Newfield Exploration Company (NFX, Financial) reported its unaudited second quarter 2014 financial results last month and provided an update on its operations. With the recent sale of Newfield's Malaysia business, and the process underway to divest its China business, the financial and operating results for the company's international businesses are reported as "discontinued operations."
For the second quarter of 2014, Newfield reported a consolidated net loss of $22 million, or $0.16 per share. Net income would have been $59 million, or $0.43 per share, excluding an unrealized loss on commodity derivatives of $127 million ($82 million after-tax), or $0.59 per share.
Second quarter consolidated net cash provided by operating activities before changes in operating assets and liabilities were $336 million. Newfield's net production from continuing operations in the second quarter of 2014 was 12.1 MMBOE, exceeding the mid-point of quarterly guidance by approximately 1.1 MMBOE. Net liftings from discontinued operations totaled approximately 0.04 MMBOE. Domestic liquids production in the second quarter was up 13% compared to the first quarter of 2014 and 40% over the comparable period in 2013. Liquids comprised approximately 55% of total second quarter domestic production.
Uinta Basin
Uinta Basin second quarter net production averaged 26,100 BOEPD, up 5% from an average of 24,900 BOEPD in the first quarter of 2014. Based on strong well performance, primarily from the Central Basin, Newfield nearly doubled its beginning of the year guidance for the basin, and now expects Uinta production to grow about 10% year-over-year.
Planned 2014 capital investments of $400 million are focused on two areas – the waterflood development of the Greater Monument Butte Unit and recent drilling in high-potential, horizontal plays in the adjacent Central Basin.
Early production data from recent SXL wells is supportive of the company's original average type curves for the Uteland Butte and Wasatch plays. Oil cuts for the new wells are averaging about 90% after the first 90 days of production. Newfield expects to drill 15-20 SXLs in the Central Basin in 2014.
Consistent with the Company's other SXL programs (Eagle Ford, Williston, Anadarko Basin), Newfield is demonstrating the economic benefits of drilling and completing longer laterals. A recent "best-in-class" Uteland Butte SXL well was drilled and completed for approximately $11.6 million gross.
Anadarko Basin
The company's second quarter 2014 production from the Anadarko Basin increased more than 30% over the first quarter of 2014, and is expected to more than double year-over-year. Newfield's second quarter net production in the Anadarko Basin averaged 39,000 BOEPD compared to 29,500 BOEPD in first quarter of 2014. The Anadarko Basin is Newfield's largest investment region in 2014 (more than $750 million), constituting approximately 45% of planned total investments.
The Company is planning to drill about 70 wells in the SCOOP and STACK plays and exit 2014 with net production of nearly 50,000 BOEPD.
The SCOOP and STACK plays offer multiple "stacked" geologic horizons for exploitation. The company continues to add to its acreage position in the Anadarko Basin and has leased an additional 25,000 net acres year-to-date. Newfield today has more than 250,000 net acres in the Anadarko Basin.
The "Yandell" development, located in SCOOP Wet Gas, recently commenced production from five XL wells (lateral length 4,950'). The wells had an individual average 24-hour initial production of approximately 1,300 BOEPD gross, of which 41% was oil.
Newfield's 2014 production estimate for the Anadarko Basin is now 14.8 MMBOE, up from its beginning of the year guidance of 14.3 MMBOE. Through the end of the second quarter of 2014, the company "made up" for its beginning of the year shortfall in sales related to mid-stream infrastructure expansions and has increased its second half 2014 guidance.
Williston Basin
Williston Basin net production in the second quarter of 2014 averaged 18,100 BOEPD, up 21% over its first quarter 2014 average of 14,900 BOEPD. Year-over-year production in the Williston Basin has increased more than 50%. Based on the strength of well performance and field-level execution, Newfield increased its 2014 Williston Basin growth outlook by an additional 4%. The Company expects its 2014 volumes in the Williston Basin to increase 41% over 2013 levels.
Newfield continues to see drilling efficiencies through execution of its SXL development campaign in the Williston. Year-to-date, SXL well (10,000' lateral lengths) costs are averaging $7.9 million, including about $0.8 million in artificial lift and facilities. Recent wells are being drilled in under 20 days and the company expects these efficiencies will allow for the drilling of about eight additional wells in 2014. With its continued four-rig program, Newfield now expects to drill more than 55 wells in 2014.
Eagle Ford
Eagle Ford net production in the second quarter of 2014 averaged 12,300 BOEPD, up approximately 12% from its first quarter 2014 average. The company is running a single-rig program to develop its West Asherton field and Fashing area. Production is expected to grow approximately 39% year-over-year. Newfield expects to drill about 20 wells during 2014.
