<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
Commission file number 1-12534
NEWFIELD EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 72-1133047
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
363 N. Sam Houston Parkway E.
Suite 2020
Houston, Texas 77060
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (281) 847-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of July 24, 1996, there were 35,702,329 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
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TABLE OF CONTENTS
<TABLE>
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Page
PART I
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Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30,
1997 and December 31, 1996 . . . . . . . . . 1
Consolidated Statement of Income for the
three months ended June 30, 1997 and 1996
and for the six months ended
June 30, 1997 and 1996 . . . . . . . . . . . 3
Consolidated Statement of Cash Flows for the
six months ended June 30, 1997 and 1996. . . 4
Notes to Financial Statements . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . 8
PART II
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 18
</TABLE>
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NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . $ 13,254 $ 13,290
Accounts receivable, oil and gas. . . . 30,626 46,814
Other . . . . . . . . . . . . . . . . . 2,226 1,179
------------ ------------
Total current assets. . . . . . . . . 46,106 61,283
------------ ------------
Oil and gas properties (full cost method,
of which $47,882 at June 30, 1997
and $55,305 at December 31, 1996 were
excluded from amortization) . . . . . . 640,410 526,680
Furniture, fixtures and equipment . . . . 2,905 2,496
Less-accumulated depreciation,
depletion and amortization. . . . . . . (241,099) (199,161)
------------ ------------
402,216 330,015
------------ ------------
Other assets . . . . . . . . . . . . . . 261 4,640
------------ ------------
Total assets . . . . . . . . . . . . $ 448,583 $ 395,938
============ ============
</TABLE>
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NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities. . . . . . . . . . . . . $ 34,215 $ 46,072
Advances from joint owners . . . . . . 2,298 3,612
Current maturities of capital
lease obligations. . . . . . . . . . 52 163
----------- -----------
Total current liabilities. . . . . . 36,565 49,847
----------- -----------
Other liabilities. . . . . . . . . . . . 4,193 2,048
Long-term debt . . . . . . . . . . . . . 87,500 60,000
Deferred taxes . . . . . . . . . . . . . 53,495 44,141
----------- -----------
Total long-term liabilities. . . . . 145,188 106,189
----------- -----------
Commitments and contingencies (Note 2) . --- ---
Stockholders' equity:
Preferred stock ($0.01 par value,
5,000,000 share authorized,
no shares issued). . . . . . . . . . --- ---
Common stock ($0.01 par value,
100,000,000 and 50,000,000 shares
authorized; 35,677,829 and 35,243,040
shares issued and outstanding at
June 30, 1997 and December 31,
1996, respectively). . . . . . . . . 357 352
Additional paid-in capital . . . . . . . 154,793 147,291
Unearned compensation . . . . . . . . . (2,985) (2,746)
Retained earnings . . . . . . . . . . . 114,665 95,005
----------- -----------
Total stockholders' equity . . . . . 266,830 239,902
----------- -----------
Total liabilities and
stockholders' equity . . . . . . . $ 448,583 $ 395,938
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Oil and gas revenues. . . . $ 42,345 $ 33,013 $ 89,272 $ 65,975
---------- ---------- ---------- ----------
Operating expenses:
Lease operating . . . . . 5,022 4,052 10,605 7,398
Depreciation, depletion
and amortization. . . . 22,219 14,625 41,973 29,346
General and
administrative, net . . 2,574 1,643 5,527 4,073
Stock compensation. . . . 278 531 708 873
---------- ---------- ---------- ----------
Total operating
expenses. . . . . . . 30,093 20,851 58,813 41,690
---------- ---------- ---------- ----------
Income from operations. . . 12,252 12,162 30,459 24,285
Other income (expense):
Interest income . . . . . 235 129 608 283
Interest expense, net . . (532) (70) (857) (144)
---------- ---------- ---------- ----------
(297) 59 (249) 139
---------- ---------- ---------- ----------
Income before income taxes . 11,955 12,221 30,210 24,424
Income tax provision . . . . 4,182 4,272 10,550 8,546
---------- ---------- ---------- ----------
Net income . . . . . . . . . $ 7,773 $ 7,949 $ 19,660 $ 15,878
========== ========== ========== ==========
Earnings per common share. . $ 0.21 $ 0.21 $ 0.52 $ 0.43
========== ========== ========== ==========
Weighted average number
of shares and common
stock equivalents
outstanding. . . . . . . . 37,807 37,323 37,746 37,006
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1997 1996
------------ ------------
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Cash flows from operating activities:
Net income . . . . . . . . . . . . . $ 19,660 $ 15,878
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion
and amortization . . . . . . . . 41,973 29,346
Deferred taxes . . . . . . . . . . 9,883 8,529
Stock compensation . . . . . . . . 708 873
------------- ------------
72,224 54,626
Changes in operating assets and
liabilities:
Decrease in accounts receivable,
oil and gas. . . . . . . . . . . 16,188 383
Decrease (increase) in other
current assets . . . . . . . . . (1,047) 2,573
Decrease (increase) in other
assets . . . . . . . . . . . . . 4,379 (501)
Increase (decrease) in accounts
payable and accrued
liabilities. . . . . . . . . . . (20,097) 578
Increase (decrease) in advance
from joint owners. . . . . . . . (1,314) 2,690
Increase in other liabilities. . . 2,145 754
------------ ------------
Net cash provided by
operating activities . . . . . 72,478 61,103
------------ ------------
</TABLE>
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NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from investing activities:
Additions to oil
and gas properties . . . . . . . (105,490) (49,402)
Additions to furniture,
fixtures and equipment . . . . . (443) (269)
------------ ------------
Net cash used in
investing activities . . . . . (105,933) (49,671)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings . . . . . 199,000 97,000
Repayments of borrowings . . . . . (171,500) (103,000)
Proceeds from issuance of
common stock, net. . . . . . . . 6,030 1,637
Payments on capital
lease obligations. . . . . . . . (111) (250)
------------ ------------
Net cash provided by (used in)
financing activities . . . . . 33,419 (4,613)
------------ ------------
Increase (decrease) in cash and
cash equivalents . . . . . . . . . (36) 6,819
Cash and cash equivalents,
beginning of period. . . . . . . . 13,290 12,533
------------ ------------
Cash and cash equivalents,
end of period. . . . . . . . . . . $ 13,254 $ 19,352
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Accounting Policies
Unless the context otherwise requires, references to the "Company"
include Newfield Exploration Company and its subsidiaries. The unaudited
consolidated financial statements of the Company reflect, in the opinion of
management, all adjustments, consisting only of normal and recurring
adjustments, necessary to present fairly the Company's consolidated financial
position at June 30, 1997 and the Company's consolidated results of operations
for the three- and six-month periods ended June 30, 1997 and 1996 and
consolidated cash flows for the six-month periods ended June 30, 1997 and
1996. The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and therefore do not include all
disclosures required of financial statements prepared in conformity with
generally accepted accounting principles. Interim period results are not
necessarily indicative of results of operations or cash flows for a full-year
period.
The consolidated financial statements include the accounts of Newfield
Exploration Company and its subsidiaries (collectively, the Company). All
significant intercompany balances and transactions have been eliminated.
These consolidated financial statements and the notes thereto should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, including those financial statements and notes
thereto incorporated by reference from the Company's 1996 Annual Report to
Stockholders.
(2) Contingencies
The Company has been named as a defendant in certain lawsuits arising
in the ordinary course of business. While the outcome of these lawsuits
cannot be predicted with certainty, management does not expect these matters
to have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
The Company's operations are subject to various federal, state and
local laws and regulations relating to the protection of the environment.
The Company believes its current operations are in material compliance with
current environmental laws and regulations. There can be no assurance,
however, that current regulatory requirements will not change, currently
unforseen environmental incidents will not occur or past non-compliance
with environment laws will not be discovered.
(3) Huffco Acquisition
In May 1997, the Company acquired the assets and subsidiaries of Huffco
International, L.L.C., which includes a 35% working interest in a 415,000 acre
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production sharing contract in the Bohai Bay, offshore China. The Company
also acquired certain rights and data relating to offshore West Africa, an
international database and increased its technical staff. The purchase price
was $6.3 million.
(4) Subsequent Events
Subsequent to June 30, 1997, the Company completed the acquisition of
interests in five oil and gas producing fields, comprised of interests in
nine offshore blocks, in the East Cameron, West Cameron and High Island
areas of the Gulf of Mexico, offshore Louisiana and Texas for a purchase
price of approximately $43 million. The current combined production from
these fields is approximately 18 MMcfe of natural gas per day net to the
interests acquired, or approximately 10% of the Company's net daily
production prior to the acquisition.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
As an independent oil and gas producer, the Company's revenue,
profitability and future rate of growth are substantially dependent upon
prevailing prices for natural gas, oil and condensate, which are dependent
upon numerous factors beyond the Company's control, such as economic,
political and regulatory developments and competition from other sources of
energy. The energy markets have historically been very volatile and there
can be no assurance that oil and gas prices will not be subject to wide
fluctuations in the future. A substantial or extended decline in oil and
gas prices could have a material adverse effect on the Company's financial
position, results of operations, cash flows, quantities of oil and gas
reserves that may be economically produced and access to capital.
The Company's results of operations may vary significantly from quarter
to quarter as a result of development operations, commodity prices, the
curtailment of production in association with workover and recompletion
activities and the incurrence of expenses related thereto, the timing and
amount of reimbursement for customary overhead costs received by the Company
and other factors, and, therefore, the results of operations for any one
quarter may not be indicative of results for the full fiscal year.
The Company uses the full cost method of accounting for its oil and gas
properties. Under this method, all acquisition, exploration and development
costs, including certain related employee costs (less any reimbursements for
such costs) incurred for the purpose of acquiring and finding oil and gas
reserves are capitalized in a "full cost pool" as incurred. The Company
records depletion of its full cost pool using the unit of production method
and uses its internal estimates of proved quantities of oil and gas reserves
for financial accounting matters. To the extent that such capitalized costs
in the full cost pool (net of depreciation, depletion and amortization and
related deferred taxes) exceed the present value (using a 10% discount rate)
of estimated future net after-tax cash flows from proved oil and gas
reserves, such excess costs are charged to operations. Once incurred, a
write-down of oil and gas properties is not reversible at a later date even
if oil or gas prices increase.
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." The statement specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") and is designed to improve the
EPS information provided in the financial statements by simplifying the
existing computation. When adopted this statement will result in an increased
basic EPS for the Company. The Company will adopt the provisions of the
statement in its 1997 year-end financial statements.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information About Capital Structure"
("Statement No. 129"). The statement consolidates the existing requirements
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to disclose certain information about an entity's capital structure, for both
public and nonpublic entities. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("Statement No. 130"). The statement establishes standards for reporting and
display of comprehensive income and its components. In June 1997, the FASB
issued Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("Statement No. 131"). The
statement specifies revised guidelines for determining an entity's operating
and geographic segments and the type and level of financial information about
those segments to be disclosed. The Company will adopt the provisions of
Statements No. 129, 130 and 131 in its 1998 financial statements.
Results of Operations
The following table sets forth certain operating information with
respect to the oil and gas operations of the Company:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production:
Oil and condensate (MBbls) 819 622 1,625 1,237
Gas (MMcf) 12,896 9,597 24,283 19,329
Total production (MMcfe) 17,808 13,326 34,030 26,750
Average Realized Price:
Oil and condensate (per Bbl) $ 18.01 $ 19.69 $ 20.15 $ 18.94
Gas (per Mcf) 2.15 2.17 2.34 2.20
Average Costs (per Mcfe)
Lease operating $ 0.28 $ 0.30 $ 0.31 $ 0.28
Depreciation, depletion
and amortization 1.25 1.10 1.23 1.10
General and
administrative, net 0.14 0.12 0.16 0.15
</TABLE>
Production. Net production increased 27%, from 26.7 billion cubic feet
of natural gas equivalent ("Bcfe") for the six months ended June 30, 1996,
to 34.0 Bcfe for the six months ended June 30, 1997. Oil and condensate
production for the six months ended June 30, 1997 increased 388 thousand
barrels ("MBbls"), or 31%, compared to the same period of 1996. Increased
oil production for the first six months of 1997 was due primarily to
production increases from development drilling activities during 1996 at
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South Timbalier 148 and Ewing Bank 947, the acquisition of Ship Shoal 69
in the third quarter of 1996 and a well drilled and placed on production
late in the fourth quarter 1996 at Vermilion 398. Gas production increased
by 5.0 billion cubic feet ("Bcf"), or 26%, from 19.3 Bcf for the six months
ended June 30, 1996 to 24.3 Bcf for the comparable period of 1997. Increased
gas production was due to production increases from development drilling
activities during 1996 at Ewing Bank 947, South Timbalier 148 and West Delta
152 and a well drilled and placed on production during the fourth quarter
of 1996 at Vermilion 308. These increases were partially offset by natural
production decline on other properties of the Company.
Net production increased 34%, from 13.3 Bcfe for the three months ended
June 30, 1996 to 17.8 Bcfe for the three months ended June 30, 1997. Oil
and condensate production for the three months ended June 30, 1997 increased
197 MBbls, or 32%, compared to the same period of 1996. Increased oil
production was due primarily to production increases from development
drilling activities during 1996 at South Timbalier 148 and Ewing Bank 947,
the acquisition of Ship Shoal 69 in the third quarter of 1996 and a well
drilled and placed on production late in the fourth quarter 1996 at Vermilion
398. Gas production increased by 3.3 Bcf, or 34%, from 9.6 Bcf
for the three months ended June 30, 1996 to 12.9 Bcf for the comparable
period of 1997. Increased gas production was due to production increases
from development drilling activities during 1996 at Ewing Bank 947, South
Timbalier 148 and West Delta 152 and a well drilled and placed on production
during the fourth quarter of 1996 at Vermilion 308.
Oil and Gas Revenues. Oil and gas revenues for the six months ended
June 30, 1997 increased by $23.3 million, or 35%, compared to the same
period of 1996, primarily as a result of increased oil and gas production
and increased oil and gas prices. The average realized price of oil and
condensate and natural gas increased by 6%.
For the six months ended June 30, 1997, the average realized gas
price was $2.34 per thousand cubic feet ("Mcf"), which, as a result of
hedging activities, was 93% of the $2.52 per Mcf average gas sales price
that would have otherwise been received. As a result of hedging activities
for gas production for the six months ended June 30, 1996, the Company
realized an average gas price of $2.20 per Mcf, or 80% of the $2.75 per
Mcf average gas sales price that would have otherwise been received.
There were no oil hedging activities for the six months ended June 30, 1997.
For the six months ended June 30, 1996, the average realized oil and
condensate price was $18.94, which, as a result of hedging activities, was
97% of the $19.47 per barrel average oil and condensate sales price that
would have otherwise been received.
Oil and gas revenues for the three months ended June 30, 1997 increased
by $9.3 million, or 28%, compared to the same period of 1996, primarily as a
result of increased oil and gas production.
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For the three months ended June 30, 1997, the average realized gas price
was $2.15 per Mcf, which, as a result of hedging activities, was 99% of the
$2.16 per Mcf average gas sales price that would have otherwise been received.
As a result of hedging activities for gas production for the three months
ended June 30, 1996, the Company realized an average gas price of $2.17 per
Mcf, or 89% of the $2.45 per Mcf average gas sales price that would have
otherwise been received.
There were no oil hedging activities for the three months ended June 30,
1997. Oil hedging activities for the three months ended June 30, 1996 had
a negligible impact on oil and condensate revenues.
Lease Operating Expense. Lease operating expense for the six months
ended June 30, 1997 increased to $10.6 million from $7.4 million for the
comparable period of 1996. Lease operating expense per Mcf equivalent
("Mcfe") increased from $0.28 for the six months ended June 30, 1996,
to $0.31 for the comparable period of 1997. These increases are primarily
attributable to a general increase in costs in the oil service industry,
increased workover activities, and lease operating costs associated with
properties acquired after June 30, 1996.
Lease operating expense for the three months ended June 30, 1997
increased to $5.0 million from $4.1 million for the comparable period of
1996. Lease operating expense per Mcfe decreased from $0.30 for the three
months ended June 30, 1996, to $0.28 for the comparable period of 1997.
The decrease in lease operating expense per unit is primarily attributable
to increased production volumes during the second quarter of 1997.
Depreciation, Depletion and Amortization Expense. During the six and
three months ended June 30, 1997, depreciation, depletion, and
amortization expense increased to $42.0 million and $22.2 million,
respectively, from $29.3 million and $14.6 million, respectively, for the
comparable periods of 1996. The increases were the result of an increased
depletion rate per Mcfe and production increases from acquisitions and
exploratory and development drilling activities during 1996 and 1997. The
depletion rate per unit for the six and three month periods ended June 30,
1997 increased to $1.23 and $1.25 per Mcfe, respectively, from $1.10 per
Mcfe, for each of the comparable periods of 1996. The increases in the
depletion rate per unit are primarily attributable to increased costs of
drilling goods and services, platform and facilities construction and
transportation services in the industry.
General and Administrative Expense, Net. General and administrative
expense, which is net of overhead reimbursements received by the Company
from other working interest owners, increased to $5.5 million, or $0.16
per Mcfe, and $2.6 million, or $0.14 per Mcfe, for the six and three month
periods ended June 30, 1997, respectively, as compared to $4.1 million,
or $0.15 per Mcfe, and $1.6 million, or $0.12 per Mcfe, for the same periods
of 1996, respectively. Performance based compensation, as a component of
general and administrative expense, increased from $2.2 million, or $0.08 per
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<PAGE> 14
Mcfe, and $1.1 million, or $0.08 per Mcfe, for the six and three month
periods ended June 30, 1996, respectively, to $2.5 million, or $0.07 per
Mcfe, and $1.2 million, or $0.07 per Mcfe, for the six and three month
periods ended June 30, 1997, respectively. Direct costs associated with
staff increases during 1996 were partially offset by joint interest
reimbursements. To the extent that the Company continues to grow and
increase its ownership in certain properties, the Company expects general
and administrative expenses, in the aggregate, to continue to increase.
See - "Recent Developments."
Net Income. As a result of the foregoing, the Company had net income
of $19.7 million and $7.8 million, or $0.52 and $0.21 per share, for the
six and three month periods ended June 30, 1997, respectively, as compared
to $15.9 million and $7.9 million, or $0.43 per share and $0.21 per share,
for the comparable periods of 1996. The increase in earnings per share is
primarily due to an increase in oil and gas revenues for the six month
period ended June 30, 1997 as compared to the comparable period of 1996.
Liquidity and Capital Resources
The Company had $9.5 million of working capital at June 30, 1997
compared to $11.4 million at December 31, 1996. The $1.9 million decrease
in working capital is primarily due to increased drilling activity during
the first six months of 1997 offset by the impact of increased revenues
during the period. In addition, working capital balances may fluctuate
from quarter to quarter to the extent the Company increases or decreases
borrowings under the credit agreement. Historically, the Company has funded
its oil and gas activities through cash flow from operations, equity capital
from private and public sources and bank borrowings.
From time to time, the Company has utilized hedging transactions with
respect to a portion of its oil and gas production to achieve a more
predictable cash flow, as well as to reduce its exposure to price
fluctuations. While the use of these hedging arrangements limits the
downside risk of adverse price movements, they may also limit future
revenues from favorable price movements. The use of hedging transactions
also involves the risk that the counterparties will be unable to meet the
financial terms of such transactions. All of the Company's hedging
transactions to date were carried out in the over-the-counter market and the
obligations of the counterparties have been guaranteed by entities with at
least an investment grade rating or secured by letters of credit. The
Company accounts for these transactions as hedging activities and,
accordingly, gains or losses are included in oil and gas revenues when the
hedged production is delivered. As of June 30, 1997, the Company had
entered into commodity price swap contracts effectively fixing the price of
1.0 Bcf of natural gas per month for July through September 1997 at a volume
weighted average price of $2.31 per one million British thermal units
("MMBtu") (or approximately $2.45 per Mcf based upon the average energy
content of the Company's gas production for the twelve months ended
December 31, 1996). Additionally, the Company has entered into a put option
for 2.1 Bcf of natural gas per month for July through September 1997 with a
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<PAGE> 15
floor price, after the cost of the option, of $1.90 Per MMBtu (or
approximately $2.01 per Mcf). These gas hedging transactions are settled
based on reported sales prices of natural gas delivered into those pipelines
at the physical locations where the Company sells its production, (the "Sales
Point Price"). Because substantially all of the Company's natural gas
production is sold under spot contracts that reference to the Sales Point
Price, the Company has no basis risk with respect to these transactions.
The Company maintains a $125 million reserve-based revolving credit
facility with The Chase Manhattan Bank, N.A., as agent. As of June 30, 1997,
$87.5 million was outstanding under this credit facility and the borrowing
base was $160 million. Subject to notification and conditioned upon the
then effective Borrowing Base, the Company retains the right to increase the
commitment amount of the facility up to $200 million. Subsequent to June 30,
1997, the Company borrowed additional funds under the credit facility to
complete the acquisition of interests in nine offshore blocks. See -
"Recent Developments."
The Company's net cash flow from operations for the first six months
of 1997 was $72.5 million compared to $61.1 million for the same period of
1996. The increase is primarily due to increases in oil and gas production
and average realized oil and gas prices and changes in operating assets and
liabilities. Net cash flow from operations before changes in operating assets
and liabilities for the first six months of 1997 was $72.2 million compared to
$54.6 million for the same period of 1996. The increase in net cash flow from
operations before changes in operating assets and liabilities is primarily
attributable to increased oil and gas production.
Capital expenditures for the six months ended June 30, 1997 were $113.7
million compared to $56.7 million for the same period of 1996. The Company's
exploration capital expenditures for the first six months of 1997 were $45.4
million of the total of approximately $67.2 million budgeted for 1997.
Development drilling and construction expenditures for platforms, facilities
and pipelines were $55.1 million for the first six months of 1997 of the
total of approximately $92.2 million budgeted for 1997. Expenditures for
proved property acquisitions for the first six months of 1997 were $13.2
million. No significant abandonment or dismantlement costs are anticipated
during 1997. The Company continues to pursue attractive acquisition
opportunities. The timing and size of any acquisition and the associated
capital commitments are unpredictable.
Actual levels of capital expenditures may vary significantly due to
many factors, including drilling results, oil and gas prices, industry
conditions, the prices and availability of goods and services and the extent
to which proved properties are acquired. The Company anticipates that these
capital expenditures will be funded principally from cash flow from
operations, working capital, and bank borrowings. During the first six months
of 1997, the Company borrowed $199 million and repaid $171.5 million under the
credit facility. The Company anticipates additional borrowings under this
facility during the remainder of 1997.
-13-
<PAGE> 16
To cover the various obligations of lessees on the Outer Continental
Shelf (the "OCS"), the United States Department of the Interior Minerals
Management Service (the "MMS") generally requires that lessees post
substantial bonds or other acceptable assurances that such obligations will
be met. The cost of such bonds or other surety can be substantial and there
is no assurance that bonds or other surety can be obtained in all cases.
Additionally, the MMS may require operators in the OCS to post supplemental
bonds in excess of lease and area wide bonds to assure that abandonment
obligations on specific properties will be met. The Company is currently
exempt from the supplemental bonding requirements of the MMS. Under certain
circumstances, the MMS may require any Company operations on federal leases
to be suspended or terminated. Any such suspension or termination could
materially and adversely affect the Company's financial condition and
operations.
The Company's operations are subject to various federal, state and
local laws and regulations relating to the protection of the environment.
The Company believes its current operations are in material compliance with
current environmental laws and regulations. There can be no assurance,
however, that current regulatory requirements will not change, currently
unforseen environmental incidents will not occur or past non-compliance
with environment laws will not be discovered.
The Company has been named as a defendant in certain lawsuits arising
in the ordinary course of business. While the outcome of these lawsuits
cannot be predicted with certainty, management does not expect these matters
to have a material adverse effect on the financial position, liquidity or
results of operations or cash flows of the Company.
Recent Developments
In May 1997, the Company acquired the assets and subsidiaries of Huffco
International, L.L.C., which includes a 35% working interest in a 415,000
acre production sharing contract in the Bohai Bay, offshore China. The
Company also acquired certain rights and data relating to offshore West
Africa, an international database and increased its technical staff.
Additionally, David Trice, Chief Executive Officer of Huffco joined the
Company as vice president and president of Newfield International, Inc. and
Ms. Terry Huffington, principal owner of Huffco International, L.L.C., was
elected a director of the Company.
In July 1997, the Company completed the acquisition of interests in nine
offshore blocks in the East Cameron, West Cameron and High Island areas of the
Gulf of Mexico, offshore Louisiana and Texas for a purchase price of
approximately $43 million. The current combined production from these fields
is approximately 18 MMcfe of natural gas per day net to the interests
acquired, or approximately 10% of the Company's net daily production prior to
the acquisition.
-14-
<PAGE> 17
As a result of these activities, the 1997 capital budget has been
increased to $211 million. The 1997 production target has been revised to
72 Bcfe and the Company has a goal of 15-20% volume growth during 1998.
Forward Looking Information
Certain of the statements set forth in this document regarding production
targets and planned capital expenditures and activities are forward looking
and are based upon assumptions and anticipated results that are subject to
numerous uncertainties. Actual results may vary significantly from those
anticipated due to many factors, including drilling results, oil and gas
prices, industry conditions, the prices of goods and services, the
availability of drilling rigs and other support services and the availability
of capital resources. In addition, the drilling of oil and gas wells and the
production of hydrocarbons are subject to governmental regulations and
operating risks.
-15-
<PAGE> 18
Part II
Item 4. Submission of Matters to a Vote of Security Holders
At the May 1, 1997 Annual Meeting of Stockholders, the Company's
stockholders voted on four matters; 35,235,927 shares of common stock were
outstanding and entitled to vote as of the March 7, 1997 record date.
(1) Election of Eight Directors:
The stockholders elected the eight nominees as directors for
a one-year term by the following vote:
Nominee Elected For Withheld
---------------- ---------------- ----------------
Joe B. Foster 32,678,928 8,097
Robert W. Waldrup 32,679,876 7,149
Charles W. Duncan, Jr. 32,676,811 10,214
Jeffrey A. Harris 32,678,749 8,276
Howard H. Newman 32,678,749 8,276
Thomas G. Ricks 32,678,876 8,149
C.E. (Chuck) Shultz 32,678,718 8,307
Dale E. Zand 32,678,224 8,801
(2) Amendment of Article Fourth of the Company's Second Restated
Certificate of Incorporation:
The stockholders ratified a proposal to amend Article Fourth
of the Company's Second Restated Certificate of Incorporation
to increase the number of shares of common stock authorized
for issuance from 50,000,000 to 100,000,000 shares by the
following vote:
For Against Abstentions
---------------- ---------------- ----------------
31,838,846 836,107 12,072
(3) Amendment of 1995 Non-Employee Director Restricted Stock Plan:
The stockholders ratified a proposal to amend the Company's
1995 Non-Employee Director Restricted Stock Plan by the
following vote:
For Against Abstentions
---------------- ---------------- ----------------
27,048,809 5,620,566 17,650
-16-
<PAGE> 19
(4) Appointment of Independent Public Accountants:
The stockholders ratified the appointment of Coopers &
Lybrand L.L.P. as the Company's independent public accountants
for the year 1997 by the following vote:
For Against Abstentions
---------------- ---------------- ----------------
32,668,232 4,922 13,871
-17-
<PAGE> 20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11.1 Computation of Earnings per Share
27 Financial Data Schedule (included only in the electronic
filing of this document)
(b) Reports on Form 8-K:
On May 15, 1997, the Company filed a Current Report on Form 8-K,
dated May 13, 1997, reporting the acquisition of the assets and
subsidiaries of Huffco International, L.L.C. Additionally, Ms.
Terry Huffington, principal owner of Huffco International, L.L.C.,
was elected a director of the Company.
-18-
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWFIELD EXPLORATION COMPANY
Date: July 25, 1997 By: /s/ Terry W. Rathert
Terry W. Rathert
Vice President-Planning and Administration
and Secretary
(Authorized Officer and Principal
Financial Officer)
-19-
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
--------- ------------------------
<S> <C>
11.1 Computation of Earnings per Share
27 Financial Data Schedule (included only in
the electronic filing of this document)
</TABLE>
-20-
<PAGE> 1
Exhibit 11.1
NEWFIELD EXPLORATION COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income for earnings
per share $ 7,773 $ 7,949 $ 19,660 $ 15,878
========= ========= ========= =========
Earnings per share $ 0.21 $ 0.21 $ 0.52 $ 0.43
========= ========= ========= =========
Calculation of weighted
average shares
outstanding:
Common stock,
weighted average 35,504,778 34,845,046 35,378,072 34,682,616
Common stock
equivalents 2,302,263 2,478,000 2,368,218 2,323,704
---------- ---------- ---------- ----------
Total common stock
and equivalents
outstanding for
earnings per share 37,807,041 37,323,046 37,746,290 37,006,320
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEWFIELD
EXPLORATION COMPANY'S CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997, THAT
ARE CONTAINED IN ITS FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,254
<SECURITIES> 0
<RECEIVABLES> 30,626
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,106
<PP&E> 643,315
<DEPRECIATION> 241,099
<TOTAL-ASSETS> 448,583
<CURRENT-LIABILITIES> 36,565
<BONDS> 87,500
<COMMON> 155,150
0
0
<OTHER-SE> 111,680
<TOTAL-LIABILITY-AND-EQUITY> 448,583
<SALES> 89,272
<TOTAL-REVENUES> 89,272
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 52,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 857
<INCOME-PRETAX> 30,210
<INCOME-TAX> 10,550
<INCOME-CONTINUING> 19,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,660
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0
</TABLE>
