Newfield Posts Loss for First Quarter

Newfield Exploration Co. late Wednesday reported first-quarter financial and operating results along with its expected range of production for 2007. --Commodity derivative expense of $246 million ($160 million after tax), or $1.24 per share, associated with unrealized changes in the fair market value of open derivative contracts that are not designated for hedge accounting.
--A $47 million ceiling test writedown (after tax), or $0.36 per share, associated with low natural gas prices in the U.K. at the end of the first quarter. The U.S. equivalent gas price used in this calculation was $3.74 per Mcf.
--An increase in Newfield's litigation reserve associated with a statewide royalty owner class action lawsuit in Oklahoma related to royalty payments dating back to December 1997. This charge significantly increased G&A expense in the first quarter of 2007. G&A expense for the remainder of 2007 is expected to be about $0.50 per Mcfe.

Without the effects of the above items, net income for the quarter would have been $119 million, or $0.92 per share. Earnings for the quarter include $36 million of hurricane related repair expenses. Revenues in the first quarter of 2007 were $440 million. Net cash provided by operating activities before changes in operating assets and liabilities was $346 million.

Newfield's production in the first quarter of 2007 was 64.7 Bcfe.

Operational Highlights

  • Fastball, located at Viosca Knoll 1003 in the deepwater Gulf of Mexico, was successful and encountered more than 90' of net hydrocarbon pay. The well was drilled for approximately $20 million (gross). The field will be developed as a tie back to existing infrastructure. First production is expected in late 2008 or early 2009. Newfield operates the development with a 66% working interest.
  • Success continues under Newfield's South Texas joint venture. The Sarita B-87 well found 713' of net gas pay -- the thickest pay seen in any well to date. Completion is underway. The Sarita B-83 well was recently tested at 24 MMcfe/d (gross). Both successes set up additional development drilling locations. Newfield has an inventory of 20 ready-to-drill prospects under this venture and is currently operating three drilling rigs.
  • Woodford Shale production reached 110 MMcfe/d (gross) in the quarter. Newfield has an interest in more than 80 horizontal wells, or 40% of the industry's 200 horizontal wells drilled in the play. Newfield remains the leading operator with 14 rigs running.

"We're off to a good start in 2007 with a success in the deepwater Gulf and continued success in our onshore regions -- South Texas, the Mid-Continent and the Rockies," said David A. Trice, Newfield Chairman, President and CEO. "Throughout 2006 and early 2007, we suffered delays with large development projects in the deepwater Gulf of Mexico and overseas. We are days away from bringing two new developments on-line -- Grove in the North Sea and Wrigley in the deepwater Gulf of Mexico. With certainty on the timing of these developments, we are now able to issue an expected range of production for 2007. We have growth in all of our operating regions and our teams will continue to work hard to deliver on our promises."

                                    2006a (Bcfe)  2007e (Bcfe)   % Increase

    Gulf of Mexico                       93        95 - 100        2 - 7%
    Onshore U.S.                        143       158 - 162       10 - 13%
    International
     (excludes Grove and Abu)           6.6         7 - 8          6 - 21%
    Total                             242.6       260 - 270        7 - 11%

    Grove Field, U.K. North Sea         ---         1 - 3*            NM
    Abu Field, offshore Malaysia        ---         4 - 6             NM

     * Assumes that the Grove Field is voluntarily curtailed to approximately
       10 MMcfe/d (gross) for the remainder of 2007 due to low U.K. natural
       gas prices.

Second Quarter 2007 Estimates

Natural Gas Production and Pricing

The Company's natural gas production in the second quarter of 2007 is expected to be 53 - 58 Bcf (582 - 643 MMcf/d). Based on current prices, Newfield estimates that its realized price for natural gas production from the Gulf of Mexico and onshore Gulf Coast, after basis differentials, transportation and handling charges, will average $0.40 - $0.60 less per MMBtu than the Henry Hub Index. Realized gas prices for the Company's Mid-Continent properties, after basis differentials, transportation and handling charges, typically average 75 - 85% of the Henry Hub Index. Hedging gains or losses will affect price realizations.

Crude Oil Production and Pricing

The Company's oil production, including international liftings, in the second quarter of 2007 is expected to be 2.1 - 2.3 million barrels (23,000 - 26,000 BOPD). Newfield expects to produce approximately 2,700 BOPD net from its Malaysian operations and approximately 2,100 BOPD net from its China operations. The timing of liftings in Malaysia and China may affect total reported production. The price the Company receives for Gulf Coast production typically averages about $2 per barrel below the NYMEX West Texas Intermediate (WTI) price. The price the Company receives for its production in the Rocky Mountains averages about $13 - $15 per barrel below WTI. Oil production from the Mid-Continent typically sells at a $1.00 - $1.50 per barrel discount to WTI. Oil production from Malaysia typically sells at Tapis, or about even with WTI. Oil Production from China typically sells at $10 - $12 per barrel less than WTI. Hedging gains or losses will affect price realizations.

Lease Operating Expense and Production Taxes

LOE is expected to be $97 - $107 million ($1.40 - $1.55 per Mcfe) in the second quarter of 2007. This includes major expense of $15 million related to hurricane related repairs in the Gulf of Mexico. It is anticipated that hurricane repairs will be substantially completed by the end of the second quarter. Production taxes in the second quarter of 2007 are expected to be $23 - $25 million ($0.33 - $0.37 per Mcfe). These expenses vary and are subject to impact from, among other things, production volumes and commodity pricing, tax rates, service costs, the costs of goods and materials and workover activities.

General and Administrative Expense

G&A expense for the second quarter of 2007 is expected to be $33 - $37 million ($0.48 - $0.53 per Mcfe), net of capitalized direct internal costs. Capitalized direct internal costs are expected to be $13 - $15 million. G&A expense includes incentive compensation expense. Incentive compensation expense depends largely on adjusted net income (as defined in the Company's incentive compensation plan), which excludes unrealized gains and losses on commodity derivatives.

Interest Expense

The non-capitalized portion of the Company's interest expense for the second quarter of 2007 is expected to be $21 - $23 million ($0.30 - $0.34 per Mcfe). As of April 25, 2007, Newfield had $245 million outstanding under its credit arrangements. The remainder of debt consists of four separate issuances of notes that in the aggregate total $1,175 million in principal amount. Capitalized interest for the second quarter of 2007 is expected to be about $10 - $11 million.

Income Taxes

Including both current and deferred taxes, the Company expects its consolidated income tax rate in the second quarter of 2007 to be about 35 - 38%. About 85 - 95% of the tax provision is expected to be deferred.

The Company provides information regarding its outstanding hedging positions in its annual and quarterly reports filed with the SEC and in its electronic publication -- @NFX. This publication can be found on Newfield's web page at http://www.newfield.com .

Newfield Exploration Company is an independent crude oil and natural gas exploration and production company. The Company relies on a proven growth strategy of growing reserves through the drilling of a balanced risk/reward portfolio and select acquisitions. Newfield's domestic areas of operation include the U.S. onshore Gulf Coast, the Anadarko and Arkoma Basins of the Mid-Continent, the Uinta Basin of the Rocky Mountains and the Gulf of Mexico. The Company has international operations in Malaysia, the U.K. North Sea and China.

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