Newfield Exploration (NFX)

[dan_s]

I have updated my forecast model for NFX and it will be posted to the EPG website later today.

NFX is my Top Pick for the STACK play in Oklahoma. Newfield will have a lot of good news to report on their STACK drilling program when they report Q4 results next week. For those of you that own GST, Newfield will be completing 5 to 7 horizontal stack wells this year that are direct offsets to Gastar's acreage block in Oklahoma. Newfield has been getting some of their best results in the Meramec due SW of Gastar's leasehold.

My valuation of NFX is adjusted to $51.85/share, compared to First Call's price target of $37.43.

Analysts' forecasts submitted to First Call for NFX, and all of the Sweet 16, are all over the map, so don't put much weight in what First Call is now showing for Revenues, EPS or CFPS.

For example, the spread between the low and high revenue forecasts for NFX are $1.08 Billion to $2.17 Billion. That is quite a difference. Part of the reason is that some analysts do not include the impact of hedges in their revenue forecasts. They just take their firm's commodity price deck for oil, gas and NGLs and multiply them by forecast volumes. NFX got more than $500 million of cash settlements on their hedges in 2015 and they have a lot of their production hedged for 2016 as well. You can't ignore the hedges.