Newfield Posts Strong Production Volumes, Up 12% over 2Q 2008
Newfield's production in the second quarter of 2009 was 65 Bcfe, an increase of 12% over the second quarter of 2008. An additional 1 Bcfe was produced in Malaysia during the second quarter of 2009 but was not lifted due to timing of liftings.
"Our second quarter results show the diligent efforts of our employees to lower costs and improve margins throughout our focus areas," said President & CEO Lee K. Boothby. "We are seeing cost reductions throughout our operations. A combination of improving efficiencies in drilling and completions, falling service costs and a strong hedge position in 2009-2010 provides us with an advantage in today's challenging environment. Our production volumes are strong. In fact, we expect to be in the top half of our guidance range for 2009 AND we intend to continue deferring completions in the Woodford, as well as defer completions on the remainder of our planned Granite Wash wells in 2009.
"We are intensely focused on how we are allocating capital in our business units today, ensuring that dollars are flowing to the areas with the best returns and the highest growth prospects. We intend to meet our production targets in 2009 and are confident that our portfolio will allow us to grow production at similar percentage levels, within cash flow, in 2010-11."
Gross operated production from the Mid-Continent division has been running ahead of beginning of the year expectations, primarily due to increased production from the Granite Wash play. Current gross production from the Mid-Continent is 400 MMcfe/d, or 292 MMcfe/d net.
- Horizontal Drilling Success at Stiles Ranch -- Newfield's first seven horizontal wells in the Granite Wash play had an average initial production rate of 22 MMcfe/d. All of the wells to date have been drilled in the Stiles Ranch field, located in Wheeler County, Texas. In the second quarter of 2009, Newfield increased its activity in the field and is today running three operated drilling rigs, all drilling horizontal wells. Newfield has an approximate 80% working interest in Stiles Ranch and substantially all of the acreage is held-by-production. A complete update on the Granite Wash activities can be found in a separate news release issued earlier today.
- Woodford Shale -- Since the beginning of the year, Newfield has released three operated rigs in the Woodford. The Company now has 10 operated rigs running under term contracts, with four of the remaining rigs rolling off of term contracts in the second half of 2009. The timing of rig contract expirations and the fact that more than 90% of the Company's 165,000 net acres are now held-by-production provides flexibility. Due to the recent weakness in natural gas prices, Newfield has been intentionally slowing its pace of new well completions. Newfield has an inventory of about 25 wells that have been drilled but not completed. The timing of these completions largely depends on natural gas prices. Gross operated production in the Woodford is approximately 240 MMcfe/d, or about equal to the first quarter 2009 exit rate.
- Woodford Gas Sales Now Flowing Through Mid-Continent Express -- Last week, Newfield initiated firm gas sales through the new Arkoma Connector and into the Mid-Continent Express pipeline. Today, 100% of the Company's Woodford gas is being sold under firm transportation agreements. Newfield's realized prices for Mid-Continent properties are expected to improve to 75-85% of the Henry Hub Index as the Company utilizes firm transportation agreements that provide guaranteed pipeline capacity at a fixed price to move its natural gas production to the Perryville, Louisiana markets.
Deepwater Gulf of Mexico Update
Newfield recently announced two discoveries in the deepwater Gulf of Mexico -- Pyrenees and Winter. Since the beginning of 2008, Newfield has drilled seven successful wells out of eight exploration attempts in the deepwater Gulf and now has seven deepwater developments underway, providing significant future production growth.
- Pyrenees Sidetrack Underway -- Located at Garden Banks (GB) Block 293 in approximately 2,100' of water, Pyrenees encountered approximately 125' of net hydrocarbon pay in three separate intervals. Newfield and its partners recently contracted a deepwater rig and are in the process of sidetracking the well to test both shallower and deeper objectives. Newfield operates the development with a 40% working interest.
- Additional Prospects Around Pyrenees Added Through Recent GOM Lease Sale -- In the most recent GOM lease sale, Newfield picked up four additional lease blocks associated with the "Pyrenees Complex." New prospects include Mastiff (GB 338, 382) and Saluki (GB 381, 425) where Newfield operates with an 85% and a 100% working interest, respectively. The Company is in the process of selling down a portion of its interest in these prospects on a promoted basis. Exploratory drilling could occur as early as 2010.
- Winter -- Winter (GB 605) is located in approximately 3,400' of water. The well encountered approximately 44' of net hydrocarbon pay in two sands and was temporarily abandoned. Partners are considering various development options, with first production anticipated in 2011. Newfield is the operator with a 30% working interest.
Monument Butte Update
Gross oil production from Monument Butte, located in the Uinta Basin of Utah, is about 16,000 BOPD. Differentials have narrowed recently to $12-$13 per barrel below WTI (including transportation expense). Newfield is running a three-rig program in the Monument Butte field today and plans to add a fourth operated rig in the third quarter of 2009. The Monument Butte field area covers approximately 180,000 gross acres, substantially all held by production.
Williston Basin Update
The Company has approximately 500,000 net acres, with nearly 200,000 acres in prospective development areas. Newfield has drilled 11 successful oil wells in the North Dakota portion of the Williston Basin and gross operated production is about 4,000 BOEPD. Newfield is currently running one operated rig in the basin. The most recent completion was the Moberg 1-29H well, located in McKenzie County, North Dakota. The well had initial production of 1,200 BOEPD. Newfield operates the well with a 72% working interest.
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