Energy Prospectus

THE WOODLANDS, Texas, Jan. 13, 2015 /PRNewswire/ -- Newfield Exploration Company (NFX) today disclosed that the Company has concluded its marketing process for its China business and now plans to retain the assets. For financial purposes, the China business will be reclassified as "continuing operations" in the fourth quarter of 2014.

"The recent and significant pull back in global oil prices created headwinds for our China sales process," said Larry Massaro, Newfield's executive vice president and CFO. "Our China oil fields are expected to generate significant free cash flows over the next several years. Although our intent was to monetize the asset, it was not a sale at any price. We will remain disciplined in our capital investments and intend to use the cash flows from our China business to manage short-term borrowing levels and ensure that we manage our overall debt and liquidity positions during a period of weak oil prices."

FYI: Larry Massaro used to work with me at Hess. He is a good guy and very smart.

What impact dies this have on your valuation? As I recall you were expecting a sale approaching a billion dollars with proceeds used to reduce debt.

What is the amount of cash flow coming from these assets? What level of capex is required if any to hold the leases/ concession?

An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab.

My forecast models never assume an asset sale until it is confirmed by the company. China assets are expected to generate free cash flow in 2015.

At this point, I am assuming 10% year-over-year production growth for 2015. NFX has not provided production guidance for 2015.

Based on my forecast, NFX should generate approximately $1 billion cash flow from operations in 2015, compared to ~$1.3 billion in 2014. They have quite a bit of their oil hedged at good prices for 2015. See hedging table on the bottom of the forecast model.

The company's balance sheet is in pretty good shape. They did not have to sell the China assets. I was just hoping they would get a much better price than the market was expecting.

From the company:
Newfield has monetized more than $2.6 billion in non-strategic assets over the last three years and has used proceeds to fund its domestic businesses. The recent sale of the Granite Wash (closed in Oct. 2014) allowed for the repayment of $600 million in long-term debt. Newfield's credit facility expires in 2018 and the Company has no long-term bond maturities prior to 2020. Newfield currently has more than $1 billion of liquidity under its credit facility and other money market lines.

Net liftings from China in the fourth quarter of 2014 were approximately 300,000 bbls of crude oil. Newfield will provide 2015 guidance for its China business along with total company guidance in February 2015.

The Pearl facility, located in the South China Sea, is currently producing oil and development drilling is ongoing. Net capital investments in China for 2015 are estimated at less than $50 million. The Pearl facility is expected to reach a peak rate in mid-2015. [My SWAG is that production will reach 40,000 BOPD this year based on the size of the platform and production facilities.]