NFX Newfield Exploration Company

Newfield Exploration Company (NFX) entered into an agreement with HollyFrontier Corporation (HFC) for the supply of crude oil at the latter’s refinery in Woods Cross, Utah. However, the financial terms of the transaction were not disclosed.

Per the deal, Newfield will deliver 20,000 barrels of crude oil every day at the facility for a period of 10 years, beginning in 2014. This happens to be the second deal signed by Newfield to capture about 40,000 barrels of oil for its projected oil growth in the Uinta Basin.

In early December 2011, Newfield inked a seven-year supply agreement with Tesoro Corporation (TSO). Accordingly, the former will provide 18,000 barrels of crude oil at the latter’s refinery in Salt Lake City, Utah, from 2013.

Newfield, which has been operating in the Uinta Basin since 2004, intends to conduct exploration activities in over 6,000 potential locations. The company plans to run at least eight rigs in the Basin in 2012 as opposed to the previous five-rig program.

Management believes that this collaboration will enable Newfield to take advantage of its growing capacity in the Uinta Basin and be mutually beneficial throughout the next decade.

Newfield also announced the extension of its existing agreement with Big West Oil, thereby boosting 3,000 barrels of oil sales per day through the first quarter of 2014.

Based in Houston, Texas, Newfield is an independent energy company engaged in the exploration and production of crude oil and natural gas. The company’s domestic operation spreads over Mid-Continent, the Rocky Mountains, onshore Texas, Appalachia and the Gulf of Mexico, while overseas exposure includes Malaysia and China.

We like Newfield’s diversified portfolio of assets that render both flexibility and significant growth potential. We expect the company’s reserve potential in the Southern Alberta Bakken, Wasatch oil, Uinta Basin and the new resource play to be a liquid-rich catalyst for the stock.

However, because of the company’s sensitivity to gas price volatility, as well as drilling results, costs, geo-political risks and project timing delays; we see limited upside potential for shares.

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.

 
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