Oil and gas company, Newfield Exploration Company (NFX) announced that it discontinued oil production at its East Belumut field offshore Malaysia due to the subsea pipeline damage caused by the activities of an unidentified marine vessel.
 
Newfield’s pipeline connects the East Belumut platform on PM 323 to the Tinggi platform, located approximately 17 miles from East Belumut. Located approximately 160 miles offshore Peninsular Malaysia in 240 feet of water, the East Belumut platform had a gross production of about 20,000 barrels of oil per day prior to the damage.
 
The company acts as the operator of the PM 323 block with a 60% interest and approximates a period of 6–8 weeks to fix a broken underwater pipeline as well as to restore production.
 
With 8% of Newfield’s overall volumes coming from Malaysia, the company now expects its 2010 total production to be at the lower end of its previous guidance range of 283–288 billion cubic feet equivalent (Bcfe) following the subsea pipeline disruption. The company now expects its deferred production for the third quarter of 2010 to be 0.5–0.6 million barrels.
 
Newfield is an independent energy company engaged in exploration and production of crude oil and natural gas, mostly concentrated in the Gulf of Mexico (GoM) region. The ongoing GoM chaos is not the whole deepwater drilling story. Any pipeline damage in the oil and gas industry will inevitably make headlines in the current scenario. Hence, we believe Newfield needs to be cautious on any damage-related news, keeping its repercussions on the company in mind.
 
Although the GoM is still Newfield’s largest area of operation, the company’s move from high-cost and traditional asset base to high-quality gas plays, its unconventional acreage in Marcellus play, its growing oil volumes in Monument Butte and additional potential in the Bakken play are well appreciated. We currently maintain a Zacks #3 Rank (Hold) on Newfield.
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