Newfield Exploration Co.
) has reported adjusted third-quarter 2012 earnings of 48 cents
per share, which missed the Zacks Consensus Estimate of 52 cents
and came in below the year-earlier profit of $1.10. The
deterioration can be traced back to lower oil and gas price
The company's total revenue dropped 2.1% year over year to
Total quarterly production of 75.5 billion cubic feet
equivalent (Bcfe), comprising 51% natural gas, dropped 0.4% year
over year. Natural gas volumes were 38.7 Bcf, down 14.8% year
over year. Oil, condensate and natural gas liquids (NGLs) volume
expanded 19.6% year over year to 6.1 million barrels
Newfield's oil and natural gas price realizations (including
the effect of hedges) averaged $8.81 per thousand cubic feet
equivalent (Mcfe), down 5.1% from the year-earlier level. Natural
gas prices dropped 37.6% to $3.57 per Mcf. Liquid prices dipped
1.9% to $84.50 per barrel.
Recurring lease operating expenses (LOE) during the quarter
were $1.13 per Mcfe, up 6.6% from the year-ago level. Production
and other taxes increased to $1.07 per Mcfe from the year-earlier
level of $1.28. General and administrative expenses increased
17.6% year over year to 80 cents per Mcfe.
At quarter end, Newfield had a cash balance of $125 million,
while long-term debt was $3,190 million, representing a
debt-to-capitalization ratio of 3.4% (versus 46.2% at the end of
the previous quarter). Capital expenditure (capex) was
approximately $450 million in the reported quarter.
For 2012, Newfield expects its estimated output to be about
298 Bcfe versus its previous expectation of 296 Bcfe to 304 Bcfe.
LOE is expected at $1.10 per Mcfe.
Earlier, Newfield had given guidance for full-year 2012
capital budget program to be in the range of $1,500 to $1,700
million. The company intends to spend the capital mostly for
liquid-rich operations and expects to generate more than 30%
year-over-year production growth in oil and liquids.
Newfield's diversified portfolio of assets provides both
flexibility and a significant growth potential. We expect the
company's reserve potential in the Southern Alberta Bakken,
Wasatch Oil, Uinta Basin and Williston play to be a liquid-rich
catalyst for the stock.
Newfield completed its agreement with energy explorer
W&T Offshore Inc.
) involving divestment of all of its remaining 78 offshore assets
in the Gulf of Mexico (GoM).
Newfield's main objective behind exiting the GoM region is to
concentrate on its onshore oil-rich assets in the United States
and Southeast Asia. The company aims to increase its cash flow by
boosting oil and liquids growth from its core assets in these
Though we remain positive on Newfield Exploration's emerging
resource plays' development program, we believe that its
sensitivity to gas price volatility, as well as drilling results,
costs, geo-political risks and project timing delays will weigh
on the stock. Increasing cost pressure in the highly competitive
shale plays is also a 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 Underperform recommendation on the
NEWFIELD EXPL (NFX): Free Stock Analysis
W&T OFFSHORE (WTI): Free Stock Analysis
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