Newfield Exploration Co. (NFX) recently announced bullish production guidance for 2014. The company in 2014 expects net production from continuing operations to range from 44–48 million barrels of oil equivalent (BOE), or 10%–20% higher than the 2013 estimated net production from continuing operations of approximately 40 million BOE. Similarly the company expects domestic liquids production in 2014 to increase 30% versus 2013.
Newfield plans to invest about approximately $1.6 billion in capital expenditures during 2014. Of this with a planned investment of approximately $700 million, the Anadarko Basin will be the company's single-largest investment region in 2014. The company plans to run eight operated drilling rigs in its SCOOP and STACK plays. Newfield has more than 225,000 net acres in the region and expects its 2014 production to double over 2013 levels. Net production from the Anadarko Basin is expected to exit 2014 at nearly 50,000 barrels of oil equivalent per day (BOEPD).
Planned 2014 capital investments in the Uinta Basin are approximately $400 million. Newfield plans to run three operated rigs in the Greater Monument Butte Unit and one to two rigs in the Central Basin. About 200 wells are planned for the ongoing Monument Butte waterflood development. In the Central Basin's Uteland Butte and Wasatch plays, up to 10 horizontal wells are planned. Uinta Basin production in 2014 is expected to grow approximately 5% over 2013 levels.
Newfield said it expects to maintain its current four-rig program in the Williston Basin in 2014. A planned investment of approximately $330 million is expected to allow for the drilling of 45 – 50 wells. The company's Williston Basin program is in development mode with 2013 average well costs decreasing about 20% over 2012 averages. The program is focused on drilling super extended laterals from common pad locations. Net production in 2014 from the Williston Basin is expected to grow nearly 40% year-over-year.
Approximately $170 million is planned for investment in the Eagle Ford, where Newfield expects to drill about 20 development wells in 2014. Well costs in 2013 have averaged about $7.3 million, reflecting continued efficiency gains in development. Net production from the region is expected to increase more than 30% over 2013 levels.
Newfield Exploration’s exposure to emerging resource plays, along with its shift of resources away from natural gas into liquids, is likely to help it to grow in the E&P space.
In the third quarter, the company reported strong oil and liquids domestic production of 6.7 million barrels, representing a 10% increase on a year-over-year basis. For 2013, the company intends to spend the capital mostly for liquid-rich operations and expects about 43% year-over-year growth in oil and liquids domestic production.
We expect the company’s reserve potential in the Southern Alberta Bakken, Wasatch oil, Uinta Basin and Cana Woodford to be liquid-rich catalysts for the stock. Though we remain positive on Newfield Exploration’s emerging resource plays development program, we believe that a volatile natural gas price environment could weigh on the stock since most of its reserves are tied up in natural gas. Specifically, oil and gas prices have been increasingly volatile in recent years. This volatility tends to impact sector stock performance.
Newfield Exploration currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector that are expected to outperform in the near term. These include Zacks Ranked #1 (Strong Buy) stocks of SM Energy Company (SM), Matador Resources Co. (MTDR) and Abraxas Petroleum Corp. (AXAS).
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