Newfield Exploration Gets Busy With Oil and Liquids
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Newfield Exploration Co. (NYSE: NFX) made progress during the second quarter of 2012 on the company’s plan to shift away from natural gas development and increase the percentage of crude oil and natural gas liquids in its production and reserve base. This transition is being led by the development of various onshore plays in the United States as well as opportunities internationally.
Second Quarter of 2012
Newfield Exploration reported crude oil and natural gas liquids production of 67,000 barrels per day in the second quarter of 2012, up 40% year over year. Crude oil and natural gas liquids comprise about 49% of the company’s total production and a much higher 86% of total revenue. This liquids stream is mostly crude oil, with natural gas liquids comprising only 4% of the company’s total production volume in the quarter.
Newfield Exploration estimates that approximately 50% of its production in the second half of 2012 will be crude oil and liquids. This is a significant accomplishment when you consider that the company’s production was 87% natural gas as recently as the fourth quarter of 2009.
Newfield Exploration’s high percentage of production of crude oil and liquids ranks the company near the top among the independent exploration and production companies.
Apache Corporation (NYSE: APA) reported about the same percentage of crude oil and liquids production but is much more diversified geographically than Newfield Exploration. The company has significant operations in Egypt, Africa, Australia, Canada and the North Sea, and reported 63% of its production outside the United States in the first quarter of 2012.
Pioneer Natural Resources (NYSE: PXD) has approximately 60% of its production volume in crude oil and natural gas liquids and recently increased production growth guidance for 2012. The company now expects to grow production by 25% to 29%, up from the previous range of 23% to 27%.
Rosetta Resources (NASDAQ: ROSE) has approximately 58% of its production volume composed of crude oil and liquids and is focused exclusively on the onshore United States, with a strong core position in the Eagle Ford Shale in Texas. The company reported 90% of its production from this play in the first quarter of 2012.
Many other exploration and production companies are also trying to transition towards crude oil and other liquids and away from natural gas but have not made as much progress. Ultra Petroleum (NYSE: UPL) is focused on the Marcellus Shale and Pinedale Field in Wyoming and reported that 97% of its production was composed of natural gas in the first quarter of 2012.
Despite this natural gas orientation, Ultra Petroleum’s operations are still economic even at low commodity prices, with the company reporting returns ranging from 10% to 30% on wells in the Pinedale field even at a natural gas price of $3.00 per Mcf.
Newfield Exploration has focused its development efforts on a number of onshore oil and liquid areas in the United States including the Bakken play in North Dakota, Woodford Shale in Oklahoma, the Eagle Ford Shale in Texas and various plays in the Uinta Basin.
The Bakken is a major focus of the company and Newfield Exploration is operating three rigs in the Williston Basin currently and expects to grow crude oil production from here by 35% over 2011 levels. The company is also developing the Three Forks formation, which is present just under the Bakken on much of its acreage.
Other operators are also active in developing the Bakken in North Dakota, with Hess Corporation reporting oil production of 55,000 barrels of oil equivalent (BOE) per day in the second quarter of 2012, up from only 25,000 BOE per day in the same quarter of 2011. This activity has led to a sharp rise in oil production in North Dakota over the last few years, with oil production in the state reaching an average of 639,277 barrels per day in May 2012.
Newfield Exploration has also moved aggressively to explore and develop internationally and is focused on Malaysia and China. The company reported net oil and liquids production of 30,400 BOE per day from Malaysia in the second quarter of 2012 and expects full year production from here to increase 40% over 2011.
In China, Newfield Exploration has 290,000 net acres under lease and is working to build infrastructure to enable production from the Pearl oil field. The company expects to invest $100 million here and see initial production of 15,000 barrels of oil per day in the fourth quarter of 2013 or the first quarter of 2014.
shaleplays has no positions in the stocks mentioned above. The Motley Fool owns shares of Ultra Petroleum and has the following options: long JAN 2014 $30.00 calls on Ultra Petroleum, long JAN 2014 $40.00 calls on Ultra Petroleum, and long JAN 2014 $50.00 calls on Ultra Petroleum. Motley Fool newsletter services recommend Ultra Petroleum. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.