NFX Q1 Results

[dan_s]

First Quarter Highlights: Adjusted EPS compare to my forecast of $0.67/share. Discretionary cash flow compares to my forecast of $290 million. Darn good quarter.

In the first quarter of 2018, both domestic net production and Anadarko Basin net production exceeded the high-end of the Company's guidance ranges. First quarter 2018 domestic net production was 173,600 BOEPD (41% oil and 61% liquids). The better than expected results during the quarter were primarily related to higher volumes from the Anadarko Basin, which averaged approximately 117,500 BOEPD during the first quarter.

Consolidated production for the first quarter of 2018 was 176,500 BOEPD (42% oil, and 62% liquids). The Company lifted 261,000 net barrels from its offshore oil field in China.

First quarter 2018 capital investments were $345 million and the Company reiterated its full year capital investment plan of approximately $1.3 billion.
During the first quarter, Newfield amended and extended its unsecured credit facility by $200 million to a total capacity of $2.0 billion. The term was extended to May 2023. As of March 31, 2018 the Company had no borrowings on the facility.

The Company continues to see strong returns from its development drilling campaign in STACK. To date, Newfield has drilled or participated in more than 85 infill wells. These developments have tested as many as 12 wells per drilling spacing unit and results to date on average exceed our three-year plan well performance estimates. Long-term production updates for these various infill developments can be found in the Company's @NFX publication.

As part of an ongoing drilling campaign to hold acreage by production, the Company turned to sales several new wells in the Western STACK region of Blaine and Custer Counties, Oklahoma. The Debbie and Sandrock wells attained early gross production rates of nearly 30 MMcfe/d. The Sawyer and Lois wells had 24-hour gross initial rates of 2,483 BOEPD (54% oil) and 1,842 BOEPD (40% oil), respectively. As expected, due to the geographic location of these HBP wells, the production was weighted toward natural gas -- but results demonstrate the potential of this region. With the recent completion of these wells, Newfield's acreage position in this area is substantially all held by production. Additional information regarding these Western STACK wells is available in @NFX.

Realized crude oil prices during the first quarter of 2018 in STACK averaged approximately 100% of NYMEX WTI. Domestic natural gas prices in first quarter averaged more than 90% of Henry Hub pricing as a result of Newfield's proactive marketing initiatives. Detailed information on realizations for the first quarter can be found in @NFX.
First Quarter 2018 Financial and Production Summary

For the first quarter, the Company recorded net income of $86 million, or $0.43 per diluted share (all per share amounts are on a diluted basis). Earnings were impacted by an unrealized derivative loss of $79 million, or $0.39 per share. After adjusting for the effect of the unrealized derivative loss during the period, net income would have been $165 million, or $0.82 per share. See the "Explanation and Reconciliation of Non-GAAP Financial Measures" at the end of this press release for additional disclosures.

Revenues for the first quarter were $580 million. Net cash provided by operating activities was $260 million. Discretionary cash flow from operations was $321 million.

[mattreue]

"Darn good quarter". Obviously the market does not think so. Why do you think it is underperforming today?

[bobs]

could you explain the 79M unrealized loss on derivative contracts since that might be reason for the 10%+ drop in price after the earnings announcemnt

[dan_s]

SEC and GAAP accounting rules require companies to "mark-to-market" their hedges. Hedges (i.e. "derivative") are like Calls and Puts on stocks. They derive their value form the underlying commodity. Any company that has a lot of future oil production hedged is going to have non-cash writedown on the value of those hedges when the price of oil goes up from the beginning to the end of a quarter. The non-cash portion is added back to get "Adjusted Earnings".

I doubt that the mark-to-market adjustment had anything to do with the share price. Most investors know to ignore them.

I will take a look at NFX on Friday morning.