Company provides operational update, increases 2008 production
guidance HOUSTON, April 23 /PRNewswire-FirstCall/ -- Newfield
Exploration Company (NYSE:NFX) today reported first quarter 2008
financial and operating results. Newfield will be hosting a
conference call at 8:30 a.m. (CDST) on April 24. To participate in
the call, dial 719-325-4773 or listen through the website at
http://www.newfield.com/. First Quarter 2008 Newfield's production
in the first quarter of 2008 was 55.1 Bcfe. Production results
exceeded guidance due to higher than expected production volumes
from the Woodford Shale Play, increased oil liftings from Malaysia
and better than expected production in the deepwater Gulf of
Mexico. Newfield's production in the first quarter of 2008 was 10%
higher than production in the fourth quarter of 2007. "We have
kicked off 2008 with strong production growth," said David Trice,
Newfield Chairman, President and CEO. "Our first quarter production
was above the upper end of our guidance range. We sold significant
assets in 2007, making year-over-year comparisons difficult," Trice
added. "However, when adjusting volumes for assets sold and
acquired, our first quarter 2008 production was up more than 20%
over pro forma production in the first quarter of 2007. We are
raising our full-year 2008 guidance to account for better than
expected production and a recent bolt-on acquisition in South
Texas. Our new guidance is 224-234 Bcfe." Newfield's previous 2008
guidance was 215-230 Bcfe. For the first quarter of 2008, Newfield
reported a net loss of $64 million, or $0.50 per diluted share (all
per share amounts are on a diluted basis). The loss for the first
quarter of 2008 includes a net unrealized loss on commodity
derivatives of $281 million ($169 million after-tax), or $1.30 per
share. In addition to the net unrealized loss on commodity
derivatives, the Company also paid $15 million to reset a portion
of its 2010 crude oil hedges. The after-tax effect of the reset was
$9 million, or $0.07 per share. Without the effects of these items,
net income was $114 million, or $0.87 per diluted share. Revenues
in the first quarter of 2008 were $515 million. Net cash provided
by operating activities before changes in operating assets and
liabilities was $316 million. See "Explanation and Reconciliation
of Non-GAAP Financial Measures" found after the financial
statements in this release. Capital expenditures in the first
quarter of 2008 were $514 million, in line with the Company's first
quarter budget. Operational Update The Woodford -- Newfield has
entered the development phase in the Woodford. As a result, the
Company is seeing significantly lower drilling and completion
costs. Recent highlights include: -- Newfield's Woodford production
set a recent high of 187 MMcfe/d (gross operated). This represents
an increase of nearly 15% since year-end 2007. Newfield expects its
gross Woodford production to exceed 250 MMcfe/d by year end 2008,
representing a more than 50% increase in production when compared
to 2007 exit rates. -- Newfield has 20 extended lateral wells
producing today, some of which have as much as 450 days of
production. In addition, the Company has six extended laterals that
commenced production in the last week and are cleaning up after
fracture stimulation. There are 10 additional extended lateral
wells that have been drilled and will commence production in the
next 30 days. An updated horizontal well performance and type curve
chart can be found in the @NFX publication on Newfield's website at
http://www.newfield.com/. -- Newfield recently signed an agreement
to increase its firm transportation on the MidContinent Express
Pipeline (MEP) by 100,000 dekatherms per day (dth/d). Newfield now
has 300,000 dth/d of firm transportation on the MEP and has
dedicated up to an additional 150,000 dth/d of natural gas
production as it becomes available which may increase the Company's
firm capacity to 450,000 dth/d on MEP. Under a previously announced
separate agreement, Newfield also has 40,000 dth/d of firm capacity
in 2008, increasing to 50,000 dth/d in 2009, with Laclede Energy
Resources, Inc. -- The Company is currently operating 11 rigs in
the Woodford. Based on the success of recent drilling and cost
reductions, a twelfth drilling rig is being added for the remainder
of the year. For 2008, Newfield expects to drill approximately
120,000 more lateral feet than in 2007. Extended lateral
completions are improving capital efficiency. -- Eight of the 11
Newfield operated rigs are drilling from multi-well pads. Pad
drilling has significantly decreased completed well costs. Newfield
expects that about 80% of the operated wells it plans to drill in
2008 will be drilled from multi-well pads. This is up from a
beginning of the year estimate of 50%. -- More than 80% of the
wells planned for 2008 will be extended lateral completions. This
is up from a beginning of the year estimate of 50%. Processing of
recent 3-D seismic indicates that a significantly greater portion
of the Company's acreage can be developed with extended lateral
wells. Most recent wells have horizontal lengths of up to 4,700
feet and are completed with nine fracture stimulation stages. --
The most recent extended lateral wells have had initial gross
production rates of more than 7 MMcfe/d, were drilled and completed
for approximately $6.7 million (gross) and have estimated ultimate
gross recoveries of more than 4.5 Bcfe. -- Costs for standard wells
(less than 3,000 feet of horizontal section) averaged approximately
$5.7 million (gross) in 2007. The Company's most recent standard
lateral wells drilled from common pads have averaged less than $5
million (gross). About 20% of the planned wells in 2008 will be
standard lateral completions. -- Newfield has 16 spacing pilots
planned in 2008 to determine optimal development spacing. Ten of
the pilots are being drilled on 40-acre spacing, four on 60-acre
spacing and two on 80-acre spacing. To date, Newfield has drilled
and placed on production five development pilots that consist of 18
wells on varying development spacing, including 40, 60 and
80-acres. The production performance from these 18 wells is in line
with our expectations. -- As of year-end 2007, Newfield had booked
approximately 600 Bcfe in proved reserves in the Woodford. The
Company believes that its net reserve potential on its 165,000 net
acre Woodford position is 4 - 8 Tcfe. -- The Woodford remains the
most active play in Oklahoma with a record 46 industry rigs
currently running. To date, Newfield has spud 183 horizontal wells
and the industry as a whole has spud 548 horizontal wells. Monument
Butte Oil Field -- Based on the continued success of development
drilling, higher oil prices and increased demand for black wax
crude oil, Newfield recently added a fifth drilling rig in its
Monument Butte field, located in the Uinta Basin of northeast Utah.
The field is producing approximately 15,000 BOPD gross and is now
expected to exit 2008 producing in excess of 16,000 BOPD gross.
Increased demand for black wax crude allowed the Company to
recently enter into additional term sales agreements with area
refiners. Newfield expects to drill approximately 240 wells in the
Monument Butte field during 2008. Newfield continues to have
success with its 20-acre infill drilling program at Monument Butte.
To date, the Company has drilled 65 wells on 20-acre spacing, which
indicates the potential to drill an additional 1,000-2,500 wells in
the field. This is in addition to the more than 1,000 locations
remaining to be drilled on 40-acre spacing. Newfield has drilled
680 wells in the field since acquiring it in 2004. The field has
more than 1,000 producing oil wells. Newfield is currently drilling
the first well under a Deep Gas Exploration Agreement signed
earlier this year with Red Technology Alliance. The well is
targeting the Mancos Shale and has a planned total depth of 16,600
feet. Prospective targets include the Wasatch, Mesa Verde,
Blackhawk and Mancos Shale. The agreement allows for promoted
exploratory drilling and progressive earning in approximately
71,000 net acres in which Newfield will retain a greater than 70%
interest. Approximately 10,700 net acres in the immediate vicinity
of recent deep gas tests drilled by Newfield in 2007 were excluded
from the agreement. Newfield retains an 85% average interest in
this area, where Newfield is currently participating (NFX 58% WI)
in the completion and testing of two Mancos Shale wells. Newfield
also expects to drill several operated wells in the excluded area
in the second half of 2008. Deepwater Gulf of Mexico Exploration
Discoveries -- Newfield recently drilled two successful exploration
wells in the deepwater Gulf of Mexico. The Gladden Prospect,
located at Mississippi Canyon 800, found 80 feet of net oil pay. An
updip location is being drilled that is expected to be completed in
late May. The Anduin West Prospect, located at Mississippi Canyon
754, found 30 feet of net gas and condensate pay. The well is being
completed and a production test is planned in the next week.
Newfield is the operator of both discoveries and has a 47.5%
working interest in Gladden and a 50% working interest in Anduin
West. The Company has production handling agreements in place with
nearby host facilities and expects first production from both
fields in late 2009. In the March 2008 Federal OCS Lease Sale,
Newfield was the high-bidder on 19 of 28 lease blocks (14 located
in deepwater). If all blocks are awarded, the net investment will
be approximately $70 million and builds prospect inventory for the
next several years in deepwater. South Texas Acquisition --
Newfield recently signed an agreement to acquire a package of South
Texas properties from a private company for $227 million. Current
net production associated with the properties is approximately 19
MMcfe/d. Risked proved and probable reserves for the acquisition
are 100 Bcfe, about half of which is classified as proved under SEC
guidelines. Newfield has identified more than 100 drilling
locations on the acquired acreage and sees the potential to add
more than 200 Bcfe of total reserves from this acquisition. The
assets overlap and expand Newfield's existing operations in the
Wilcox and Vicksburg trends, two of Texas' most prolific producing
regions. The acquisition adds 47,000 gross acres (32,000 net
acres). Newfield plans to finance the transaction under its $1.25
billion undrawn revolving credit facility. Subject to customary
conditions, the transaction is expected to close around May 1,
2008. South Texas Joint Venture -- Newfield recently drilled its
26th successful well under its joint venture with Exxon-Mobil in
South Texas. The most recent well -- the B-94 -- was a deep
discovery that significantly expanded the known limits of the
Sarita Field. Last year, Newfield entered into a joint venture with
a private company covering 42,000 acres southeast of Sarita and
acquired 3-D seismic data. Within the next week, Newfield plans to
spud the first of two additional high potential 2008 exploration
wells in the Sarita area. Production under Newfield's JV with
Exxon-Mobil set a record in the first quarter of 2008 of 85 MMcfe/d
gross. Newfield's interest in this joint venture is approximately
50%. Newfield expects to drill an additional 10-12 wells in the
area in 2008. The Company sees at least an additional 20 drilling
locations and plans to operate 2-4 rigs throughout the year.
Offshore China Exploration Discovery -- Newfield made an oil
discovery during the first quarter of 2008 on its Pearl River Mouth
Basin acreage. The LF7-2-1 exploration well found nearly 60 feet of
net oil pay. The well tested the first of a series of features on a
structural ridge. Additional drilling is planned. Newfield operates
the discovery with a 100% interest. Newfield's interest is subject
to the Chinese National Offshore Oil Company's right to take a 51%
interest during development. A separate exploratory well drilled
during the quarter, the HZ28-1-1, was not commercial. Malaysia --
The Puteri production platform, located on PM 318, is undergoing
final commissioning and the export pipeline has been installed.
Newfield expects the field to commence first oil production in the
second quarter and ramp up to 6,000 - 8,000 BOPD (gross). Newfield
recently installed the production facility for the East Belumut and
Chermingat fields, located on PM 323. A rig is on location and
Newfield expects production from the fields to begin in the second
quarter. The combined rate from these fields will ramp up to 15,000
BOPD (gross). The Abu Field, PM 318, has ramped up to a planned
production rate of 15,000 BOPD (gross) and the field achieved
payout in the first quarter of 2008 -- less than 10 months from the
date of first production. Newfield has a 50% interest in PM 318 and
a 60% operated interest in PM 323. 2008 Capital Budget Newfield has
increased its 2008 capital budget to $2 billion from an initial
$1.6 billion. The budget excludes approximately $115 million of
capitalized interest and overhead. The increase reflects the
following: -- the recent $227 million acquisition of properties in
South Texas and subsequent development drilling activities; --
bidding success at the most recent Gulf of Mexico lease sale; --
development capital for the recent Anduin West and Gladden
deepwater GOM discoveries; -- an additional drilling rig in the
Woodford Shale Play; and -- an additional drilling rig in the
Monument Butte field. 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 an active drilling program and select
acquisitions. Newfield's domestic areas of operation include the
U.S. onshore Gulf Coast, the Anadarko and Arkoma Basins of the
Mid-Continent, the Rocky Mountains and the Gulf of Mexico. The
Company has international operations in Malaysia and China. **The
statements set forth in this release regarding estimated or
anticipated second quarter 2008 results, estimated full-year 2008
production, drilling and development plans, the timing of
activities, the timing of initial production and future rates of
production from wells, fields and regions, expected cost reductions
in the Woodford Play and the expected ultimate recovery of reserves
from wells 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. For information,
contact: Investor Relations: Steve Campbell (281) 847-6081 Media
Relations: Keith Schmidt (281) 674-2650 Email: 1Q08 Actual Results
and 2Q08 Estimates 1Q08 Actuals Domestic Int'l Total
Production/Liftings Natural gas - Bcf 40.4 - 40.4 Oil and
condensate - MMBbl 1.4 1.0 2.4 Total Bcfe 48.9 6.2 55.1 Average
Realized Prices Note 1 Natural gas - $/Mcf $7.89 $- $7.89 Crude oil
- $/Bbl $47.16 $85.38 $63.28 Mcf equivalent - $/Mcfe $7.88 $14.23
$8.60 Operating Expenses: Lease operating Recurring ($MM) $38.6
$12.5 $51.1 per/Mcfe $0.79 $2.01 $0.93 Major (workovers, repairs,
etc) ($MM) $7.9 $- $7.9 per/Mcfe $0.16 $- $0.14 Production and
other taxes ($MM) Note 5 $21.7 $29.3 $51.1 per/Mcfe $0.44 $4.71
$0.93 General and administrative (G&A), net ($MM) $30.8 $0.8
$31.6 per/Mcfe $0.63 $0.13 $0.57 Capitalized G&A ($MM) $(15.5)
per/Mcfe $(0.28) Interest expense ($MM) $19.3 per/Mcfe $0.35
Capitalized interest ($MM) $(13.4) per/Mcfe $(0.24) Effective tax
rate (%) 40.4% Income taxes (%) Current 24% Deferred 76% 2Q08
Guidance Domestic Int'l Total Production/Liftings Natural gas - Bcf
40.7 - 43.5 - 40.7 - 43.5 Oil and condensate - MMBbl 1.3 - 1.4 0.75
- 0.85 2.0 - 2.2 Total Bcfe 48.5 - 51.9 4.5 - 5.1 53 - 57 Average
Realized Prices Note 1 Natural gas - $/Mcf Note 2 Crude oil - $/Bbl
Note 3 Note 4 Mcf equivalent - $/Mcfe Operating Expenses: Lease
operating Recurring ($MM) $39.9 - $44.1 $10.5 - $11.6 $50.4 - $55.7
per/Mcfe $0.81 - $0.87 $2.17 - $2.45 $0.93 - $1.00 Major
(workovers, repairs, etc) ($MM) $5.3 - $5.9 $0.8 - $0.9 $6.1 - $6.8
per/Mcfe $0.11 - $0.12 $0.17 - $0.19 $0.11 - $0.12 Production and
other taxes ($MM) Note 5 $29.3 - $32.4 $21.6 - $23.9 $51.0 - $56.3
per/Mcfe $0.60 - $0.64 $4.47 - $5.06 $0.94 - $1.01 General and
administrative (G&A), net ($MM) $33.1 - $36.6 $1.3 - $1.5 $34.4
- $38.1 per/Mcfe $0.67 - $0.72 $0.28 - $0.31 $0.63 - $0.68
Capitalized G&A ($MM) $(15.5 - $17.1) per/Mcfe $(0.29 - $0.31)
Interest expense ($MM) $18.4 - $20.4 per/Mcfe $0.34 - $0.37
Capitalized interest ($MM) $(13.4 - $14.8) per/Mcfe $(0.25 - $0.27)
Effective tax rate (%) 39.0% Income taxes (%) Current 22% - 25%
Deferred 75% - 78% Note 1: Actual average realized prices include
the effects of hedging contracts. If the effects of these contracts
were excluded, the average realized price for total gas would have
been $7.54 per Mcf and the total oil and condensate average
realized price would have been $85.18 per barrel. Note 2: Gas
prices in the Mid-Continent, after basis differentials,
transportation and handling charges, typically average 75 - 85% of
the Henry Hub Index. Gas prices in the Gulf Coast, after basis
differentials, transportation and handling charges, are expected to
average $0.40 - $0.60 per MMBtu less than the Henry Hub Index. Note
3: Oil prices in the Gulf Coast typically average about $5 per
barrel below the NYMEX WTI price. Rockies oil prices average about
$13 - $15 per barrel below WTI. Oil production from the
Mid-Continent typically sells at a $1.00 - $1.50 per barrel below
WTI. Note 4: Oil in Malaysia typically sells at Tapis, or about 95%
of WTI. Oil production from China typically sells at $10 - $15 per
barrel below WTI. Note 5: Guidance for production taxes determined
using $100/Bbl oil and $10/MMBtu gas. CONSOLIDATED STATEMENT OF
INCOME (Unaudited, in millions, except per share data) For the
Three Months Ended March 31, 2008 2007 Oil and gas revenues $515
$440 Operating expenses: Lease operating 59 111 Production and
other taxes 51 17 Depreciation, depletion and amortization 157 180
General and administrative 32 39 Total operating expenses 299 347
Income from operations 216 93 Other income (expenses): Interest
expense (19) (23) Capitalized interest 13 11 Commodity derivative
expense (321) (158) Other 3 1 (324) (169) Loss from continuing
operations before income taxes (108) (76) Income tax benefit (44)
(29) Loss from continuing operations (64) (47) Loss from
discontinued operations, net of tax - (49) Net loss $(64) $(96)
Earnings (loss) per share: Basic -- Loss from continuing operations
$(0.50) $(0.37) Loss from discontinued operations, net of tax -
(0.38) $(0.50) $(0.75) Diluted -- Loss from continuing operations
$(0.50) $(0.37) Loss from discontinued operations, net of tax -
(0.38) $(0.50) $(0.75) Weighted average number of shares
outstanding for basic earnings (loss) per share 129 127 Weighted
average number of shares outstanding for diluted earnings (loss)
per share 129 127 CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited,
in millions) March 31, December 31, 2008 2007 ASSETS Current
assets: Cash and cash equivalents $80 $250 Short-term investments
77 120 Other current assets 700 557 Total current assets 857 927
Oil and gas properties, net (full cost method) 6,290 5,923 Other
assets 142 136 Total assets $7,289 $6,986 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities $1,216 $929 Other
liabilities 34 18 Derivative liabilities 254 248 Long-term debt
1,052 1,050 Asset retirement obligation 59 56 Deferred taxes 1,137
1,104 Total long-term liabilities 2,536 2,476 Commitments and
contingencies - - STOCKHOLDERS' EQUITY Common stock 1 1 Additional
paid-in capital 1,298 1,278 Treasury stock (32) (32) Accumulated
other comprehensive loss (3) (3) Retained earnings 2,273 2,337
Total stockholders' equity 3,537 3,581 Total liabilities and
stockholders' equity $7,289 $6,986 CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS (Unaudited, in millions) For the Three Months Ended
March 31, 2008 2007 Cash flows from operating activities: Net loss
$(64) $(96) Adjustments to reconcile net loss to net cash provided
by operating activities: Loss from discontinued operations, net of
tax - 49 Depreciation, depletion and amortization 157 180
Stock-based compensation 5 4 Commodity derivative expense 321 158
Cash (payments) receipts on derivative settlements (40) 91 Deferred
taxes (63) (38) 316 348 Changes in operating assets and liabilities
(44) (9) Net cash provided by continuing activities 272 339 Net
cash used in discontinued activities - (4) Net cash provided by
operating activities 272 335 Cash flows from investing activities:
Additions to oil and gas properties and other (501) (506) Purchases
of short-term investments (22) - Redemption of short-term
investments 68 24 Net cash used in continuing activities (455)
(482) Net cash used in discontinued activities - (38) Net cash used
in investing activities (455) (520) Cash flows from financing
activities: Net proceeds under credit arrangements - 127 Payments
to discontinued operations - (15) Proceeds from issuances of common
stock 9 3 Stock-based compensation excess tax benefit 4 1 Net cash
provided by continuing activities 13 116 Net cash provided by
discontinued activities - 15 Net cash provided by financing
activities 13 131 Decrease in cash and cash equivalents (170) (54)
Cash and cash equivalents from continuing operations, beginning of
period 250 52 Cash and cash equivalents from discontinued
operations, beginning of period - 28 Cash and cash equivalents, end
of period $80 $26 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 first quarter of 2008 stated without the effects
of certain items to net income is shown below: 1Q08 (in millions)
Net loss $(64) Net unrealized loss on commodity derivatives(1) 281
Hedge reset 15 Income tax adjustment for above items (118) Earnings
stated without the effect of the above items $114 (1) The
determination of "Net unrealized loss on commodity derivatives" for
the first quarter of 2008 is as follows: 1Q08 (in millions)
Commodity derivative expense $(321) Cash payments (receipts) on
derivative settlements 40 Net unrealized loss on commodity
derivatives $(281) 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: 1Q08 (in millions) Net cash provided by operating activities
$272 Net change in operating assets and liabilities 44 Net cash
provided by operating activities before changes in operating assets
and liabilities $316 DATASOURCE: Newfield Exploration Company
CONTACT: investor relations, Steve Campbell, +1-281-847-6081, or
media relations, Keith Schmidt, +1-281-674-2650, , both of Newfield
Exploration Company Web site: http://www.newfield.com/
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