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Newfield Exploration Second Quarter 2010 Recap
Newfield Exploration Company (NYSE:NFX) reported good progress in developing its core areas in the United States in the second quarter of 2010, as the company continues to focus on more oil oriented plays in its portfolio of properties.
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Earnings
Newfield Exploration reported net income of $96 million in the quarter, or 72 cents per diluted share, but this included an unrealized loss on its hedging activities. Excluding this charge and a small gain on an early redemption of one of its bonds, the company earned $142 million, or $1.06 per share.
Newfield Exploration has been focusing its capital into oil properties in its portfolio for quite some time. This is shown in the company's production figures. Newfield Exploration reported a 13% increase in domestic oil production in the second quarter of 2010, compared to the second quarter of 2009, and a 20% sequential increase from the first quarter of 2010. Newfield Exploration estimates that 45% of the company's capital budget for 2010 will be directed to oil investments.
Monument Butte
Newfield Exploration is involved in the Uinta Basin, at the Monument Butte field. Monument Butte just might be the most prolific field that most investors have never heard of, as the more popular shale plays in other areas of North America usually dominate investor attention.
The company was producing 22,600 barrels of oil per day (BOPD) from this field as of the middle of July 2010, and estimates its production will reach 25,000 BOPD by the end of 2010.
Williston Basin
Newfield Exploration is also accelerating development of its properties exposed to the Bakken in the Williston basin. The company reported the completion of the Garvey Federal 1-29H, which produced at an initial rate of 3,800 barrels oil equivalent (BOE) per day.
Newfield Exploration is moving to longer laterals in drilling in the area, and will soon start using 9,000 foot laterals for wells here. One company that has successfully used longer laterals in the Bakken is Brigham Exploration Company (Nasdaq:BEXP), which has found that the technique raises initial production rates.
Granite Wash
The Granite Wash is a natural gas area, but Newfield Exploration is focused on the Marmaton formation, which produces condensate along with the gas. This yields the company a higher revenues than dry gas wells without liquids.
Newfield Exploration has drilled and completed nine wells into the Marmaton formation, and averaged initial production of 15 million cubic feet per day of natural gas, and 640 barrels per day of condensate per well.
Woodford Shale
Newfield Exploration is cutting back development of the Woodford Shale due to the weakness in natural gas prices and what the company considers superior economics in its oil and wet gas plays.
Newfield Exploration started the year with nine rigs here and is now operating four rigs in the Woodford Shale. The company plans to keep the rig count at that level for the balance of 2010.
Other exploration and production companies developing the Woodford Shale are Cimarex Energy (NYSE:XEC), which has 97,000 net acres under lease. QEP Resources (NYSE:QEP) has acreage in the Woodford Shale, and reported proved reserves of 104 Bcfe as of December 31, 2009.
Bottom Line
Newfield Exploration has successfully shifted capital within the company to oil plays due to the depth of the company's portfolio of assets. This will continue as long as natural gas prices stay weak. (To learn more, see our Oil And Gas Industry Primer.)
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IN PICTURES: 5 Keys To Unlocking A Better Credit Score
Earnings
Newfield Exploration reported net income of $96 million in the quarter, or 72 cents per diluted share, but this included an unrealized loss on its hedging activities. Excluding this charge and a small gain on an early redemption of one of its bonds, the company earned $142 million, or $1.06 per share.
Newfield Exploration has been focusing its capital into oil properties in its portfolio for quite some time. This is shown in the company's production figures. Newfield Exploration reported a 13% increase in domestic oil production in the second quarter of 2010, compared to the second quarter of 2009, and a 20% sequential increase from the first quarter of 2010. Newfield Exploration estimates that 45% of the company's capital budget for 2010 will be directed to oil investments.
Monument Butte
Newfield Exploration is involved in the Uinta Basin, at the Monument Butte field. Monument Butte just might be the most prolific field that most investors have never heard of, as the more popular shale plays in other areas of North America usually dominate investor attention.
The company was producing 22,600 barrels of oil per day (BOPD) from this field as of the middle of July 2010, and estimates its production will reach 25,000 BOPD by the end of 2010.
Williston Basin
Newfield Exploration is also accelerating development of its properties exposed to the Bakken in the Williston basin. The company reported the completion of the Garvey Federal 1-29H, which produced at an initial rate of 3,800 barrels oil equivalent (BOE) per day.
Granite Wash
The Granite Wash is a natural gas area, but Newfield Exploration is focused on the Marmaton formation, which produces condensate along with the gas. This yields the company a higher revenues than dry gas wells without liquids.
Newfield Exploration has drilled and completed nine wells into the Marmaton formation, and averaged initial production of 15 million cubic feet per day of natural gas, and 640 barrels per day of condensate per well.
Woodford Shale
Newfield Exploration is cutting back development of the Woodford Shale due to the weakness in natural gas prices and what the company considers superior economics in its oil and wet gas plays.
Newfield Exploration started the year with nine rigs here and is now operating four rigs in the Woodford Shale. The company plans to keep the rig count at that level for the balance of 2010.
Other exploration and production companies developing the Woodford Shale are Cimarex Energy (NYSE:XEC), which has 97,000 net acres under lease. QEP Resources (NYSE:QEP) has acreage in the Woodford Shale, and reported proved reserves of 104 Bcfe as of December 31, 2009.
Bottom Line
Newfield Exploration has successfully shifted capital within the company to oil plays due to the depth of the company's portfolio of assets. This will continue as long as natural gas prices stay weak. (To learn more, see our Oil And Gas Industry Primer.)
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by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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