Newfield Exploration Reports Second Quarter 2014 Results

# Wells

Avg. BOEPD
Gross IP
(24-Hours)

Avg. BOEPD
Gross
30-Day Rate

Avg. BOEPD
Gross
60-Day Rate

Avg. BOEPD
Gross
90-Day Rate

Uteland Butte SXL (1)

3

2,157

1,532

1,323

1,154

Wasatch SXL (2)

2

2,068

1,428

1,479

1,583

Central Basin Avg. SXL (3) (4)

5

2,122

1,480

1,401

1,297

(1) 30-day, 60-day and 90-day rates include 2 wells

(2) 60-day and 90-day rates include 1 well

(3) 30-day rate includes 4 wells

(4) 60-day and 90-day rates include 3 wells

2Q14

    3Q14e

2014e

Production:

  Oil (MMBO)

4.5

4.6 – 4.8

18.1 – 18.7

  NGLs (MMBbls)

2.0

2.1 – 2.2

7.6 – 8.1

  Natural Gas (Bcf)

33.1

32

125 – 130

Total (MMBOE)

12.1

12.1 – 12.3

46.5 – 48.5

Costs and Expenses:*

  Total LOE ($MM) **

$119

$127

$486

  Production & Other Taxes ($MM)***

$29

$36

$125

  DD&A Expense ($MM)

$212

$216

$850

  General & Administrative (G&A), net ($MM)

$68

$55

$235

  Capitalized Internal Costs ($MM)

($50)

($35)

($156)

  Interest Expense ($MM)

$51

$51

$205

  Capitalized Interest ($MM)

($13)

($13)

($52)

*Production, Costs and Expenses are based on continuing operations and Costs and Expenses are expected to be within 7% of the estimates above.

** The increase in full-year LOE guidance relates to increased transportation expense and reflects new processing agreements and growing NGL volumes. The increase in expense should be offset by higher realized prices for sales volumes. 

***Table assumes 1H14 actual commodity prices and strip commodity prices for 2H14.

2Q14 Actual

 2Q14 Actual Results 

Domestic

(Continuing

Operations)

Int'l

(Discontinued

Operations)

Total

 Production/Liftings^{Note 1}

Crude oil and condensate - MMBbls 

4.5

0.04

4.5

Natural gas - Bcf 

33.1

—

33.1

NGLs - MMBbls 

2.0

—

2.0

Total MMBOE 

12.1

0.04

12.1

 Average Realized Prices^{Note 2}

Crude oil and condensate - $/Bbl 

$

82.46

$

106.86

$

82.67

Natural gas - $/Mcf 

$

3.90

$

—

$

3.90

NGLs - $/Bbl 

$

31.11

$

—

$

31.11

Bbl equivalent - $/BOE

$

47.74

$

106.86

$

47.94

 Operating Expenses: 

Lease operating ($MM)

Recurring

$

63.4

$

1.3

$

64.7

Major (workovers, etc.)

$

18.3

$

0.1

$

18.4

Transportation

$

37.7

$

—

$

37.7

Lease operating (per BOE)

Recurring

$

5.45

$

34.24

$

5.54

Major (workovers, etc.)

$

1.57

$

4.0

$

1.58

Transportation

$

3.24

$

—

$

3.23

Production and other taxes ($MM)

$

29.0

$

1.2

$

30.2

per BOE

$

2.49

$

31.04

$

2.58

General and administrative (G&A), net ($MM)

$

68.1

$

—

$

68.1

per BOE

$

5.85

$

—

$

5.83

   Capitalized internal costs ($MM)

$

(51.9)

       per BOE

$

(4.44)

Interest expense ($MM)

$

50.5

per BOE

$

4.32

Capitalized interest ($MM)

$

(13.3)

per BOE

$

(1.14)

______

Note 1: Represents volumes lifted and sold regardless of when produced. Includes natural gas produced and consumed in our operations of 2.6 Bcf during the three months ended June 30, 2014.

Note 2: Average realized prices include the effects of hedging contracts. If the effects of these contracts were excluded, the average realized price for domestic natural gas would have been $4.32 per Mcf and the domestic and total crude oil and condensate average realized prices would have been $90.19 and $90.33 per barrel, respectively. We did not have any hedging contracts associated with NGL production as of June 30, 2014.

(Unaudited, in millions, except per share data)

For the 

Three Months Ended

June 30,

For the 

Six Months Ended

June 30,

2014

2013

2014

2013

Oil, gas and NGL revenues

$

608

$

435

$

1,161

$

805

Operating expenses:

   Lease operating

119

107

230

195

   Production and other taxes

29

21

54

33

   Depreciation, depletion and amortization

212

164

400

311

   General and administrative

68

54

124

99

      Total operating expenses

428

346

808

638

Income from operations

180

89

353

167

Other income (expense):

   Interest expense

(51)

(50)

(102)

(101)

   Capitalized interest

13

13

26

27

   Commodity derivative income (expense)

(174)

117

(270)

33

   Other, net

1

2

3

4

      Total other income (expense)

(211)

82

(343)

(37)

Income (loss) from continuing operations before income taxes

(31)

171

10

130

Income tax provision (benefit)

(8)

65

9

49

Income (loss) from continuing operations

(23)

106

1

81

Income (loss) from discontinued operations, net of tax

1

5

261

22

      Net income (loss)

$

(22)

$

111

$

262

$

103

Earnings per share:

    Basic

     Income (loss) from continuing operations

$

(0.16)

$

0.78

$

0.01

$

0.60

     Income (loss) from discontinued operations

—

0.04

1.91

0.16

       Basic earnings (loss) per share

$

(0.16)

$

0.82

$

1.92

$

0.76

    Diluted

     Income (loss) from continuing operations

$

(0.16)

$

0.78

$

0.01

$

0.60

     Income (loss) from discontinued operations

—

0.04

1.89

0.16

       Diluted earnings (loss) per share

$

(0.16)

$

0.82

$

1.90

$

0.76

Weighted-average number of shares outstanding for basic income (loss) per share

136

135

136

135

Weighted-average number of shares outstanding for diluted income (loss) per share

136

136

138

136

CONDENSED CONSOLIDATED BALANCE SHEET

 (Unaudited, in millions)

June 30,

December 31,

2014

2013

ASSETS

Current assets:

     Cash and cash equivalents

$

36

$

95

     Restricted cash

—

90

     Other current assets

492

716

         Total current assets

528

901

     Oil and gas properties, net (full cost method)

8,185

8,101

     Derivative assets

5

26

     Other assets

238

293

         Total assets

$

8,956

$

9,321

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Derivative liabilities

$

—

$

90

     Other current liabilities

1,129

1,200

         Total current liabilities

1,129

1,290

     Other liabilities

35

38

     Derivative liabilities

58

—

     Long-term debt

3,077

3,694

     Asset retirement obligations

108

201

     Deferred taxes

1,307

1,142

         Total long-term liabilities

4,585

5,075

STOCKHOLDERS' EQUITY

Common stock and additional paid-in capital

1,551

1,527

Accumulated other comprehensive loss

2

2

Retained earnings

1,689

1,427

      Total stockholders' equity

3,242

2,956

      Total liabilities and stockholders' equity

$

8,956

$

9,321

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, in millions)

For the

Six Months Ended

June 30,

2014

2013

Cash flows from operating activities:

  Net income (loss)

$

262

$

103

Adjustments to reconcile net income (loss) to net cash

  provided by operating activities:

  Depreciation, depletion and amortization

437

439

  Deferred tax provision (benefit)

153

68

  Stock-based compensation

35

17

  Commodity derivative (income) expense

270

(33)

  Cash receipts (payments) on derivative settlements, net

(86)

35

  Gain on sale of Malaysia business

(388)

—

  Other, net

(2)

4

681

633

Changes in operating assets and liabilities

52

(23)

      Net cash provided by (used in) operating activities

733

610

Cash flows from investing activities:

   Additions to oil and gas properties and other

(1,021)

(890)

   Acquisitions of oil and gas properties

(15)

(3)

   Proceeds from sales of oil and gas properties

12

19

   Proceeds received from sale of Malaysia business, net

809

—

   Redemptions of investments

39

1

      Net cash provided by (used in) investing activities

(176)

(873)

Cash flows from financing activities:

   Net proceeds under credit arrangements

(618)

231

   Other

2

(5)

      Net cash provided by (used in) financing activities

(616)

226

Increase (decrease) in cash and cash equivalents

(59)

(37)

Cash and cash equivalents, beginning of period

95

88

Cash and cash equivalents, end of period

$

36

$

51

Explanation and Reconciliation of Non-GAAP Financial Measures

Earnings Stated Without the Effect of Certain Items

         Earnings stated without the effect of certain items is a non-GAAP financial measure. Earnings without the effect of these items are presented because they affect the comparability of operating results from period to period. In addition, earnings without the effect of these items are more comparable to earnings estimates provided by securities analysts.

         A reconciliation of earnings for the second quarter of 2014 for our continuing operations stated without the effect of certain items to net loss is shown below:

2Q14

(in millions)

Net loss

$

(22)

Income from discontinued operations, net of tax

1

Loss from continuing operations

(23)

127

Income tax adjustment for above items 

(45)

Earnings stated without the effect of the above items 

$

59

2Q14

(in millions)

Commodity derivative expense

$

(174)

Cash receipts on derivative settlements, net

47

Net unrealized loss on commodity derivatives

$

(127)

Net Cash Provided by Operating Activities Before Changes in Operating Assets and Liabilities

         Net cash provided by operating activities before changes in operating assets and liabilities is presented because of its acceptance as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. This measure should not be considered as an alternative to net cash provided by operating activities as defined by generally accepted accounting principles.

         A reconciliation of net cash provided by operating activities before changes in operating assets and liabilities to net cash provided by operating activities is shown below:

(in millions)

Net cash provided by operating activities

$

368

   Net change in operating assets and liabilities

(32)

Net cash provided by operating activities before changes

in operating assets and liabilities

$

336