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Exploring Newfield Exploration’s Free Cash Flow

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Jan. 14 2016, Updated 2:06 p.m. ET

Newfield Exploration’s cash flows

In 3Q15, Newfield Exploration (NFX) reported cash flow from operations (or CFO) of ~$312 million. This was 7.4% lower than its CFO in 3Q14. The drop was mainly due to lower revenues.

NFX’s 3Q15 revenues came in at ~$377 million, down ~38% compared to ~$610 million in 3Q14. The company’s year-to-date revenues were ~$1.2 billion compared to the ~$1.8 billion it recorded in the first nine months of 2014. This represents a fall of ~33%.

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Newfield Exploration’s free cash flows

NFX’s FCF (free cash flow) has remained negative in the past nine quarters, as can be seen in the above graph. NFX’s FCF was -$189 million in 3Q15.

Discussing 2016 during NFX’s 3Q15 earnings conference call, CEO (chief executive officer) Lee Boothby said, “We’re working toward a capital budget that substantially balances with our expectations for cash flow inclusive of hedge revenues.”

Newfield Exploration’s capex

Like many upstream companies, NFX also scaled back its 2015 capex (capital expenditure). Its 2015 estimated capex of $1.4 billion was ~30% less than 2014 levels.

Companies Chesapeake Energy (CHK), Hess (HES), and Marathon Oil (MRO) also reduced their 2015 capex figures by ~46%, 16%, and 46%, respectively. These companies combined make up ~3% of the Energy Select Sector SPDR ETF (XLE).

During its 3Q15 earnings conference call, NFX said that it would announce its 2016 capex budget in February 2016. NFX provided a preliminary guidance of $900 million for its 2016 maintenance capex. It expects approximately $800 million of this amount to be associated with drilling and completions expenses. It expects the remainder to be used for infrastructure, leasehold, and land renewals.

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