Newfield Exploration Is In-Line with Its Historical Valuations


Jan. 15 2016, Updated 8:06 a.m. ET

Newfield Exploration’s historical valuations

Newfield Exploration’s (NFX) 3Q15 enterprise value (or EV) to adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) ratio was ~5.8x. EV is the sum of a company’s market capitalization and net debt.

Article continues below advertisement

Breaking down Newfield Exploration’s valuation

NFX’s 3Q15 EV-to-EBITDA multiple is trading at a premium to its historical average of 5.1x. The multiple has been trading at a premium for the past three quarters.

The market value of NFX’s equity has risen by ~10% year-over-year. Its net debt fell from ~$2.6 billion in 3Q14 to ~$2.5 billion in 3Q15. The result of this was a ~2% rise in NFX’s EV in 3Q15 over 3Q14.

The company’s trailing-12-month EBITDA as of 3Q15 fell ~9% year-over-year. Because its EBITDA fell more than its net debt, NFX’s net debt to-EBITDA multiple rose in 2015.

NFX’s forward EV-to-EBITDA multiple, which uses market expectations for the company’s EBITDA for the current year, is ~6.3x. The higher forward multiple indicates that Wall Street expects NFX’s EBITDA to fall this year compared to the last 12 months. It also indicates that Newfield Exploration could continue to trade at a premium compared to its historical levels.

Other upstream companies including Devon Energy (DVN), Hess (HES), and ConocoPhillips (COP) also saw lower EBITDA levels in 2015 compared to 2014 due to lower crude oil and natural gas prices. These companies’ 3Q15 EBITDAs for the trailing 12 months fell by ~20%, ~60%, and ~67%, respectively, compared to 3Q14. These companies combined make up ~7% of the Energy Select Sector SPDR ETF (XLE).

NFX’s proved reserves

As of December 31, 2014, Newfield Exploration had total proved reserves of ~645 million barrels of oil equivalent. According to NFX’s 10-K filing, the discounted value of its reserve base at the end of 2014 was $6.2 billion. This would be lower today, given the lower price of crude oil.

In the next part of this series, we’ll look at NFX’s relative valuation.


More From Market Realist

  • Michelob Ultra beer
    Company & Industry Overviews
    AB InBev Is the Top Beer Brand Worldwide—Is It a Monopoly?
  • Businesswoman looking out a window
    Company & Industry Overviews
    Shifting Focus: Three Women Investing Funds in 2021
  • Aol logo on office building,
    Company & Industry Overviews
    What We Know About Apollo Global Management, New Owners of AOL and Yahoo
  • Chick-fil-A sign
    Company & Industry Overviews
    Why It Only Costs $10K to Own a Chick-fil-A Location
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.