Newfield Exploration Co. is budgeting $1.6 billion for its oil and natural gas projects this year, with the bulk of the budget to be directed at its growing Midcontinent development activities. The Houston-based independent also is forecasting double-digit organic production growth.

About 80% of the 2008 budget will be allocated to development activities, which will be "substantially funded" through cash flow and cash on hand, Newfield stated last week. After selling $1.8 billion in assets last year, Newfield exited 2007 with $370 million in cash. Most of the assets sold last year were in the shallow waters of the Gulf of Mexico (GOM) in a $1.1 billion deal that Newfield struck with McMoRan Exploration Co. (see NGI, June 25, 2007).

Domestically, Newfield targets exploration and production development in the Midcontinent, the Rocky Mountains and onshore in Texas.

"Our '08 budget will deliver organic production growth of 13-21%," said Newfield CEO David A. Trice. "We expect to produce 215-230 Bcfe in '08, compared to approximately 190 Bcfe in 2007, adjusted for our '07 asset sales and acquisitions. Our growth is largely coming from growing onshore resource plays and new oil developments offshore Malaysia. Because of the quality of our asset portfolio, we have visible production and reserve growth for the next several years."

The Midcontinent region is now Newfield's largest division in terms of proved reserves -- representing 1.1 Tcfe at year-end 2007, or about 45% of the company's total proved reserves. Planned investments in the region account for about 40%, or $620 million, of Newfield's total budget this year, with most of the spending planned for the Woodford Shale, located in southeastern Oklahoma's Arkoma Basin.

"We plan to invest approximately $460 million in the Woodford Shale," said Trice. "We expect to drill about 100 operated horizontal wells this year and participate in another 60-70 outside operated wells...With this level of activity, our gross operated Woodford Shale production is expected to exit 2008 at approximately 250 MMcfe/d, an increase of 50% over the 2007 exit rate of 165 MMcfe/d."

Newfield, which has a 165,000-net-acre leasehold in the Woodford Shale, said it already has processed 3-D seismic coverage on more than 60% of its net acreage in the Woodford Shale, and by the end of this year about 95% of its acreage will have 3-D seismic coverage. It also has spudded 160 operated horizontal wells in the play.

In the Rockies Newfield plans to spend $310 million on development in 2008, or 20% of the total budget. The most significant investment area will be the Monument Butte Field, located in northeast Utah's Uinta Basin. Newfield expects to drill about 200 wells there this year.

"In late 2006, we began an infill 20-acre pilot program at Monument Butte and to date we've drilled more than 50 wells across a large portion of the field," said Trice. "The success of the 20-acre program indicates the potential to drill more than 1,000 additional locations. So in total we have as many as 2,000 wells remaining to drill at Monument Butte, which should result in increases in production over the next decade and more than 100 million barrels of additional proved reserves."

Onshore in Texas Newfield plans to spend $245 million, or 15% of its capital budget. Under an existing South Texas joint venture with ExxonMobil Corp., Newfield expects to drill 10-12 additional wells this year in the Sarita Field area of Kenedy County, TX. In the Val Verde Basin of West Texas, Newfield also plans to drill 12-15 wells targeting primarily the Ellenberger, Canyon and Strawn formations. Another $240 million, or 15% of the budget, is allocated to the Gulf of Mexico. This includes up to five deepwater wells, new seismic and 2008 federal lease sales.

Newfield noted that about 75% of its 2008 natural gas production is hedged at a New York Mercantile Exchange floor price of $8/MMBtu. Debt-to-book capitalization ratio at year-end 2007 was 23% and the company's $1.25 billion revolver is undrawn.

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