Newfield Exploration Reports Fourth Quarter and Full-year 2017 Results
Newfield Exploration Company (NFX) today announced full-year and fourth quarter 2017 unaudited financial and operating results. Additional details can be found in the Companys @NFX publication, located on its website http://www.newfield.com.
Newfield plans to host a conference call at 10 a.m. CST on February 21, 2018. To listen to the call, please visit Newfields website at http://www.newfield.com. To participate in the call, dial 323-794-2094 and provide conference code 7828350 at least 10 minutes prior to the scheduled start time.
-- Fourth quarter 2017 net production exceeded guidance expectations.
• Domestic net production was 169,800 BOEPD (40% oil and 61% liquids), exceeding mid-point guidance by approximately 1,750 BOEPD. The better than expected results during the quarter were primarily related to higher volumes from the Anadarko Basin, which reached more than 117,000 BOEPD (12% increase from the prior quarter).
• There were no liftings during the fourth quarter of 2017 from China. Following recent repairs to the Pearl Fields third-party storage vessel, production in China resumed in early 2018 with a lifting planned for the first quarter.
• Full-year 2017 domestic net production significantly exceeded original guidance expectations.
• Domestic net production grew approximately 10% over the prior year (excluding 9,400 BOEPD of production associated with the 2016 sale of the Companys Texas assets) and averaged 152,000 BOEPD (40% oil and 61% liquids). Original 2017 guidance was for 3-5% growth.
• For the full year, Anadarko Basin production grew 16% over the prior year and averaged nearly 100,000 BOEPD (34% oil and 62% liquids). Lease operating expenses (LOE) in the Anadarko Basin averaged $1.76 per BOE for the year, the lowest LOE within the Companys portfolio.
-- At the end of the fourth quarter, the Company had $326 million of cash on hand.
-- Recent operational highlights include:
• The Company turned to sales its most "technically comprehensive" spacing pilot to-date -- the Velta June -- which has 12 wells (drilled on four separate pads) located in the Meramec formation. This 5,000 lateral development reached combined peak production from the pads in excess of 10,000 BOEPD gross. Newfield operates the Velta June with a 48% working interest.
• The information obtained from the Velta June development will be applied to the entirety of the STACK development with key learnings on completion cluster efficiencies, intra-well communication, well design cost/benefit analysis, fracture geometry and flowback practices.
• Newfield has now completed nearly 80 infill wells in STACK and has tested from four to 12 wells per section in the Meramec horizon. The results have shown the ability to generate strong returns across the acreage from the Stark 10-well development located in the west, to the Jackson/Florene spacing test located to the east. Additional information regarding performance to date and the recent Jackson/Florene test is available in @NFX presentation.
• In 2017, Newfield allocated capital to test additional prospective horizons on its acreage in the Anadarko Basin. This endeavor was dubbed "SCORE" -- the Sycamore, Caney, Osage Resource Expansion. Since early 2017, Newfield has drilled or participated in approximately 20 SCORE wells. In addition to successful Newfield operated and industry wells in the Sycamore, Caney and Osage, Newfield recently extended the prolific STACK Meramec play to the northwest and the North SCOOP oil play was extended to the east.
• One distinct highlight was the Larry well, completed in the black oil window along the eastern edge of Newfields North SCOOP play. This SXL well had a gross IP30 of more than 1,900 BOEPD, of which more than 80% was oil. Newfield remains highly encouraged by its North SCOOP development and plans significant HBP drilling activity in its three-year plan (3YR Plan).
• Newfield continued to grow its daily production in the Williston Basin with a single operated-rig. In the fourth quarter of 2017, net production averaged 20,300 BOEPD. In 2018, the Company expects to continue to run a single rig and grow production approximately 7% year-over-year.
• Uinta Basin production continued to grow during 2017 with the deployment of a single operated-rig. Fourth quarter 2017 net production averaged 18,200 BOEPD. Recent efforts have focused exclusively on unlocking the value of the Central Basin through lower well costs and improved well productivity.
• Newfield has recently drilled more than 20 wells in the Central Basin, largely under a joint venture drilling agreement. This program successfully reduced completed well costs and enhanced well productivity. Newfield plans to continue to run a single rig in the Central Basin in 2018 related primarily to HBP operations. The Company holds interests in approximately 225,000 net acres in the basin.
Fourth Quarter and Full-Year 2017 Financial and Production Summary
For the fourth quarter, the Company recorded net income of $95 million, or $0.47 per diluted share (all per share amounts are on a diluted basis). Earnings were impacted by one time tax benefits of 47 million or $0.24 per share, due to the Tax Reform Act repeal of AMT and refundable AMT tax credits, and an unrealized derivative loss of $95 million, or $0.48 per share. After adjusting for the effect of the tax benefit and unrealized derivative loss during the period, net income would have been $143 million, or $0.71 per share.
Revenues for the fourth quarter were $509 million. Net cash provided by operating activities was $311 million. Discretionary cash flow from operations was $342 million. Newfields total net production in the fourth quarter of 2017 was 15.6 MMBOE, comprised of 40% oil, 21% natural gas liquids and 39% natural gas.
For the full year, the Company recorded net income of $427 million, or $2.13 per diluted share (all per share amounts are on a diluted basis). Earnings were impacted by one time tax benefits of $61 million, or $0.30 per share, due to the Tax Reform Act repeal of AMT and refundable AMT tax credits, $17 million, or $0.09 per share due to the carryback of net operating losses, and an unrealized derivative loss of $83 million, or $0.41 per share. After adjusting for the effect of the tax benefit and unrealized derivative losses during the period, net income would have been $432 million, or $2.15 per share.
Revenues for the full year were $1,767 million. Net cash provided by operating activities was $952 million. Discretionary cash flow from operations was $1,062 million. For the full-year 2017, Newfields net production was 57.3 MMBOE, of which 1.7 MMBOE was from offshore China.
Proved Reserves and Costs Incurred
Newfields year-end 2017 proved reserves were up 33% year-over-year to 680 MMBOE (over 99% domestic). Crude oil and natural gas prices used to calculate reserves were $51.34 per barrel (up 20%) and $2.98 per MMbtu (up 20%), respectively. As a result, our standardized measure of discounted future net cash flows is $4.4 billion and our pre-tax present value of reserves (discounted at 10%) at year-end 2017 was approximately $4.9 billion, up 84% over the prior year-end.
During 2017, proved reserves increased 167 MMBOE primarily as a result of positive performance revisions of 139 MMBOE and revisions of 14 MMBOE resulting from commodity price increases. During 2017, Newfield added proved reserves of 76 MMBOE, which included 2 MMBOE of reserves purchased and 74 MMBOE added through extensions, discoveries and other additions. We also sold non-strategic assets of 4 MMBOE and produced 58 MMBOE.
Approximately 58% of proved reserves are liquids and 59% are proved developed. The largest source of reserve additions during 2017 came from the Anadarko Basin, which now total 477 MMBOE and comprise more than over two-thirds of Newfields total proved reserves. The proved reserve life index for the Company is approximately 12 years. Newfield engaged the consulting firms DeGolyer and MacNaughton and Ryder Scott Company to perform an audit of the internally prepared reserve estimates on certain fields covering 97% of year-end 2017 proved reserve quantities on a barrel of oil equivalent basis. The purpose of these audits was to provide additional assurance on the reasonableness of internally prepared reserve estimates. Newfields proved reserves are, in aggregate, reasonable and within the established audit tolerance guidelines of 10 percent.
Newfield invested approximately $1.3 billion in 2017, which includes approximately $202 million in acquisitions, land and leasehold expenditures and approximately $120 million of capitalized interest and internal costs. The tables below provide additional information on reserves and costs incurred during 2017.
December 31, 2016
Revisions of previous estimates
Extensions, discoveries and other additions 35
Purchases of properties
Sales of properties
December 31, 2017
The following table presents costs incurred for oil and gas property acquisition, exploration and development for 2017:
Total costs incurred(2) $
1Includes net change in asset retirement costs of $(20) million
2Total costs incurred includes approximately $124 million of capitalized interest and internal costs
Newfield Exploration Company is an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. Our U.S. operations are onshore and focus primarily on large scale, liquids-rich resource plays in the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota and the Uinta Basin of Utah. In addition, we have producing oil assets offshore China.
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "may," "forecast," "outlook," "could," "budget," "objectives," "strategy," "believe," "expect," "anticipate," "intend," "estimate," "project," "target," "goal," "plan," "should," "will," "predict," "guidance," "potential" or other similar expressions are intended to identify forward-looking statements. Other than historical facts included in this release, all information and statements, including but not limited to information regarding planned capital expenditures, estimated reserves, estimated production targets, estimated wellhead rates of return, estimated future operating costs and other expenses and other financial measures, estimated pre-tax future tax rates, drilling and development plans, the timing of production, and other plans and objectives for future operations, are forward-looking statements. Although, as of the date of this release, Newfield believes that these expectations are reasonable, this information is based upon assumptions and anticipated results that are subject to numerous uncertainties and risks and no assurance can be given that such expectations will prove to have been correct.
Actual results may vary significantly from those anticipated due to many factors, including but not limited to commodity prices and our ability to hedge commodity prices, drilling results, accessibility to economic transportation modes and processing facilities, our liquidity and the availability of capital resources, operating risks, failures and hazards, industry conditions, governmental regulations, including water regulations, in the areas we operate in financial counterparty risks, the prices of goods and services, the availability of drilling rigs and other support services, our ability to monetize assets and repay or refinance our existing indebtedness, labor conditions, severe weather conditions, new regulations or changes in tax or environmental legislation, environmental liabilities not covered by indemnity or insurance, legislation or regulatory initiatives intended to address seismic activity or induced seismicity, and other operating risks.
Please see Newfields 2017 Annual Report on Form 10-K, and other subsequent public filings, all filed with the U.S. Securities and Exchange Commission (SEC), for a discussion of other factors that may cause actual results to vary. Unpredictable or unknown factors not discussed in this press release or in Newfields SEC filings could also have material adverse effects on Newfields actual results as compared to its anticipated results. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this release. Unless legally required, Newfield undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For additional information, please contact Newfields Investor Relations department. Phone: 281-210-5321 Email: IR@newfield.com
4Q17 Actual Results
Crude oil and condensate (MBbls)
Natural gas (Bcf)
Average Realized Prices(2)(3)
Crude oil and condensate (per Bbl)
Natural gas (per Mcf)
NGLs (per Bbl)
Crude oil equivalent (per BOE)
Lease operating (in millions)
Major (workovers, etc.)
Lease operating (per BOE)
Major (workovers, etc.)
Transportation and processing (in millions)
Production and other taxes (in millions)
General and administrative (G&A), net (in millions)
Capitalized direct internal costs (in millions)
Other operating expenses (income), net (in millions)
Interest expense (in millions)
Capitalized interest (in millions)
Other non-operating (income) expense (in millions)
(1) Represents volumes lifted and sold regardless of when produced. Includes natural gas produced and consumed in operations of 1.1 Bcf during the three months ended December 31, 2017.
(2) Average realized prices include the effects of derivative contracts. Excluding these effects, the average realized price for domestic and total natural gas would have been $2.57 per Mcf and the average realized price for our total crude oil and condensate would have been $51.13 per barrel.
(3) All per unit pricing and expenses exclude natural gas produced and consumed in operations.
CONDENSED CONSOLIDATED BALANCE SHEET
Cash and cash equivalents
Other current assets
Total current assets
Oil and gas properties, net (full cost method)
LIABILITIES AND STOCKHOLDERS EQUITY
Other current liabilities
Total current liabilities
Asset retirement obligations
Total long-term liabilities
Common stock, treasury stock and additional paid-in capital 3,246
Accumulated other comprehensive income (loss)
Retained earnings (deficit)
Total stockholders equity
Total liabilities and stockholders equity
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions, except per share data)
Three Months Ended
Oil, gas and NGL revenues
Transportation and processing
Production and other taxes
Depreciation, depletion and amortization
General and administrative
Ceiling test and other impairments
Total operating expenses
Income (loss) from operations
Commodity derivative income (expense)
Total other income (expense)
Income (loss) before income taxes
Income tax provision (benefit)
Net income (loss)
Earnings (loss) per share:
Weighted-average number of shares outstanding for basic earnings (loss) per share
Weighted-average number of shares outstanding for diluted earnings (loss) per share 201
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization
Deferred tax provision (benefit)
Unrealized (gain) loss on derivative contracts
Ceiling test and other impairments
Changes in operating assets and liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Additions to and acquisitions of oil and gas properties and other
Proceeds from sales of oil and gas properties
Redemptions of investments
Purchases of investments
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net proceeds (repayments) of borrowings under credit arrangements
Proceeds from issuances of common stock, net
Net cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Explanation and Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income (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. This measure should not be considered an alternative to net income (loss) as defined by generally accepted accounting principles.
A reconciliation of earnings for the fourth quarter and full year of 2017 stated without the effect of certain items to net income (loss) is shown below:
Net Income (loss)
Carryback of net operating losses
Tax Reform Act repeal of AMT and refundable AMT tax credits
Unrealized (gain) loss on derivative contracts
Earnings stated without the effect of the above items
Weighted-average number of shares outstanding for per diluted share
Discretionary Cash Flow from Operations
Discretionary cash flow from operations represents net cash provided by operating activities before changes in operating assets and liabilities and is presented because of its acceptance as an indicator of an oil and gas exploration and production companys ability to internally fund exploration and development activities and to service or incur additional debt. This measure should not be considered 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 to discretionary cash flow from operations is shown below:
Net cash provided by operating activities
Net changes in operating assets and liabilities 31
Discretionary cash flow from operations
PV-10 is a non-GAAP financial measure and generally differs from the standardized measure of discounted future net cash flows (the most directly comparable measure calculated and presented under U.S. generally accepted accounting principles) because it does not include the effects of income taxes on future net revenues. Neither PV-10 nor the standardized measure represents an estimate of the fair market value of our crude oil and natural gas properties. PV-10 is used in the oil and natural gas industry as a measure to compare the relative size and value of proved reserves held by companies without regard to the specific income tax characteristics of such entities.
The following table shows a reconciliation of the standardized measure to PV-10:
Standardized measure of discounted future net cash flows
Present value of future income tax expense
Proved reserve PV-10 value (before tax)
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SOURCE Newfield Exploration Company