Newfield Fails to Meet Estimate - Analyst Blog
July 22 2011 - 12:14PM
Zacks
Newfield Exploration Co. (NFX) has reported
adjusted second-quarter 2011 earnings of $1.02 per share, which
missed the Zacks Consensus Estimate of $1.07 and came in below the
year-earlier profit of $1.06. The underperformance was primarily
due to lower natural gas production and higher operating
expenses.
The company’s oil and gas revenues climbed 38.6% year over year
to $621 million.
Operational Performance
Total quarterly production of 73.2 billion cubic feet equivalent
(Bcfe), comprising 64% natural gas, rose nearly 0.4% year over
year. Natural gas volumes were down more than 8% from the
year-earlier level at 47.0 Bcf. Oil and condensate volume expanded
22.2% year over year to 4.4 million barrels (MMBbls).
Newfield’s oil and natural gas price realizations (including the
effect of hedges) averaged $9.24 per thousand cubic feet equivalent
(Mcfe), up 17.6% from the year-earlier level. Natural gas prices
climbed 5.5% to $5.77 per Mcf. Liquid prices improved 14% to $91.16
per barrel.
Newfield’s recurring lease operating expenses (LOE) during the
quarter were $1.00 per Mcfe, up 47% from the year-ago level.
Production and other taxes increased significantly to $1.10 per
Mcfe from the year-earlier level of 43 cents per Mcfe. General and
administrative expenses increased 8.8% year over year to 62 cents
per Mcfe.
Financials
At quarter end, Newfield had a cash balance of $74 million,
while long-term debt stood at $2,889 million, representing a
debt-to-capitalization ratio of 44.8% (versus 42.2% at the end of
the previous quarter). Capital expenditure (capex) was
approximately $630 million, excluding the company’s $300 million
acquisition in the UintaBasin.
Guidance
For the third quarter of 2011, Newfield has projected output in
the 74–84 Bcfe range. LOE is expected to range between 87 cents and
$1.04 per Mcfe.
For 2011, management has guided production volume at 312–316
Bcfe, or 8–10% over the year-ago level. Newfield’s liquids are
expected to be 39% of 2011 volumes compared with 33% in 2010.
Management expects LOE per Mcfe to range between 82 cents and
$1.00.
Newfield maintained its full-year capital budget program at
$1,900 million. The budget excludes capitalized costs and the
recently concluded acquisition in the Uinta Basin.
Outlook
We appreciate Newfield’s high quality gas plays, unconventional
acreage in the Marcellus play, growing oil volumes in Monument
Butte, record production at Granite Wash and additional potential
in the Bakken play (Williston Basin). The company increased its
acreage significantly through its latest acquisition in the Uinta
Basin and expects oil production growth from the region to exceed
25%.
Newfield’s strategy of raising funds by selling assets and
directing them toward growing reserves through an active drilling
program and select acquisitions will be value accretive over the
long term.
While we like the company’s focus on drilling activities through
a hike in capex, we remain cautious on the full-year production
guidance as well as escalating costs. Again, competition from peers
such as Denbury Resources Inc. (DNR) and
Pioneer Natural Resources Co. (PXD) is an added
cause for concern.
Newfield shares currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. Longer-term, we are
maintaining our Neutral recommendation on the stock.
DENBURY RES INC (DNR): Free Stock Analysis Report
NEWFIELD EXPL (NFX): Free Stock Analysis Report
PIONEER NAT RES (PXD): Free Stock Analysis Report
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