Newfield Exploration Co.'s natural gas-weighted production jumped 20% in 2Q2008 from the same period a year ago, lifted by strong performance from its Woodford Shale operations in the Arkoma Basin.
The Houston-based explorer's 2Q2008 production reached 57.6 Bcfe, which exceeded the upper end of its guidance for the quarter. Based on the quarterly results, Newfield again raised its 2008 expected range of production -- the third time this year -- and now estimates full-year volumes will be 232-239 Bcfe, which is 22-26% over 2007 production (adjusted for asset sales and acquisitions).
"We said 2008 is about execution, and we are delivering," CEO David Trice told energy analysts Thursday during a conference call to discuss the quarterly results. Trice and his management team spoke from their Monument Buttes offices in Utah, where Newfield has begun oil exploration. "Major projects are driving our growth, and first and most important is the Woodford Shale."
Newfield's Woodford production set a quarterly record with more than 200 MMcfe/d gross, Trice said. "This represents an increase of more than 20% since year-end 2007. Newfield expects its gross operated Woodford production to exceed 250 MMcfe/d by year-end 2008, representing a more than 50% increase in production when compared to 2007 exit rates."
In the Oklahoma play, in which Newfield is the dominant producer with 165,000 net acres, the company had booked 600 Bcfe in proved reserves at the end of 2007. "Woodford is a great asset. We got their first, we've drilled the most wells, and we're at a great point in the development of this play," said Trice. "Nearly all of it is covered by 3-D seismic, and we have thousands of wells to drill." Eighteen additional extended lateral wells are awaiting completion.
"We are clearly in the development mode. Our completed well costs continue to decrease," and are estimated now at around "$2/Mcf and below." Newfield has 43 extended lateral wells producing currently, and "90% of the wells drilled this year will be extended reach laterals." In total, the industry has spud 641 horizontal wells in the field and of that total, Newfield has spud 205 of them. Newfield's development in the play is based on "60-acre spacing or less," and its rig count should be 15 by early next year. In the next two to three years, the company wants to move to 24 rigs, he added.
Besides its emerging oil operations in the Monument Butte of Utah, Newfield also is assessing a deep gas play there. The first deep gas test under an agreement with Red Technology Alliance (RTA) has reached its proposed total depth and testing is under way, Trice noted. The test well was drilled to more than 16,600 feet, and it targeted the Mancos Shale, as well as shallower, known productive horizons including the Wasatch, Mesa Verde and Blackhawk. The RTA agreement allows for promoted exploratory drilling and progressive earnings in 71,000 net acres in which Newfield would retain more than a 70% stake. A second well under this agreement has begun drilling; results are expected in the next two months.
For the quarter, Newfield reported a net loss of $244 million ($1.89/share), which included an unrealized loss on commodity derivatives of $508 million net ($384 million after-tax), or a loss of $2.95/share. Without the derivatives loss, net income was $140 million ($1.06/share). Revenues in 2Q2008 reached $691 million. Capital spending was $730 million, which included a $226 million acquisition in South Texas.
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