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Newfield Raises Budget But Eyes Costs

Newfield Exploration Co. Thursday raised its 2011 capital budget to $1.9 billion from $1.7 billion set at the beginning of the year. The increase largely relates to leasing in "an undisclosed resource play," said CEO Lee Boothby during a conference call with financial analysts.

"Our expansion into this area actually began in 2010," he said. "Although we felt it was prudent to include in our planned expenditures, we are not yet ready to disclose our position in this area...[W]e want to keep our stealth play stealth..."

Production guidance for 2011 remains 312-323 Bcfe, an estimated increase of 8-12% over 2010 volumes.

Another reason for the increased budget is higher costs, Boothby said, noting 5-10% increases in service and labor costs throughout the company's onshore operations in the United States. "These increased costs relate to pressure pumping, steel price inflation, water handling trucking costs, mostly diesel-related, as well as overall increases in labor expenses," he said.

Drilling results in Newfield's Eagle Ford Shale acreage in South Texas and elsewhere have been strong. "...[W]e are drilling wells in record time in the Eagle Ford, the Uinta Basin and the Granite Wash," Boothby said. "The resulting impact is more wells and more completions in a given calendar year.

"During the first quarter, our Eagle Ford Shale wells were drilled and cased at an average of less than 10 days. This illustrates that our experience from other resource plays is transportable. Our initial drilling results in the Eagle Ford were encouraging, and our efforts today are focused on optimizing our completions to increase both oil production rates and [estimated ultimate recoveries]."

The level of drilling performance in the Eagle Ford has been a bit of a surprise to the company, Boothby allowed, although he said the play is one area where costs have been rising and the company is monitoring spending closely.

(To read the full story go to shaledaily.com.)

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