Newfield Exploration’s Key Strategies to Counter Low Oil Prices


Jan. 13 2016, Updated 11:06 a.m. ET

Newfield exploration’s cost efficiencies

In its 3Q15 earnings release, Newfield Exploration (NFX) noted that it had reduced its 3Q15 lease operating expenses by 22% compared to 1Q15. Its general and administrative (G&A) expenses had fallen by 17% since 1Q15.

In its 3Q15 earnings conference, NFX said that on a unit of production basis, its estimated 2015 lease operating expenses were expected to be ~25% lower than 2014 levels. These will likely fall by an additional 5%–10% from current levels in 2016. G&A expenses in 2016 are expected to be down $40 million compared to 2015.

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Newfield Exploration’s asset divestments

In the first nine months of 2015, NFX sold $77 million worth of its non-core assets in a bid to refocus its portfolio and reinvest the proceeds into the Anadarko Basin.

NFX said in its 3Q15 earnings call that it has other assets in its portfolio that it could consider divesting, without specifying a timeline. “We do have assets that would be considered for disposition at the right place and time when we choose to accelerate activity in the Anadarko Basin,” CEO (chief executive officer) Lee Boothby said.

Newfield exploration’s hedges

NFX expects hedges to have contributed cash flows of ~$490 million in 2015. For 2016, NFX expects hedges to contribute cash flows of ~$250 million. Lee Boothby said, “We are well hedged for 2015-16 and have significant liquidity. Our priorities remain a balance of maintaining financial strength, holding our economically resilient STACK acreage position by production and capturing remaining acreage opportunities in the Anadarko Basin.”

NFX has hedged a significant portion of its production into 2017. These hedges will help it to weather low oil prices.

Chesapeake (CHK) is another upstream company that is hedged in 2016. However, companies such as Cabot Oil and Gas (COG) and Devon Energy (DVN) are rolling off hedges in 2016. These companies combined make up ~2.5% of the Vanguard Energy ETF (VDE).


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