Joining some of its peers, most notably EOG Resources, Newfield Exploration announced it is curtailing a small portion of its fourth quarter natural gas production in response to low gas prices. The company also reported that the action will allow it to take advantage of a likely further decline in service sector costs.

Newfield said in a filing with the Securities and Exchange Commission it still expects to meet its full-year production target of at least 175 Bcfe, a 25% increase from 2000 production levels. However, it was ahead of schedule and expects to reduce production flows by about 30 MMcf/d mostly in the Gulf of Mexico.

“We’ve already trimmed back our rig count in some key operating areas over the last couple months,” said spokesman Steve Campbell. “Some of that is in response to falling service costs and rig rates and some is in response to gas prices that have deteriorated. Drilling costs are falling at this point, so we think we can pick up cheaper rigs and service costs a month from now.”

Campbell noted the company increased its production forecast at mid-year from 170 Bcfe to 175-180 Bcfe, which would have been a 30% increase in production over last year. “We thought it was prudent to not produce our reserves in a spot price environment that is weak today. Over 60% of our current production is hedged at very attractive prices close to $4/MMBtu. We are significantly hedged, over half our production, through the middle of next year,” he said. “By all means you would produce 60-70% of your gas and take that $4 and smile, but we have the rest of our production out there and we are a six-year reserve life company, so each quarter we are producing a significant amount of our net present value.

“We’re curtailing a small amount of production, maybe 30 MMcf/d. Most of that is coming out of the Gulf of Mexico. It’s not only curtailments. It’s also capital spending. An example would be why do a workover today, if you think you can do that workover operation next month cheaper than you can do it today. We deferred some capital projects.”

The company’s U.S. gas production in the first half of the year averaged 366 MMcf/d. Production volumes for the first half of 2001 were 31% above the same period last year.

EOG Resources, another large U.S. independent producer, announced late last month that it plans to reduce production by about 75 MMcf/d, with most of the reduction occurring in the Gulf Coast region of Texas and Louisiana (see Daily GPI, Sept. 26). “Natural gas is too hard to find, and we’re not going to give it away,” EOG Resources spokeswoman Maire A. Baldwin said at the time of the company’s announcement.

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