Newfield has reported its unaudited fourth quarter and full-year 2008 financial and operating results.
Fourth Quarter 2008
For the fourth quarter of 2008, Newfield recorded a net loss of $789 million, or $6.09 per diluted share (all per share amounts are on a diluted basis). The loss reflects the following items:
- a $1.8 billion ($1.2 billion after-tax), or $8.82 per share, reduction in the carrying value of oil and gas properties due to significantly lower commodity prices at year-end 2008. This non-cash adjustment resulted from the application of full cost accounting rules;
- a net unrealized gain on commodity derivatives of $623 million ($401 million after-tax), or $3.07 per share;
- a goodwill impairment of $62 million or $0.48 per share.
Without the effect of the above items, net income for the fourth quarter of 2008 would have been $26 million, or $0.20 per share.
Revenues in the fourth quarter of 2008 were $338 million. Net cash provided by operating activities before changes in operating assets and liabilities was $243 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.
Newfield's production in the fourth quarter of 2008 was 62 Bcfe. Capital expenditures in the fourth quarter of 2008 were $533 million.
Full Year 2008
For the full year 2008, Newfield reported a net loss of $373 million, or $2.88 per diluted share. The loss reflects the following items:
- a $1.8 billion ($1.2 billion after-tax), or $8.75 per share, reduction in the carrying value of oil and gas properties due to significantly lower commodity prices at year-end 2008. This non-cash adjustment resulted from the application of full cost accounting rules;
- a net unrealized gain on commodity derivatives of $665 million ($429 million after-tax), or $3.25 per share;
- a goodwill impairment of $62 million or $0.47 per share.
Without the effect of the above items, net income for 2008 would have been $415 million, or $3.14 per share.
Revenues for 2008 were $2.2 billion. Net cash provided by operating activities before changes in operating assets and liabilities was $857 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.
Newfield's production for the full year of 2008 was 236 Bcfe, an increase of 24% over 2007 volumes (adjusted for asset sales and acquisitions). Capital expenditures in 2008 were approximately $2.3 billion.
- Proved Reserves Increase 18% to 2.95 Tcfe at Year-End 2008 - Newfield added 758 Bcfe in 2008, stated before negative price related reserve revisions of 66 Bcfe. Reserve Life Index of approximately 13 years reflects continued growth in longer-lived "resource plays."
- Approximately 75% of Total Year-End Reserves Located in Resource Plays -- Mid-Continent and Rocky Mountain divisions posted combined reserve growth of 21%. Newfield has significant inventory of development drilling locations. Nearly two-thirds of 2009 capital budget allocated to these regions.
- Most Significant Reserve Additions Came in Mid-Continent Division -- Newfield's Mid-Continent division reserves grew 26%. Division now comprises nearly 50% of total Company reserves. Reserves in the Mid-Continent region were added for finding and development costs of $1.80 per Mcfe, excluding the negative impact of price-related reserve revisions, and $2.02 per Mcfe including these revisions. See "Finding and Development Costs" found after the financial statements in this release.
- Woodford Shale Sets Production Record in Fourth Quarter 2008 -- In mid-December 2008, gross operated production exceeded Newfield's year-end goal of 250 MMcfe/d. Total Woodford production volumes in 2008 increased 65% over 2007. Benefit of efficiency gains expected to grow production an additional 30% in 2009, despite running fewer operated rigs. A complete Woodford Shale update can be found in today's edition of the Company's @NFX publication on the website at http://www.newfield.com.
- Success with Initial Dual Lateral Woodford Completion -- Newfield's first dual lateral completion in the Woodford had an initial gross production rate of 13 MMcfe/d and is currently producing 6 MMcfe/d after nearly three months of production. Each lateral was approximately 4,250 feet in length.
- Stiles Ranch Field Achieves Record Production -- Production from the Stiles Ranch Field, located in the Texas Panhandle, recently reached a record gross production rate of 130 MMcfe/d. Newfield has an approximate 80% interest in the field.
- Monument Butte Field Benefits from Increased Activity Levels in 2008 --
- 2008 gross production grew 17% over 2007 levels, reaching 17,000 BOPD in late 2008.
- The Company has drilled 124 wells on 20-acre spacing in its Monument Butte Field, located in the Uinta Basin of the Rocky Mountains. The Company expects to drill more than 3,000 development wells to fully develop the field. Newfield has drilled more than 900 wells in the field since acquiring it in 2004.
- During 2007 and 2008, Newfield added 45,000 net acres north and adjacent to Monument Butte. The lands are owned by the Ute Tribe. Newfield has drilled 44 successful wells on this acreage out of 45 attempts to date. Results have been consistent with drilling in the main field area.
- The Company remains encouraged with our deep gas drilling beneath Monument Butte. The Company drilled six successful wells in 2008 to test the Wasatch, Mesa Verde, Blackhawk and Mancos Shale beneath the Monument Butte Field. Half of these wells were covered under a deep gas exploration agreement signed in late 2008 that allows for promoted exploratory drilling and progressive earning in approximately 71,000 net acres in which Newfield will retain a greater than 70% interest. The remaining three wells were drilled in the eastern portion of the field (covers 10,000 acres) where Newfield is operator and retains an 86% interest. Although results have been positive, the Company investments in this play in 2009 have been substantially curtailed due to commodity prices and our capital budget.
- Continued Positive Drilling Results from Williston Basin - Since 2007, Newfield has added more than 400,000 net acres in the Williston Basin. In 2008, the Company focused on assessing this acreage position, building an inventory of prospects and adding new acreage. Recent drilling has been focused in North Dakota on the southern end of the Nesson Anticline. Complete drilling results can be found in @NFX.
- Four Deepwater Gulf of Mexico Discoveries in 2008/early 2009 -
- Developments underway expected to generate significant production growth over the next three years. Newfield is currently drilling the first of two back-to-back deepwater wells.
- Malaysian Production Increases 145% in 2008 - All of Newfield's shallow water fields on PM 318 and PM 323 are now on-line. Although planned international activity levels have been reduced in 2009 due to capital budget constraints, production is expected to increase 10% over 2008 levels.
2009 Capital Budget, Hedging and Liquidity
As previously announced, Newfield's 2009 capital budget is aligned with anticipated cash flow and was set at $1.45 billion (including capitalized interest and overhead). As a comparison, Newfield invested $2.3 billion in 2008, including $236 million in acquisitions and $129 million of capitalized interest and overhead. Newfield currently has approximately $640 million of borrowings outstanding under its $1.25 billion credit facility.
Newfield's estimate for 2009 cash flow is anchored by its substantial hedge position. Approximately 70% of the Company's expected 2009 gas production is hedged with an average minimum price of nearly $8 per Mcf. Substantially all of Newfield's 2009 domestic oil production is hedged with half of this amount fixed at about $129 per barrel and the remainder with a floor price of $107 per barrel.