NEWFIELD EXPLORATION CO /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 24, 2012

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Exhibit 99.1





Newfield Exploration Announces Second Quarter 2012 Financial Results


The Woodlands, Texas – July 24, 2012 – Newfield Exploration Company (NYSE: NFX) today reported its unaudited second quarter 2012 financial results. Newfield will host a conference call at 7:30 a.m. CDT on July 25, 2012. To participate in the call, dial 719-457-2087 or listen through the investor relations section of Newfield’s website at http://www.newfield.com.
 
For the second quarter of 2012, Newfield recorded net income of $135 million, or $1.00 per diluted share (all per share amounts are on a diluted basis). Net income for the second quarter includes a net unrealized gain on commodity derivatives of $83 million ($53 million after-tax), or $0.39 per share.  Without the effect of this item, net income for the second quarter of 2012 would have been $82 million, or $0.61 per share.
 
Revenues for the second quarter of 2012 were $628 million. Net cash provided by operating activities before changes in operating assets and liabilities was $330 million. See “Explanation and Reconciliation of Non-GAAP Financial Measures” found after the financial statements in this release.
 
“Substantially all of our capital in 2012 is being allocated to oil and liquids projects within our portfolio,” said Lee K. Boothby, Chairman, President and CEO. “We are driving strong oil and liquids growth – now estimated to increase nearly 30% over 2011 levels.”
 
Newfield’s second quarter 2012 production was 76.4 Bcfe, of which 49% was oil and liquids. Newfield’s oil and liquids liftings in the second quarter of 2012 increased 40% over the comparable period in 2011 to 6.1 MMBbls, or an average of more than 67,000 BOPD. Natural gas liquids accounted for approximately 4% of second quarter total production. Natural gas production in the second quarter of 2012 was approximately 40 Bcf, an average of about 440 MMcf/d.
 
For the year 2012, Newfield expects its total Company production will range between 296 – 304 Bcfe and that its capital investments in 2012 will approximate $1.7 billion. Capital expenditures in the second quarter of 2012 were approximately $400 million.
 
Full-Year 2012 Guidance
 
Newfield raised its 2012 expectations for total Company production to 296 – 304 Bcfe (previous guidance was 292 – 302 Bcfe). Our cost structure per Mcfe during 2012 is expected to be within 5% of the amounts listed below.
 

 
 
2012 Estimates
 
   Domestic
           Int’l
         Total
 Production/Liftings Note 1
      
    Natural gas – Bcf
155.0
–
155.0
    Oil, condensate and NGLs– MMBbls
15.0
9.3
24.3
    Total Bcfe
245.0
55.8
300.8
             
Operating Expenses
            
  Lease operating (per Mcfe)
            
    Recurring
$
0.95
$
1.80
$
1.10
    Major (workovers, etc.) Note 2
$
0.25
$
0.46
$
0.25
    Transportation
$
0.45
$
–
$
0.40
             
  Production and other taxes (per Mcfe)
$
0.35
$
6.45
$
1.40
 
 
 
1
 
 
             
  DD&A expense (per Mcfe) Note 3
$
2.80
$
4.25
$
3.10
             
  General and administrative (G&A), net (per    Mcfe) Note 4
        
$
0.74
             
  Capitalized internal costs (per Mcfe) Note 4
        
$
(0.42)
 
            
  Interest expense (per Mcfe) Note 5
        
$
0.68
             
  Capitalized interest (per Mcfe)
        
$
(0.25)
             
 
 
 
Note 1
Production/liftings is subject to timing and will vary by quarter.
Note 2
The timing of “major expense” items varies and includes well workovers and repairs and related expenses. While the annual unit costs for international major expense are unchanged, third quarter per unit costs are expected to be approximately $0.85 due to planned production facility upgrades.
Note 3
The DD&A rate per Mcfe is reflective of the composition of the investments and reserves associated with our existing asset base and the assumed cost to add new reserves during the year. The timing and impact of the Company’s activities on this rate will vary by quarter.
Note 4
Annually, the Company updates its capitalization of internal costs related to the assessment, development, exploration and related activities of its current asset base.  The decrease in annual Capitalized Internal costs per Mcfe and corresponding increase in annual net G&A per Mcfe reflects this most recent update.
Note 5
Interest expense does not include approximately $14 million of premium payments associated with the July 2012 tender and redemption of $550 million of 6⅝% senior subordinate notes due 2016. This amount will be recorded as Other Expense in the third quarter 2012.
 
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 principal domestic areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas.  Internationally, we focus on offshore oil developments in Malaysia and China.
 
**This release contains forward-looking information. All information other than historical facts included in this release, such as information regarding estimated or anticipated drilling plans and planned capital expenditures, is forward-looking information. Although Newfield believes that these expectations are reasonable, this information is based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including drilling results, oil and gas prices, industry conditions, the prices of goods and services, the availability of drilling rigs and other support services, the availability of refining capacity for the crude oil Newfield produces in the Uinta Basin, the availability and cost of capital resources, new regulations or changes in tax legislation, labor conditions and severe weather conditions (such as hurricanes). In addition, the drilling of oil and natural gas wells and the production of hydrocarbons are subject to numerous governmental regulations and operating risks. Other factors that could impact forward-looking statements are described in "Risk Factors" in Newfield's 2011 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other subsequent public filings with the Securities and Exchange Commission, which can be found at www.sec.gov. Unpredictable or unknown factors not discussed in this press release could also have material adverse effects on forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Unless legally required, Newfield undertakes no obligation to publicly update or revise any forward-looking statements.
 

For additional information, please contact Newfield’s Investor Relation’s department.
Phone: 281-210-5201
Email: info@newfield.com

 
2
 


 
 
 
 
 
 
 
 
  
 
2Q12 Actual
2Q12 Actual Results
 
Domestic
 
 
Int'l
 
 
Total
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Production/LiftingsNote 1
 
 
 
 
 
 
 
 
 
 
Natural Gas - Bcf
 
                                                                  39.6
 
 
 0.2 
 
 
39.8 
 
 
Oil, condensate and NGLs - MMBbls
 
3.5 
 
 
2.6 
 
 
6.1 
 
 
Total Bcfe
 
60.9 
 
 
15.5 
 
 
76.4 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Average Realized PricesNote 2
 
 
 
 
 
 
 
 
 
 
Natural Gas - $/Mcf
$
3.64 
 
$
3.98 
 
$
3.65 
 
 
Oil, condensate and NGLs - $/Bbl
$
74.14 
 
$
108.07 
 
$
88.35 
 
 
Mcf equivalent - $/Mcfe
$
6.78 
 
$
17.81 
 
$
9.08 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Lease operating ($MM)
 
 
 
 
 
 
 
 
 
 
Recurring
$
56.2 
 
$
23.7 
 
$
79.9 
 
 
Major (workovers, etc.)
$
20.8 
 
$
1.1 
 
$
21.9 
 
 
Transportation
$
26.9 
 
$
—
 
$
26.9 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Lease operating (per Mcfe)
 
 
 
 
 
 
 
 
 
 
Recurring
$
0.95 
 
$
1.52 
 
$
1.07 
 
 
Major (workovers, etc.)
$
0.35 
 
$
0.07 
 
$
0.30 
 
 
Transportation
$
0.46 
 
$
—
 
$
0.36 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Production and other taxes ($MM)
$
15.2 
 
$
72.4 
 
$
87.6 
 
 
per Mcfe
$
0.26 
 
$
4.66 
 
$
1.17 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
General and administrative (G&A), net ($MM)
$
59.6 
 
$
1.4 
 
$
61.0 
 
 
per Mcfe
$
1.00 
 
$
0.12 
 
$
0.82 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Capitalized internal costs ($MM)
 
 
 
 
 
 
$
 (26.8)
 
 
 
 
per Mcfe
 
 
 
 
 
 
$
 (0.36)
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Interest expense ($MM)
 
 
 
 
 
 
$
 49.2 
 
 
per Mcfe
 
 
 
 
 
 
$
 0.66 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Capitalized interest ($MM)
 
 
 
 
 
 
$
 (17.6)
 
 
per Mcfe
 
 
 
 
 
 
$
 (0.24)
__________
_______
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
Note 1:  Represents volumes lifted and sold regardless of when produced.  Includes natural gas produced and consumed in our operations of 1.8 Bcfe during the three months ended June 30, 2012.
 
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 and total natural gas would have been $2.26 and $2.27 per Mcf and the domestic and total oil and condensate average realized prices would have been $74.20 and $88.39 per barrel, respectively.

 
3
 


 
  
 
    
 
    
 
    
 
  
CONSOLIDATED STATEMENT OF NET INCOME
    
 
    
 
    
 
  
(Unaudited, in millions, except per share data)
  
 
    
 
    
 
    
 
  
 
  
For the
Three Months Ended
June 30,
    
For the
Six Months Ended
June 30,
  
 
  
2012
    
2011
    
2012
    
2011
  
 
  
 
    
 
    
 
    
 
  
Oil and gas revenues
   $ 628     $ 621     $ 1,306     $ 1,166  
 
                                
Operating expenses:
                                
   Lease operating
     129       125       256       218  
   Production and other taxes
     88       79       171       150  
   Depreciation, depletion and amortization
     239       173       465       339  
   General and administrative
     61       44       106       81  
      Total operating expenses
     517       421       998       788  
 
                                
Income from operations
     111       200       308       378  
 
                                
Other income (expenses):
                                
   Interest expense
     (49 )     (41 )     (100 )     (81 )
   Capitalized interest
     18       19       36       37  
   Commodity derivative income (expense)
     135       169       159       (13 )
   Other
     (1 )     —       (2 )     (1 )
      Total other income (expense)
     103       147       93       (58 )
 
                                
Income before income taxes
     214       347       401       320  
 
                                
Income tax provision
     79       128       150       118  
 
                                
      Net income
   $ 135     $ 219     $ 251     $ 202  
 
                                
Income per share:
                                
   Basic
   $ 1.00     $ 1.64     $ 1.86     $ 1.52  
 
                                
   Diluted
   $ 1.00     $ 1.62     $ 1.85     $ 1.50  
 
                                
Weighted-average number of shares outstanding for basic income per share
     134       134       134       133  
 
                                
Weighted-average number of shares outstanding for diluted income per share
     135       135       135       135  
 
                                

 
4
 


 
  
 
    
 
  
CONDENSED CONSOLIDATED BALANCE SHEET
  
 
    
 
  
 (Unaudited, in millions)
  
 
    
 
  
 
  
June 30,
    
December 31,
  
 
  
2012
    
2011
  
ASSETS
  
 
    
 
  
Current assets:
  
 
    
 
  
     Cash and cash equivalents
   $ 656     $ 76  
     Derivative assets
     142       129  
     Other current assets
     614       570  
         Total current assets
     1,412       775  
 
                
     Property and equipment, net (full cost method)
     8,201       8,020  
     Derivative assets
     81       61  
     Other assets
     150       135  
         Total assets
   $ 9,844     $ 8,991  
 
                
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current liabilities:
                
     Derivative liabilities
     7       50  
     Other current liabilities
     873       882  
         Total current liabilities
     880       932  
 
                
     Other liabilities
     179       179  
     Derivative liabilities
     6       3  
     Long-term debt
     3,595       3,006  
     Deferred taxes
     993       951  
         Total long-term liabilities
     4,773       4,139  
 
                
                 
 
                
STOCKHOLDERS' EQUITY
                
Common stock and additional paid-in capital
     1,464       1,446  
Accumulated other comprehensive loss
     (8 )     (10 )
Retained earnings
     2,735       2,484  
      Total stockholders' equity
     4,191       3,920  
      Total liabilities and stockholders' equity
   $ 9,844     $ 8,991  
 
                

 
5
 

 

 
 
 
 
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
 
 
 
(Unaudited, in millions)
 
 
 
 
 
 
 
 
 
For the
Six Months Ended
June 30,
 
 
 
2012 
 
2011 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
  Net income
 
$
 251 
 
$
 202 
 
Adjustments to reconcile net income to net cash
 
 
 
 
 
 
 
  provided by operating activities:
 
 
 
 
 
 
 
  Depreciation, depletion and amortization
 
 
 465 
 
 
339 
 
  Deferred tax provision
 
 
 54 
 
 
 88 
 
  Stock-based compensation
 
 
 17 
 
 
 14 
 
  Commodity derivative (income) expense
 
 
 (159)
 
 
                                                   13
 
  Cash receipts on derivative settlements, net
 
 
 86 
 
 
 95 
 
  Other non-cash charges
 
 
 3 
 
 
 3 
 
 
 
 
 717 
 
 
 754 
 
Changes in operating assets and liabilities
 
 
 (142)
 
 
        (25)
 
      Net cash provided by operating activities
 
 
 575 
 
 
 729 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
   Additions to oil and gas properties and other
 
 
 (888)
 
 
 (1,087)
 
   Acquisitions of oil and gas properties
 
 
 (9)
 
 
 (311)
 
   Proceeds from sales of oil and gas properties
 
 
 329 
 
 
 130 
 
   Redemptions of investments
 
 
—
 
 
 1 
 
      Net cash used in investing activities
 
 
 (568)
 
 
 (1,267)
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
   Net proceeds (repayments) under credit arrangements
 
 
 (86)
 
 
           585
 
   Proceeds from issuance of senior notes
 
 
 1,000 
 
 
 — 
 
   Repayment of senior subordinated notes
 
 
 (325)
 
 
            —
 
   Other
 
 
 (16)
 
 
(12)
 
      Net cash provided by financing activities
 
 
573 
 
 
573 
 
 
 
 
 
 
 
 
 
Increase in cash and cash equivalents
 
 
 580 
 
 
                                                        35
 
Cash and cash equivalents, beginning of period
 
 
 76 
 
 
 39 
 
Cash and cash equivalents, end of period
 
$
 656 
 
$
 74 
 
 
 
 
 
 
 
 
 

 
6
 

 

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 2012 stated without the effect of certain items to net income is shown below:

      2Q12  
   
(in millions)
  
Net income
   $ 135  
Net unrealized gain on commodity derivatives(1)
     (83 )
Income tax adjustment for above items
      30  
Earnings stated without the effect of the above items
   $ 82  
         
         
(1) The determination of "Net unrealized gain on commodity derivatives" for the second quarter 2012 is as follows:
  

 
     2Q12  
 
  
(in millions)
  
Commodity derivative income
   $ 135  
Cash receipts on derivative settlements, net
     (52 )
Net unrealized gain on commodity derivatives
   $ 83  
 
        

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 natural 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:

 
 
2Q12
(in millions)
 
Net cash provided by operating activities
 
$
    363 
 
   Net change in operating assets and liabilities
 
 
                                                 33
 
Net cash provided by operating activities before changes
 
 
 
 
in operating assets and liabilities
 
$
330 
 

 
7

NEWFIELD EXPLORATION CO /DE/ Reports