
11

Sold puts
 
 
 

 

 
39.50

 

 

 
(12
)
Total
 
$
(12
)
_________________
(1)
For the fixed-price swaps with sold puts, if the market price remains below our sold puts at contract settlement, we will receive the market price plus the difference between our swaps and our sold puts.
(2)
As a result of our purchased calls, we have effectively locked in the spread between our fixed-price swaps and sold puts (less the deferred call premium). We deferred the premiums related to the purchased calls until contract settlement. At September 30, 2017, the deferred premiums totaled $2 million.


7

Table of Contents
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Natural Gas
 
 
 
 
NYMEX Contract Price Per MMBtu
 
 
 
 
 
 
 
 
Collars
 
Estimated Fair Value Asset (Liability)
Period and Type of Instrument
 
Volume in MMMBtus
 
Swaps (Weighted Average)
 
Floors (Weighted Average)
 
Ceilings (Weighted Average)
 
 
 
 
 
 
 
 
 
 
 
(In millions)
2017:
 
 

 
 

 
 

 
 

 
 

Fixed-price swaps
 
6,900

 
$
2.73

 
$

 
$

 
$
(2
)
Collars
 
15,640

 

 
2.87

 
3.28

 

2018:
 
 

 
 

 
 

 
 

 
 

Fixed-price swaps
 
35,700

 
2.99

 

 

 

Collars
 
23,550

 

 
3.02

 
3.60

 
1

2019:
 
 
 
 
 
 
 
 
 
 
Collars
 
8,100

 

 
3.00

 
3.48

 

Total
 
$
(1
)

Additional Disclosures about Derivative Financial Instruments

We had derivative financial instruments recorded in our consolidated balance sheet as assets (liabilities) at their respective estimated fair value, as set forth below.
 
 
Derivative Assets
 
Derivative Liabilities
 
 
Gross Fair Value
 
Offset in Balance Sheet
 
Balance Sheet Location
 
Gross Fair Value
 
Offset in Balance Sheet
 
Balance Sheet Location
 
 
 
 
Current
 
Noncurrent
 
 
 
Current
 
Noncurrent
 
 
(In millions)
 
(In millions)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oil positions
 
$
104

 
$
(95
)
 
$
9

 
$

 
$
(116
)
 
$
95

 
$
(17
)
 
$
(4
)
Natural gas positions
 
10

 
(9
)
 
1

 

 
(11
)
 
9

 
(1
)
 
(1
)
Total
 
$
114

 
$
(104
)
 
$
10

 
$

 
$
(127
)
 
$
104

 
$
(18
)
 
$
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Oil positions
 
$
226

 
$
(151
)
 
$
75

 
$

 
$
(197
)
 
$
151

 
$
(46
)
 
$

Natural gas positions
 
10

 
(10
)
 

 

 
(64
)
 
10

 
(51
)
 
(3
)
Total
 
$
236

 
$
(161
)
 
$
75

 
$

 
$
(261
)
 
$
161

 
$
(97
)
 
$
(3
)
 

8

Table of Contents
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

The amount of gain (loss) recognized in "Commodity derivative income (expense)" in our consolidated statement of operations and comprehensive income related to our derivative financial instruments follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In millions)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Realized gain (loss) on oil positions
 
$
13

 
$
45

 
$
58

 
$
174

Realized gain (loss) on natural gas positions
 
(2
)
 
(6
)
 
(12
)
 
11

Total realized gain (loss)
 
11

 
39

 
46

 
185

Unrealized gain (loss) on oil positions
 
(38
)
 
(27
)
 
(41
)
 
(259
)
Unrealized gain (loss) on natural gas positions
 
4

 
16

 
53

 
(48
)
Total unrealized gain (loss)
 
(34
)
 
(11
)
 
12

 
(307
)
Total
 
$
(23
)
 
$
28

 
$
58

 
$
(122
)

The use of derivative transactions involves the risk that the counterparties, which generally are financial institutions, will be unable to meet the financial terms of such transactions. Our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty, and we have netting arrangements with all of our counterparties that provide for offsetting payables against receivables by counterparty. At September 30, 2017, 10 of our 16 counterparties accounted for approximately 82% of our contracted volumes, with the largest counterparty accounting for approximately 10%.

At September 30, 2017, approximately 79% of our volumes subject to derivative instruments are with lenders under our credit facility. Our credit facility, senior notes and substantially all of our derivative instruments contain provisions that provide for cross defaults and acceleration of those debt and derivative instruments in certain situations. 

5.      Fair Value Measurements
     
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The authoritative guidance requires disclosure of the framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories:

Level 1:
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange traded derivatives such as over-the-counter commodity fixed-price swaps and, as of September 30, 2017, commodity options (i.e., price collars, sold puts, purchased calls or swaptions).
We use a modified Black-Scholes option pricing valuation model for option and swaption derivative contracts that considers various inputs including: (a) forward prices for commodities, (b) time value, (c) volatility factors, (d) counterparty credit risk and (e) current market and contractual prices for the underlying instruments.
Level 3:
Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may

9

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy. We continue to evaluate our inputs to ensure the fair value level classification is appropriate. When transfers between levels occur, it is our policy to assume that the transfer occurred at the date of the event or change in circumstances that caused the transfer.

The determination of the fair values of our derivative contracts incorporates various factors, which include not only the impact of our non-performance risk on our liabilities but also the credit standing of the counterparties involved. We utilize counterparty rate of default values to assess the impact of non-performance risk when evaluating both our liabilities to, and receivables from, counterparties.

Recurring Fair Value Measurements

The following table summarizes the valuation of our assets and liabilities that are measured at fair value on a recurring basis.
 
 
Fair Value Measurement Classification
 
 
 
 
Quoted Prices in Active Markets for Identical Assets or (Liabilities) (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Total
 
 
(In millions)
As of December 31, 2016:
 
 
 
 
 
 
 
 
Money market fund investments
 
$
320

 
$

 
$

 
$
320

Deferred compensation plan assets
 
6

 

 

 
6

Equity securities available-for-sale
 
9

 

 

 
9

Oil and gas derivative swap contracts
 

 
50

 

 
50

Oil and gas derivative option contracts
 

 

 
(75
)
 
(75
)
Stock-based compensation liability awards
 
(11
)
 

 

 
(11
)
Total
 
$
324

 
$
50

 
$
(75
)
 
$
299

 
 
 

 
 

 
 

 
 

As of September 30, 2017:
 
 

 
 

 
 

 
 

Money market fund investments
 
$
194

 
$

 
$

 
$
194

Deferred compensation plan assets
 
7

 

 

 
7

Equity securities available-for-sale
 
12

 

 

 
12

Oil and gas derivative contracts
 

 
(13
)
 

 
(13
)
Stock-based compensation liability awards
 
(6
)
 

 

 
(6
)
Total
 
$
207

 
$
(13
)
 
$

 
$
194



10

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Level 3 Fair Value Measurements

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the indicated periods.
 
 
Derivatives
 
 
(In millions)
Balance at January 1, 2016
 
$
(308
)
Unrealized gains (losses) included in earnings
 
(28
)
Purchases, issuances, sales and settlements:
 
 

Settlements
 
187

Transfers into Level 3
 

Transfers out of Level 3(1)
 
46

Balance at September 30, 2016
 
$
(103
)
Change in unrealized gains or losses included in earnings relating to Level 3 instruments still held at September 30, 2016
 
$
23

 
 
 
Balance at January 1, 2017
 
$
(75
)
Unrealized gains (losses) included in earnings
 
(17
)
Purchases, issuances, sales and settlements:
 
 

Settlements
 
30

Transfers into Level 3
 

Transfers out of Level 3(2)
 
62

Balance at September 30, 2017
 
$

Change in unrealized gains or losses included in earnings relating to Level 3 instruments still held at September 30, 2017
 
$

_________________
(1)
During the second quarter of 2016, we transferred $46 million of derivative option contracts out of the Level 3 hierarchy. The transfer was the result of our Level 3 swaptions being exercised by the counterparties as swaps in June 2016.
(2)
During the third quarter of 2017, we transferred $62 million of derivative option contracts out of the Level 3 into Level 2 hierarchy as a result of our ability to derive volatility inputs from directly observable sources.

Fair Value of Debt
 
The estimated fair value of our notes, based on quoted prices in active markets (Level 1) as of the indicated dates, was as follows:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
5¾% Senior Notes due 2022
 
$
806

 
$
789

5⅝% Senior Notes due 2024
 
1,064

 
1,044

5⅜% Senior Notes due 2026
 
740

 
714


Any amounts outstanding under our revolving credit facility and money market lines of credit as of the indicated dates are stated at cost, which approximates fair value. See Note 10, "Debt."


11

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

6.      Oil and Gas Properties

     Oil and gas properties consisted of the following:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
Proved
 
$
22,891

 
$
21,998

Unproved
 
1,198

 
1,238

Gross oil and gas properties
 
24,089

 
23,236

Accumulated depreciation, depletion and amortization
 
(9,910
)
 
(9,587
)
Accumulated impairment
 
(10,509
)
 
(10,509
)
Net oil and gas properties
 
$
3,670

 
$
3,140


Costs withheld from amortization as of September 30, 2017 consisted of the following:
 
 
Costs Incurred In
 
 
 
 
2017
 
2016
 
2015
 
2014 & Prior
 
Total
 
 
(In millions)
 
 
Acquisition costs
 
$
103

 
$
532

 
$
324

 
$
87

 
$
1,046

Exploration costs
 

 

 

 

 

Capitalized interest
 
46

 
51

 
33

 
22

 
152

Total costs withheld from amortization
 
$
149

 
$
583

 
$
357

 
$
109

 
$
1,198


We capitalized approximately $33 million of interest and direct internal costs during the three months ended September 30, 2017 and 2016 and $97 million and $89 million during the nine months ended September 30, 2017 and 2016, respectively.

At September 30, 2017, the ceiling value of our reserves was calculated based upon SEC pricing of $49.81 per barrel for oil and $3.00 per MMBtu for natural gas. Using these prices, our ceiling for the U.S. exceeded the net capitalized costs of oil and gas properties and no ceiling test impairment was required at September 30, 2017. Using SEC pricing, our ceiling for China exceeded the net capitalized costs of oil and gas properties and no ceiling test impairment was required at September 30, 2017.

Future declines in SEC pricing or downward revisions to our estimated proved reserves could result in additional ceiling test impairments of our oil and gas properties in subsequent periods.
Bohai Bay (China) Sales Agreement
On May 22, 2017, we closed our previously disclosed sale transaction with certain of our joint venture partners to divest our non-operated interest in the Bohai Bay field in China for approximately $32 million, including customary post-close adjustments. Upon completion of our assessment, the sale of our Bohai Bay assets did not significantly alter the relationship between capitalized costs and proved reserves for our China full cost pool and, as such, all proceeds were recorded as adjustments to our China full cost pool with no gain or loss recognized.


12

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

7.      Other Property and Equipment

     Other property and equipment consisted of the following:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
Furniture, fixtures and equipment
 
$
161

 
$
150

Gathering systems and equipment
 
116

 
115

Accumulated depreciation and amortization
 
(108
)
 
(98
)
Net other property and equipment
 
$
169

 
$
167


8.      Income Taxes

Included in the net tax benefit for the three months ended September 30, 2017, were refunds related to the carryback of net operating losses to previously filed U.S. federal returns and a benefit for our China in-country taxes due to a decrease in cumulative year to date taxable income. The effective tax rates for the nine months ended September 30, 2017 and 2016 were (1.0)% and (0.9)%, respectively.

Due to the ceiling test impairments of our oil and gas properties in 2015, we moved from a deferred tax liability position to a deferred tax asset position in most taxing jurisdictions. We consider it more likely than not that the related tax benefits will not be realized and therefore, we recorded a full valuation allowance on our domestic and China deferred tax assets.

As of September 30, 2017, we did not have a liability for uncertain tax positions, and as such, we did not accrue related interest or penalties. The tax years 2011 and 2013 through 2016 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.

9.    Accrued Liabilities

Accrued liabilities consisted of the following:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
Revenue payable
 
$
230

 
$
196

Accrued capital costs
 
178

 
92

Accrued lease operating expenses
 
22

 
37

Employee incentive expense
 
31

 
48

Accrued interest on debt
 
32

 
67

Taxes payable
 
10

 
15

Other
 
40

 
43

Total accrued liabilities
 
$
543

 
$
498



13

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

10.      Debt
 
Our debt consisted of the following:
 
 
September 30, 
 2017
 
December 31, 
 2016
 
 
(In millions)
Senior unsecured debt:
 
 
 
 
5¾% Senior Notes due 2022
 
$
750

 
$
750

5⅝% Senior Notes due 2024
 
1,000

 
1,000

5⅜% Senior Notes due 2026
 
700

 
700

Total senior unsecured debt
 
2,450

 
2,450

Debt issuance costs
 
(17
)
 
(19
)
Total long-term debt
 
$
2,433

 
$
2,431

 
Credit Arrangements
     
As of September 30, 2017, we had no borrowings under our money market lines of credit or revolving credit facility and had no letters of credit outstanding. We have a revolving credit facility that matures in June 2020 and provides borrowing capacity of $1.8 billion. As of September 30, 2017, the largest individual loan commitment by any lender was 12% of total commitments.

Subject to compliance with restrictive covenants in our credit facility, our available borrowing capacity (before any amounts drawn) under our money market lines of credit with various institutions, the availability of which is at the discretion of those financial institutions, was $105 million at September 30, 2017.

Loans under the credit facility bear interest, at our option, equal to (a) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin that is based on a grid of our debt rating (100 basis points per annum at September 30, 2017) or (b) the Adjusted Eurodollar Rate (as defined in the Credit Agreement), plus a margin that is based on a grid of our debt rating (200 basis points per annum at September 30, 2017).

Under our credit facility, we pay commitment fees on available but undrawn amounts based on a grid of our debt rating (37.5 basis points per annum at September 30, 2017). We incurred aggregate commitment fees under our credit facility of approximately $2 million and $5 million for the three and nine months ended September 30, 2017, respectively, which were recorded in “Interest expense” on our consolidated statement of operations and comprehensive income. For the three and nine months ended September 30, 2016, we incurred commitment fees under our credit facility of approximately $2 million and $6 million, respectively. We incurred approximately $3 million of financing costs related to amending our revolving credit facility in March 2016, which were also included in "Interest expense" on our consolidated statement of operations and comprehensive income.

Our credit facility has restrictive financial covenants that include the maintenance of a ratio of total debt to book capitalization not to exceed 0.6 to 1.0 and the maintenance of a ratio of net income before gain or loss on the disposition of assets, interest expense, income taxes and non-cash items (such as depreciation, depletion and amortization expense, unrealized gains and losses on commodity derivatives and ceiling test impairments) to interest expense of at least 2.5 to 1.0. At September 30, 2017, we were in compliance with all of our debt covenants.

Letters of credit are subject to a fronting fee of 20 basis points and annual fees based on a grid of our debt rating (200 basis points at September 30, 2017).     
 
The credit facility includes events of default relating to customary matters, including, among other things, nonpayment of principal, interest or other amounts; violation of covenants; inaccuracy of representations and warranties in any material respect when made; a change of control; or certain other material adverse changes in our business. Our senior notes also contain standard events of default. If any of the foregoing defaults were to occur, our lenders under the credit facility could terminate future lending commitments, and our lenders under both the credit facility and our notes could declare the outstanding

14

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

borrowings due and payable. In addition, our credit facility, senior notes and substantially all of our derivative arrangements contain provisions that provide for cross defaults and acceleration of those debt and derivative instruments in certain situations.

11.    Commitments and Contingencies

We have various commitments for firm transportation, operating lease agreements for office space and other agreements. For further information, see Note 12, "Commitments and Contingencies," in our Annual Report on Form 10-K for the year ended December 31, 2016. There have been no material changes to the commitments disclosed at year-end 2016, other than noted below.

In March 2017, we signed an agreement for firm natural gas transportation capacity for production from the Anadarko Basin. The table below summarizes the future minimum payments under the agreement by year as of September 30, 2017.
 
 
Total
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
 
(In millions)
Firm transportation
 
$
186

 
$

 
$
9

 
$
18

 
$
18

 
$
18

 
$
123


We have been named as a defendant in a number of lawsuits and are involved in various other disputes, all arising in the ordinary course of our business, such as (a) claims from royalty owners for disputed royalty payments, (b) commercial disputes, (c) personal injury claims and (d) property damage claims. Although the outcome of these lawsuits and disputes cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, cash flows or results of operations.

12.      Stockholders' Equity Activity
     
During the first quarter of 2016, we issued 34.5 million additional shares of common stock through a public equity offering for net proceeds of approximately $776 million. A portion of the proceeds was used to acquire additional properties in the Anadarko Basin STACK play and to repay borrowings under our credit facility and money market lines of credit. The remainder was available for general corporate purposes.

13.      Earnings Per Share
     
The following is the calculation of basic and diluted weighted-average shares outstanding and earnings per share (EPS) for the indicated periods.
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In millions, except per share data)
Net income (loss)
 
$
87

 
$
48

 
$
332

 
$
(1,243
)
 
 
 
 
 
 
 
 
 
Weighted-average shares (denominator):
 
 
 
 

 
 

 
 

Weighted-average shares — basic
 
199

 
199

 
199

 
191

Dilution effect of stock options and unvested restricted stock awards and restricted stock units outstanding at end of period
 
1

 
1

 
1

 

Weighted-average shares — diluted
 
200

 
200

 
200

 
191

Excluded due to anti-dilutive effect
 
2

 
1

 
2

 
2

 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 

 
 

 
 

Basic
 
$
0.44

 
$
0.24

 
$
1.67

 
$
(6.50
)
Diluted
 
$
0.44

 
$
0.24

 
$
1.66

 
$
(6.50
)


15

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

14.      Stock-Based Compensation
     
Our stock-based compensation expense consisted of the following:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In millions)
Equity awards
 
$
13

 
$
7

 
$
42

 
$
25

Liability awards — cash-settled restricted stock units
 
1

 
7

 
3

 
17

Total stock-based compensation
 
14

 
14

 
45

 
42

Capitalized in oil and gas properties
 
(4
)
 
(4
)
 
(14
)
 
(13
)
Net stock-based compensation expense
 
$
10

 
$
10

 
$
31

 
$
29


As of September 30, 2017, we had approximately $68 million of total unrecognized stock-based compensation expense related to unvested stock-based compensation awards that vest within four years. On September 30, 2017, the last reported sales price of our common stock on the New York Stock Exchange was $29.67 per share.

During the first quarter of 2017, we changed our qualified retirement requirements for existing market-based restricted stock units and all subsequently issued equity and liability awards. An employee becomes eligible for qualified retirement based on a combination of years of service and age. Under the revised requirements, qualified retirement allows an employee to continue vesting between 50% and 100% of awards with no additional service requirement beyond a six-month notification period. This change resulted in the accelerated recognition of stock-based compensation expense for unvested market-based restricted stock units previously issued and all subsequently issued equity and liability awards.
Equity Awards

Equity awards consist of service-based and market-based restricted stock awards and restricted stock units, stock options and stock purchase options under the Employee Stock Purchase Plan (ESPP). In May 2017, Newfield adopted the 2017 Omnibus Incentive Plan, as amended (2017 Plan), which replaced the 2011 Omnibus Stock Plan as the vehicle for granting equity-based compensation awards. At September 30, 2017, we had approximately (1) 9.4 million shares available for issuance under our 2017 Plan if all future awards are stock options, or (2) 5.6 million shares available for issuance under our 2017 Plan if all future awards are restricted stock awards or restricted stock units.

Restricted Stock and Restricted Stock Units. The following table summarizes the activity for our restricted stock awards and restricted stock units.
 
 
Service-Based
Shares
 
Weighted- Average Grant Date Fair Value per Share
 
Market-Based
Shares
 
Weighted- Average Grant Date Fair Value per Share
 
Total
Shares
 
 
(In thousands, except per share data)
Non-vested shares outstanding at January 1, 2017
 
1,574

 
$
35.56

 
859

 
$
26.28

 
2,433

Granted
 
1,223

 
29.82

 
323

(1) 
50.22

 
1,546

Forfeited
 
(74
)
 
27.11

 
(55
)
 
31.28

 
(129
)
Vested
 
(663
)
 
35.13

 
(386
)
 
22.85

 
(1,049
)
Non-vested shares outstanding at September 30, 2017
 
2,060

 
$
32.32

 
741

 
$
38.12

 
2,801

________
(1)
In February 2017, we granted approximately 323,000 restricted stock units, which based on achievement of certain criteria, could vest within a range of 0% to 200% of shares granted upon completion of the period ending December 31, 2019.


16

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Employee Stock Purchase Plan. During the first six months of 2017, we issued 61,000 shares of our common stock under our ESPP. The fair value of each option at the grant date was $10.73 per share and was determined using the Black-Scholes option valuation method assuming no dividends, a risk-free interest rate of 0.61%, an expected life of six months and weighted-average volatility of 40.2%.

On July 1, 2017, options to purchase approximately 72,000 shares of our common stock were granted under our ESPP. The fair value of each option was $7.37 per share as determined using the Black-Scholes option valuation method assuming no dividends, a risk-free interest rate of 1.132%, an expected life of six months and weighted-average volatility of 38.1%.

Stock Options. As of September 30, 2017, we had approximately 155,000 stock options outstanding and exercisable. These outstanding stock options expire in January 2018. No stock options have been granted since 2008, except for ESPP options as discussed above.

Liability Awards

Liability awards consist of service-based awards that are settled in cash instead of shares, as discussed below.

Cash-Settled Restricted Stock Units. The value of the cash-settled restricted stock units, and the associated stock-based compensation expense, is based on the Company's stock price at the end of each period. As of September 30, 2017, we had a liability of $6 million related to these awards. The following table provides information about cash-settled restricted stock unit activity.
 
 
Cash-Settled Restricted Stock Units
 
 
(In thousands)
Non-vested units outstanding at January 1, 2017
 
460

Granted
 
241

Forfeited
 
(32
)
Vested
 
(318
)
Non-vested units outstanding at September 30, 2017
 
351



17

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

15.
Segment Information

While we only have operations in the oil and gas exploration and production industry, we are organizationally structured along geographic operating segments. Our current operating segments are the United States and China. The accounting policies of our operating segments are the same as those described in Note 1, "Organization and Summary of Significant Accounting Policies," in our Annual Report on Form 10-K for the year ended December 31, 2016.

The following tables provide the geographic operating segment information for the three and nine-month periods ended September 30, 2017 and 2016. Income tax allocations have been determined based on statutory rates in the applicable geographic segment. Our income tax allocation for our China operations is based on the combined statutory rates for China and the United States.

 
 
Domestic
 
China
 
Total
 
 
(In millions)
Three Months Ended September 30, 2017:
 
 
 
 
 
 
Oil, gas and NGL revenues
 
$
428

 
$
11

 
$
439

Operating expenses:
 
 
 
 
 
 
Lease operating
 
49

 
4

 
53

Transportation and processing
 
80

 

 
80

Production and other taxes
 
16

 

 
16

Depreciation, depletion and amortization
 
120

 
4

 
124

General and administrative
 
51

 
2

 
53

Other
 
1

 

 
1

Allocated income tax (benefit)
 
42

 

 
 
Net income (loss) from oil and gas properties
 
$
69

 
$
1

 
 
Total operating expenses
 
 
 
 
 
327

Income (loss) from operations
 
 
 
 
 
112

Interest expense, net of interest income, capitalized interest and other
 
 
 
 
 
(21
)
Commodity derivative income (expense)
 
 
 
 
 
(23
)
Income (loss) from operations before income taxes
 
 
 
 
 
$
68

Total assets
 
$
4,658

 
$
86

 
$
4,744

Additions to long-lived assets
 
$
361

 
$

 
$
361



18

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

 
 
Domestic
 
China
 
Total
 
 
(In millions)
Three Months Ended September 30, 2016:
 
 
 
 
 
 
Oil, gas and NGL revenues
 
$
354

 
$
38

 
$
392

Operating expenses:
 
 
 
 
 
 
Lease operating
 
50

 
10

 
60

Transportation and processing
 
71

 

 
71

Production and other taxes
 
12

 
1

 
13

Depreciation, depletion and amortization
 
105

 
15

 
120

General and administrative
 
63

 
2

 
65

Other
 
18

 

 
18

Allocated income tax (benefit)
 
13

 
6

 


Net income (loss) from oil and gas properties
 
$
22

 
$
4

 
 
Total operating expenses
 
 
 
 
 
347

Income (loss) from operations
 
 
 
 
 
45

Interest expense, net of interest income, capitalized interest and other
 
 
 
 
 
(21
)
Commodity derivative income (expense)
 
 
 
 
 
28

Income (loss) from operations before income taxes
 
 
 
 
 
$
52

Total assets
 
$
4,051

 
$
162

 
$
4,213

Additions to long-lived assets
 
$
164

 
$

 
$
164




 
 
Domestic
 
China
 
Total
 
 
(In millions)
Nine Months Ended September 30, 2017:
 
 
 
 
 
 
Oil, gas and NGL revenues
 
$
1,172

 
$
86

 
$
1,258

Operating expenses:
 
 
 
 
 
 
Lease operating
 
142

 
25

 
167

Transportation and processing
 
223

 

 
223

Production and other taxes
 
43

 

 
43

Depreciation, depletion and amortization
 
316

 
24

 
340

General and administrative
 
146

 
5

 
151

Other
 
2

 

 
2

Allocated income tax (benefit)
 
111

 
19

 
 
Net income (loss) from oil and gas properties
 
$
189

 
$
13

 
 
Total operating expenses
 
 
 
 
 
926

Income (loss) from operations
 
 
 
 
 
332

Interest expense, net of interest income, capitalized interest and other
 
 
 
 
 
(61
)
Commodity derivative income (expense)
 
 
 
 
 
58

Income (loss) from operations before income taxes
 
 
 
 
 
$
329

Total assets
 
$
4,658

 
$
86

 
$
4,744

Additions to long-lived assets
 
$
952

 
$
1

 
$
953


19

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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



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