Newfield Exploration Earnings: An Early Look

Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors, and Newfield Exploration (NYSE: NFX  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

With the boom in the oil and gas industry, small companies have seen tremendous growth. That's the background for Newfield, whose independent oil and gas operations now span the globe. Let's take an early look at what's been happening with Newfield Exploration over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Newfield Exploration

Analyst EPS Estimate

$0.42

Change From Year-Ago EPS

(56%)

Revenue Estimate

$643 million

Change From Year-Ago Revenue

(5.1%)

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Newfield Exploration keep digging up black gold?
Lately, analysts and investors have shared concerns about Newfield. Consensus earnings-per-share estimates have fallen by $0.06 in just the past three months, with full-year 2013 EPS expectations down $0.14. That hasn't stopped the stock from rising by almost 12% since mid-November, but shares have given up nearly 10% in just the past few trading sessions.

We've already gotten a big part of the news that Newfield's quarterly report will include. Last week, the company preannounced some of its results, saying that a $1.5 billion writedown because of low natural-gas prices and asset sales will lead to a massive $1.2 billion loss for the quarter. Such writedowns have been a trend throughout the industry, with EOG Resources (NYSE: EOG  ) joining Newfield in going from a year-ago gain to a loss in its most recent quarter because of writedowns. Anadarko Petroleum (NYSE: APC  ) has also had to write down the value of its assets, although it has been able to remain profitable.

But arguably a bigger concern is Newfield's projections for flat to lower production this year. Despite plans to spend $1.7 billion to $1.9 billion on capital expenditures, falling production levels will clearly limit Newfield's growth. With the discovery of a large shale-oil deposit by Continental Resources (NYSE: CLR  ) in an area of Oklahoma close to Newfield's Cana Woodford project, investors have definitely hoped that the find would lead to higher production volume from Newfield.

The biggest news from the pre-release is that Newfield expects to focus on its U.S. operations, looking to sell, spin off, or find other strategic alternatives for its international assets in China and Malaysia. With those operations contributing a substantial percentage of revenue, Newfield would need to a lot of value from them to avoid taking a big hit to its business. Yet now doesn't seem like the best time to try to sell off energy assets, especially after the company warned last quarter of declining production from those overseas finds.

Newfield needs to explain its overall strategy further to satisfy investors that it's still on a solid growth path. Without convincing evidence of future growth, the stock may continue its recent slide.

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