Newfield Exploration Is Not a Bad Buy

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

A week before Newfield Exploration (NYSE: NFX  ) came out with its second-quarter results, I wrote about the promising long-term growth prospects of the company. However, the latest results weren't too exciting, with flat production and escalating costs dampening the mood. Should Fools be concerned?

Little to smile about
Total production stood at 71.6 billion cubic feet equivalent compared to 71.8 Bcfe in the year-ago quarter. Newfield has consciously moved away from natural gas, whose production fell 5%. At the same time, oil and natural gas liquids production increased by 9%. In fact, on the domestic front, liquids production grew by a phenomenal 24%, keeping the generally bullish oil market in perspective.

From an earnings standpoint, net income stood at $219 million, thanks to unrealized gains on derivatives worth $81 million. In other words, without the effect of this item, adjusted net income stands at $138 million, or $1.02 per share. This is a fall from adjusted earnings of $142 million, or $1.06 per share in the second quarter last year. Obviously, this is slightly concerning.

A small concern
While revenue saw a 39% jump -- thanks to higher oil price realizations -- operating expenses saw a simultaneous 32% surge, which is definitely a matter of concern. Service costs have gone up because of aggressive expansions and capital costs involved in the company's Granite Wash, Eagle Ford, and Williston Basin projects. But developing these plays comes at a cost because of their rising popularity in the E&P space.

The company intends to slash costs by "intentionally limiting activities in hot plays that have experienced rapid inflation." This means development might be hindered, which could have an effect in the long term. Newfield may end up paying the price later. Fellow competitors with a head start in operations in these hot plays will definitely have a massive advantage in terms of production. Companies such as Brigham Exploration (Nasdaq: BEXP  ) , Petrohawk (NYSE: HK  ) , and EOG Resources (NYSE: EOG  ) could definitely see gains.

Foolish bottom line
Still, all is not lost. An astute management can always turn things around. Newfield's assets are valuable. Increased demand for natural gas, however, should definitely position the company well in the future. Foolish investors need not read too much into the latest results. I'm confident of a fine showing from Newfield in the future.

To stay up to speed on Newfield Exploration, click here to add it to My Watchlist.

Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. 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.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 23, 2011, at 11:16 AM, Rustle731 wrote:

    The Article's title omits the words "at 25". Newfield's management imho continues to be penny wise and pound "foolish". Any potential earnings in new plays aren't realized until roughly two years into production, at which point production predictably falls. I want stock in the company producing their crystal ball. The answer is not to sit on your assets and hope that the supply/demand curve makes exploitation of your assets more attractive in the future. This puppy is down 18% since this article, and ain't through tanking yet. Stagnation under $30, then they get picked up on the cheap by a real player with the will to produce.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1540018, ~/Articles/ArticleHandler.aspx, 10/22/2016 10:03:23 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 12 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:01 PM
NFX $43.23 Down -0.79 -1.79%
Newfield Explorati… CAPS Rating: ***
BEXP.DL $0.00 Down +0.00 +0.00%
Brigham Exploratio… CAPS Rating: ***
EOG $93.88 Down -1.03 -1.09%
EOG Resources CAPS Rating: ****
HK.DL2 $0.00 Down +0.00 +0.00%
Petrohawk Energy C… CAPS Rating: ****