Oil and gas producer Newfield Exploration Co. (NFX) has revealed that it intends to hold onto the assets of its China business which it has completed marketing.
With oil prices declining more than 57% since Jun 2014 in view of the commodity supply glut and a lackluster global demand, the sale of the assets in China suffered significant headwinds.
The company plans to reclassify the China business as “continuing operations” in fourth-quarter 2014. Considerable free cash flow is expected from China’s oil fields over several years.
Newfield is expected to restrict its capital investments and plans to use the cash flows from its China business to manage short-term borrowing levels and ensure that its overall debt and liquidity positions during the period of weak oil prices are handled well.
In fourth-quarter 2014, net liftings from China were around 0.3 million barrels of oil. Both the 2015 guidance for Newfield’s China business as well as the total company guidance will be provided in Feb 2015.
Presently, the Pearl facility, located in the South China Sea, is producing oil and undergoing development drilling. For 2015, net capital investments are projected at less than $50 million in China. The Pearl facility is likely to attain its maximum rate in mid 2015.
Over the last three years, the company has raised over $2.6 billion from the sale of non-strategic assets. The proceeds raised have been used to fund its domestic business. Newfield closed the sale of the Granite Wash in Oct 2014, allowing it to repay $600 million in long-term debt.
Currently, Newfield carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the oil and gas sector include Spectra Energy Partners LP (SEP), Enbridge Energy Management LLC (EEQ) and GeoPark Limited (GPRK). Each of these sports a Zacks Rank #1 (Strong Buy).
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