Newfield Exploration Co. (NFX) reported better-than-expected first-quarter results on increased production volumes and higher average realized prices. Quarterly earnings came in at $1.19 per share, above the Zacks Consensus Estimate of $1.12 and year-earlier earnings of 85 cents. 

Operational Performance

Total quarterly production of 67 billion cubic feet equivalent (Bcfe) was up approximately 7% year over year. Natural gas volumes in the company’s domestic operations were up more than 7% from the year-ago level to 48 Bcf. Oil and condensate volume was flat year-over-year at 1.8 million barrels (MMBbls) during the quarter. 

Newfield’s oil and natural gas price realizations (including the effect of hedges) averaged $8.40 per thousand cubic feet equivalent (Mcfe), up 12.6% from the year-earlier level. Natural gas prices increased nearly 16% year-over-year to $6.34 per Mcf. Overall liquids prices were $80.45 per barrel, up 8.1% from the year-earlier level. 

Newfield’s recurring lease operating expenses (LOE) during the quarter were 91 cents per Mcfe, down 4.2% from the year-ago level. However, production and other taxes significantly increased year-over-year to 38 cents per Mcfe. 

General and administrative (G&A) expenses increased 5.7% to 55 cents per Mcfe. Newfield generated cash flows from operating activities of $393 million and spent $360 million on capital expenditures. At the end of the quarter, Newfield had a cash balance of $112 million. Debt balance stood at $2.2 billion, representing debt-to-capitalization ratio of 42.2%. 


For 2010, management expects production volumes in the 283 Bcfe to 288 Bcfe range. Newfield maintains its 2010 capital expenditures of $1.6 billion. Out of which, 45% is earmarked for oil projects. The company is gaining traction with its oil activities in the Uinta and Williston basins. With this, the company anticipates 60% of this year’s revenue from oil. 

Newfield’s move from high cost and traditional asset base to high quality gas plays, the unconventional acreage in Marcellus play, growing oil volumes in Monument Butte and additional potential in the Bakken play are well appreciated. With more capital being deployed towards oil, the company expects a 20% rise in this year’s domestic oil production.
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