Happy Easter to all

[dan_s]

It is an absolutely beautiful day in Sugar Land, Texas today. Susan and I had a nice walk this morning and I spent a couple hours doing yardwork, which I love in the Spring. I just put the finishing touches on our next newsletter which will be sent out on Tuesday.

There is not going to be a new "Sweet 16 Detailed Update" on Monday because there is not much to report until we get more first quarter results. Newfield Exploration (NFX) did report first quarter results that were in-line with my forecast model. My Fair Value estimate for NFX remains at $86/share. Yes, I was expecting the large mark-to-market adjustment on their hedges since commodity prices were up at the end of the quarter. IMO the accounting rules for derivatives in the "Post Enron" era are ridiculous, distortive and do not help investors one bit.

Newfield reported $2.38 cash flow per share and they are on-track to generate over $12.00 CFPS this year. They have increased their capital budget to $1.9 million. It will be covered by cash flow from operations plus the sale of some non-core assets. The increased budget will be used to accelerate their oil production. NFX production will be up just slightly in the 2nd quarter then it is going to take off. They should report a 9% to 11% overall increase in production this year and, more importantly, a 40% to 45% increase in oil production.

NFX has over 65% of their 2011 natural gas production hedged at over $6/mcf. Hence, the large mark-to-market adjustment on their derivative - confusing right?

Happy Easter to all. IMO this is the most important holiday of the year. Susan & I are getting up early for the sunrise service then we will help in the pre-school for second service. Remember, we all enjoy God's grace.