Newfield Exploration Company has reported fourth quarter and full-year 2007 financial and operating results.
Fourth Quarter 2007
For the fourth quarter of 2007, Newfield reported net income of $313 million, or $2.38 per diluted share (all per share amounts are on a diluted basis). The results include income from discontinued operations of $338 million, or $2.57 per share, substantially all of which relates to a gain of $341 million associated with the sale of the Company's U.K. North Sea business for $511 million.
Loss from continuing operations for the fourth quarter of 2007 includes unrealized commodity derivative expense of $151 million ($98 million after-tax), or $0.75 per share, and $17 million ($11 million after-tax), or $0.08 per share, of additional compensation expense under the Company's incentive compensation plan as a result of the sale of the compensation expense under the U.K. North Sea business. Without the effects of these items, income from continuing operations would have been $84 million, or $0.64 per share.
Revenues in the fourth quarter of 2007 were $398 million. Net cash provided by operating activities before changes in operating assets and liabilities was $258 million.
• Newfield's production in the fourth quarter of 2007 was 50.3 Bcfe.
• Capital expenditures in the fourth quarter of 2007 were $577 million.
Full Year 2007
For 2007, Newfield reported net income of $450 million, or $3.44 per share, including income from discontinued operations of $278 million, or $2.12 per share, which includes the gain on sale of the U.K. North Sea business.
Income from continuing operations for 2007 includes unrealized commodity derivative expense of $365 million ($237 million after-tax), or $1.82 per share, and $17 million of additional compensation expense as noted above. Without the effects of these items, income from continuing operations would have been $420 million, or $3.22 per share.
Revenues for 2007 were $1.8 billion. Net cash provided by operating activities before changes in operating assets and liabilities was $1.3 billion.
Highlights
• 2007 Asset Sales Re-shape Portfolio - Asset sales generated $1.8 billion in proceeds for 396 Bcfe of proved reserves. Proceeds were used to reduce debt and fund capital expenditures. The Company had approximately $370 million of cash and short-term investments at year-end 2007. Debt was reduced by $125 million to $1.05 billion.
• Proved Reserves Increase 10% to 2.5 Tcfe at Year-End 2007 - Newfield added 660 Bcfe through the drillbit and 221 Bcfe through acquisitions. Reserve Life Index increased to 13 years.
• More than 70% of Total Year-End 2007 Reserves in "Resource Plays" - The Mid-Continent and Rocky Mountain divisions now account for more than 70% of proved reserves. Significant increase reflects success of growing Woodford Shale Play, 2007 Rocky Mountain acquisition and ongoing development of giant Monument Butte oil field in northeast Utah.
• Mid-Continent Division Reaches New Highs - Net production from the Mid-Continent division recently hit a new high of 228 MMcfe/d. The division posted 30% production growth in 2007 and has a 3-year compound annual growth rate of 25%. Proved reserves are more than 1 Tcfe.
• Woodford Shale Production Reaches 175 MMcfe/d - Newfield's gross operated Woodford Shale production is now 175 MMcfe/d. The Company exited 2006 producing 85 MMcfe/d and 2007 at 165 MMcfe/d. The Company expects to exit 2008 at approximately 250 MMcfe/d, a 50% increase over year-end 2007 levels.
• Ongoing Development of Giant Monument Butte Field - Newfield has now drilled more than 50 wells on 20-acre spacing in its Monument Butte Field, located in the Uinta Basin of the Rocky Mountains. Initial production from the 20-acre wells is nearly triple the 2004 acquisition planning model, with wells averaging as much as 160 BOPD. Estimated ultimate recoveries of reserves are up 50% to approximately 70,000 barrels per well. The 20-acre infill program's success indicates the potential to drill an additional 1,000-2,500 wells in the field. This is in addition to the 500-1,000 locations remaining on 40-acre spacing. Newfield has drilled 678 wells in the field since acquiring it in 2004.
• Continued Success on Ute Tribe Acreage - Newfield has now drilled 16 wells on the Ute Tribal acreage, adjacent to the north boundary of the Monument Butte Field. A rig has been dedicated to drilling wells on this acreage, which encompasses 47,000 gross acres.
• Signing of New Deep Gas Exploration Agreement - Newfield recently signed an agreement with a third party to test deep gas targets below the shallow oil producing zones in its Monument Butte Field. Targets include the Wasatch, Mesa Verde, Blackhawk and Mancos Shale. Drilling is planned for the first half of 2008. The agreement allows for promoted exploratory drilling and progressive earning in approximately 71,000 net acres in which Newfield will retain a greater than 70% interest. Approximately 10,000 net acres in the immediate vicinity of recent deep gas tests were excluded from the agreement. Several Newfield operated wells are planned on this acreage in 2008.
• Malaysia Oil Volumes to Triple in 2008 - The Abu Field offshore Malaysia has ramped up to a planned production rate of 15,000 BOPD gross. The production deck for the Puteri development has been set and a pipeline will be installed late in the first quarter of 2008. First oil sales of 6,000 - 8,000 BOPD gross are expected in April 2008. The East Belumut and Chermingat Fields are expected to begin production in the second quarter of 2008 and will ramp up to 15,000 BOPD gross.
• Increased Inventory in Deepwater Gulf of Mexico - Newfield placed high bids on 18 blocks, of which 15 have been awarded to date, in a 2007 lease sale and now has an inventory of prospects that will support the drilling of 4-5 wells a year for the next several years, including 2008. Newfield has two deepwater developments underway that will add initial production volumes in 2008-09.
• Continued Success Under South Texas JV - Newfield recently drilled its 21st successful well under its joint venture with Exxon-Mobil in South Texas. Production remains above 75 MMcfe/d gross. Newfield's interest in this joint venture is approximately 50%. Newfield has an inventory of 20 ready-to-drill prospects and is currently operating two drilling rigs.
• Signed 58,000 acre JV South of Sarita Field - Newfield signed a 58,000 acre JV with a private company on prospective Frio acreage south and east of the prolific Sarita Field. Drilling is planned for early 2008.
2008 Capital Budget
Planned capital expenditures in 2008 are $1.6 billion. The budget excludes potential acquisitions and approximately $113 million of capitalized interest and overhead.
Proved Reserves and Capital Activity
Newfield's total reserves at year-end 2007 were 2.5 Tcfe, an increase of 10% over year-end 2006 reserves. Newfield sold 396 Bcfe of proved reserves during 2007. Net reserve additions from all sources were 869 Bcfe with 221 Bcfe, of the total coming from purchases of properties.