Newfield Exploration
Company NFX today announced a significant natural gas discovery on the
Block SK 310 Production Sharing Contract (PSC) area, located 50 miles offshore
Sarawak in approximately 250 feet of water. This is the Company's second
pinnacle reef natural gas discovery in the region.
The B-14 well encountered 1,800 feet of gross column and 1,585 feet of net
natural gas pay in the main carbonate objective. A drill stem test was
recently conducted, which confirmed commerciality of the reservoir. Newfield
estimates that Gas Initially In Place (GIIP) ranges from 1.5 – 3.0 Tcf.
Newfield operates Block SK 310 with a 30% interest. Partners Diamond Energy
Sarawak, a wholly-owned subsidiary of Mitsubishi Corporation and PETRONAS
Carigali, has 30% and 40% interests, respectively.
The B-14 discovery is located less than three miles from Newfield's first
pinnacle reef gas discovery, B-15, also located on Block SK 310 in
approximately 250 feet of water. Recoverable reserves on this discovery are
estimated at approximately 265 Bcf and will be developed in conjunction with
the B-14 discovery.
"This is the largest conventional exploratory success that Newfield has made
in its 25-year history," said Lee K. Boothby, Newfield Chairman, President and
CEO. "Recent amendments to gas terms in Malaysia make natural gas developments
economically competitive with oil developments. We have multiple 'reef'
prospects to test along trend, and additional drilling is expected to resume
in the third quarter with the drilling of our B-17 prospect."
Block SK 310 covers approximately 1.1 million acres. Newfield has identified
additional prospects on the contract area with multi-Tcf of remaining gas
resource potential. Newfield has committed to drill one remaining exploration
well (B-17 prospect) on Block SK 310.
Block SK 408 covers 1.1 million acres in water depths ranging from 200 – 400
feet. There have been 16 discoveries in the block so far with existing
infrastructure and production hubs located less than 10 miles from dozens of
potential prospects identified to date by Newfield. The Company has a 10-well
commitment on the block over a three-year initial exploration period. Newfield
will operate the block with a 40% interest. Other partners include Shell (30%)
and PETRONAS Carigali (30%).
Block SK 319 covers approximately 580,000 acres and is located adjacent to
Block SK 408. Water depths are 300 feet or less. Newfield has identified
several exploration prospects in the block and the Company has a five-well
commitment over an initial three-year exploration period. Block SK 319 is
operated by Shell (50%), and Newfield and PETRONAS Carigali each hold a 25%
interest.
Company Provides Update on Process to Explore "Strategic Alternatives" for its
International Businesses
In February, Newfield announced that its Board of Directors authorized the
evaluation of strategic alternatives for the Company's international
businesses, which consist of offshore developments and related projects in
Malaysia and China. Goldman, Sachs & Co. has been retained by the Company and
is leading the process. A data room for the international businesses is
expected to open in the second quarter of 2013.
Newfield's actions related to its international businesses at year-end 2012
now allow the Company to move cash from its international businesses to the
U.S. without significant U.S. cash tax implications. Newfield's 2013 domestic
federal taxes remain substantially all deferred. However, because of the
Company's domestic net operating loss carry-forward position, Newfield is not
able to recognize tax benefits from foreign tax credits.
As a result, the Company expects an effective book tax rate in 2013 of 55 –
65%. At current oil prices, Newfield's full-year 2013 international cash
income taxes are expected to be $55 – $65 million.
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