<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, 2000
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 27, 2000, there were 42,484,297 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30,
2000 and December 31, 1999 . . . . . . . . . . . . . 1
Consolidated Statement of Income for the three months
ended June 30, 2000 and 1999 and for the six
months ended June 30, 2000 and 1999. . . . . . . . . 2
Consolidated Statement of Cash Flows for the
six months ended June 30, 2000 and 1999. . . . . . . 3
Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 2000 . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 11
PART II
Item 4. Submission of Matters to a Vote of Security Holders . . . 23
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 25
</TABLE>
-ii-
<PAGE> 3
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share data)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . $ 19,505 $ 41,841
Accounts receivable-oil and gas . . . . . . 89,440 67,744
Inventories . . . . . . . . . . . . . . . . 14,552 9,962
Other . . . . . . . . . . . . . . . . . . . 4,143 6,382
------------ ------------
Total current assets. . . . . . . . . . . 127,640 125,929
------------ ------------
Oil and gas properties (full cost method, of
which $113,907 at June 30, 2000 and $77,732
at December 31, 1999 were excluded from
amortization) . . . . . . . . . . . . . . . 1,446,403 1,210,895
Less-accumulated depreciation, depletion and
amortization. . . . . . . . . . . . . . . . (653,543) (566,053)
------------ ------------
792,860 644,842
------------ ------------
Furniture, fixtures and equipment, net. . . . 3,729 3,369
Other assets. . . . . . . . . . . . . . . . . 7,130 7,421
------------ ------------
Total assets. . . . . . . . . . . . . . . $ 931,359 $ 781,561
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities. . $ 95,943 $ 88,670
Advances from joint owners. . . . . . . . . 3,769 2,057
------------ ------------
Total current liabilities . . . . . . . . 99,712 90,727
------------ ------------
Other liabilities . . . . . . . . . . . . . . 7,886 10,586
Long-term debt. . . . . . . . . . . . . . . . 209,694 124,679
Deferred taxes. . . . . . . . . . . . . . . . 37,937 36,801
------------ ------------
Total long-term liabilities . . . . . . . 255,517 172,066
------------ ------------
Company-obligated, mandatorily redeemable,
convertible preferred securities of Newfield
Financial Trust I. . . . . . . . . . . . . . 143,750 143,750
------------ ------------
Commitments and contingencies . . . . . . . . --- ---
Stockholders' equity:
Preferred stock ($0.01 par value, 5,000,000
shares authorized, no shares issued). . . --- ---
Common stock ($0.01 par value, 100,000,000
shares authorized; 42,479,997 and
41,734,884 shares issued and outstanding
at June 30, 2000 and December 31, 1999,
respectively) . . . . . . . . . . . . . . 425 417
Additional paid-in capital. . . . . . . . . . 284,071 267,352
Unearned compensation . . . . . . . . . . . . (7,753) (3,685)
Accumulated other comprehensive - loss -
foreign currency translation adjustment. . . (2,160) (179)
Retained earnings . . . . . . . . . . . . . . 157,797 111,113
------------ ------------
Total stockholders' equity. . . . . . . . 432,380 375,018
------------ ------------
Total liabilities and stockholders' equity $ 931,359 $ 781,561
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
-1-
<PAGE> 4
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Oil and gas revenues. . . . . . . $118,878 $ 60,072 $213,917 $112,986
--------- --------- --------- ---------
Operating expenses:
Lease operating . . . . . . . . 16,018 9,472 31,025 18,767
Production and other taxes. . . (104) --- 1,485 ---
Depreciation, depletion and
amortization . . . . . . . . 46,797 37,060 87,957 73,850
General and administrative
(exclusive of stock
compensation). . . . . . . . 6,257 3,193 12,603 6,256
Stock compensation. . . . . . . 906 461 1,495 991
--------- --------- --------- ---------
Total operating expenses. . . 69,874 50,186 134,565 99,864
--------- --------- --------- ---------
Income from operations. . . . . . 49,004 9,886 79,352 13,122
Other income (expenses):
Interest income . . . . . . . . 407 140 922 288
Interest expense, net . . . . . (2,913) (3,124) (5,173) (6,649)
Dividends on convertible
preferred securities of
Newfield Financial Trust I . (2,336) --- (4,672) ---
--------- --------- --------- ---------
(4,842) (2,984) (8,923) (6,361)
--------- --------- --------- ---------
Income before income taxes. . . . 44,162 6,902 70,429 6,761
Income tax provision:
Current . . . . . . . . . . . . 10,730 --- 14,447 ---
Deferred. . . . . . . . . . . . 3,871 2,527 9,298 2,556
--------- --------- --------- ---------
14,601 2,527 23,745 2,556
--------- --------- --------- ---------
Net income. . . . . . . . . . . . $ 29,561 $ 4,375 $ 46,684 $ 4,205
========= ========= ========= =========
Basic earnings per common share . $ 0.70 $ 0.11 $ 1.11 $ 0.10
========= ========= ========== =========
Diluted earnings per common share $ 0.66 $ 0.10 $ 1.06 $ 0.10
========= ========= ========== =========
Weighted average number of shares
outstanding for basic earnings
per share. . . . . . . . . . . 42,402 41,078 42,140 40,796
========= ========= ========= =========
Weighted average number of shares
outstanding for diluted
earnings per share . . . . . . 47,322 42,221 47,049 41,967
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this financial statement.
-2-
<PAGE> 5
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
2000 1999
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . $ 46,684 $ 4,205
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion
and amortization. . . . . . . . . . . 87,957 73,850
Deferred taxes. . . . . . . . . . . . . 9,298 2,556
Stock compensation. . . . . . . . . . . 1,495 991
----------- ------------
145,434 81,602
Changes in assets and liabilities:
(Increase )decrease in accounts
receivable, oil and gas . . . . . . . (22,515) 10,840
Increase in inventory . . . . . . . . . (5,514) ---
(Increase) decrease in other
current assets. . . . . . . . . . . . 532 (1,575)
Decrease in other assets . . . . . . . 291 268
Decrease in accounts payable
and accrued liabilities . . . . . . . (4,408) (16,172)
Increase in advances from
joint owners. . . . . . . . . . . . . 1,712 1,015
Decrease in other liabilities . . . . . (2,533) (1,458)
----------- ------------
Net cash provided by
operating activities. . . . . . . . 112,999 74,520
----------- ------------
Cash flows from investing activities:
Additions to oil and gas properties . . (223,982) (51,746)
Additions to furniture, fixtures and
equipment . . . . . . . . . . . . . . (840) (556)
----------- ------------
Net cash used in
investing activities. . . . . . . . (224,822) (52,302)
----------- ------------
Cash flows from financing activities:
Proceeds from borrowings. . . . . . . . 153,000 190,000
Repayments of borrowings. . . . . . . . (68,000) (214,000)
Proceeds from issuances of common
stock, net. . . . . . . . . . . . . . 4,938 5,371
----------- ------------
Net cash provided by (used in)
financing activities . . . . . . . 89,938 (18,629)
----------- ------------
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . (451) ---
----------- ------------
Increase (decrease)in cash and cash
equivalents.. . . . . . . . . . . . . . (22,336) 3,589
Cash and cash equivalents,
beginning of period . . . . . . . . . . 41,841 92
----------- ------------
Cash and cash equivalents, end of period. . . $ 19,505 $ 3,681
=========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this financial statement.
-3-
<PAGE> 6
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
------------------- PAID-IN UNEARNED RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS LOSS EQUITY
---------- ------ -------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1999.................. 41,734,884 $ 417 $267,352 $ (3,685) $111,113 $ (179) $375,018
Issuance of common
stock............... 648,857 7 4,931 4,938
Issuance of
restricted stock,
less amortization
of $290............. 96,256 1 5,562 (5,273) 290
Amortization of stock
compensation........ 1,205 1,205
Tax benefit from
exercise of
stock options....... 6,226 6,226
Comprehensive Income:
Net income............ 46,684 46,684
Foreign currency
translation
adjustment net
of tax.............. (1,981) (1,981)
---------
Total
Comprehensive
Income........ 44,703
---------- ------ -------- ------------ -------- ------------ ---------
BALANCE, June 30,
2000................... 42,479,997 $ 425 $284,071 $ (7,753) $157,797 $ (2,160) $432,380
========== ====== ======== ============ ======== ============ =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
-4-
<PAGE> 7
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Accounting Policies
Basis of Presentation
Unless the context otherwise requires, references to the "Company"
include Newfield Exploration Company and its subsidiaries. All significant
intercompany balances and transactions have been eliminated. 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, 2000 and the Company's consolidated results of
operations for the three and six month periods ended June 30, 2000 and 1999
and consolidated cash flows for the six-month periods ended June 30, 2000
and 1999. The consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
disclosures required for 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.
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, 1999, including the financial statements and notes thereto.
Earnings per Share
Basic earnings per common share ("EPS") is computed by dividing
net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur
if securities were exercised for or converted into common stock.
The following is a calculation of basic and diluted weighted average
shares outstanding for the three months and six months ended June 30, 2000 and
1999, respectively (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Income - basic. . . . . . . . . $ 29,561 $ 4,375 $ 46,684 $ 4,205
Preferred dividends on
convertible securities, net
of tax. . . . . . . . . . . . 1,518 --- 3,037 ---
--------- --------- --------- ---------
Income - diluted. . . . . . . . $ 31,079 $ 4,375 $ 49,721 $ 4,205
========= ========= ========= =========
Shares:
Shares outstanding - basic. . . 42,402 41,078 42,140 40,796
Stock options . . . . . . . . . 997 1,143 986 1,171
Convertible preferred securities
of Newfield Financial Trust I. 3,923 --- 3,923 ---
--------- --------- --------- ---------
Shares oustanding - diluted . . 47,322 42,221 47,049 41,967
========= ========= ========= =========
Earnings per Share:
Basic. . . . . . . . . . . . . $ 0.70 $ 0.11 $ 1.11 $ 0.10
Diluted. . . . . . . . . . . . $ 0.66 $ 0.10 $ 1.06 $ 0.10
</TABLE>
-5-
<PAGE> 8
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
The calculation of shares outstanding for diluted EPS for the three months
ended June 30, 2000 and 1999 does not include the effect of outstanding stock
options to purchase 43,000 and 57,500 shares, respectively, because to do
so would have been antidilutive. The calculation of shares outstanding for
diluted EPS for six months ended June 30, 2000 and 1999 does not include the
effect of outstanding stock options to purchase 63,000 and 525,200 shares,
respectively, because to do so would have been antidilutive.
Hedging
The Company enters into various commodity price hedging contracts with
respect to its oil and gas production. 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 arrangements also involves the risk that the counterparties will be
unable to meet the financial terms of such transactions. Hedging contracts are
accounted for as hedges in accordance with Statement of Financial Accounting
Standards No. 80. Gains and losses on these contracts are recognized in revenue
in the period in which the underlying production is delivered. These contracts
are measured for correlation at both the inception of the contract and on an
ongoing basis. If these instruments cease to meet the criteria for deferral
accounting, any subsequent gains or losses are recognized in income. If these
instruments are terminated prior to maturity, resulting gains and losses
continue to be deferred until the hedged item is recognized in revenue.
(2) Property Acquisition
In February 2000, the Company acquired interests in three producing gas
fields in South Texas for approximately $137 million. The acquisition has been
accounted for as a purchase and, accordingly, income and expenses from the
properties have been included in the Company's statement of income from the
date of purchase.
The unaudited pro forma results of operations assuming that such
acquisition occurred on January 1 of the respective periods are as follow (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Proforma:
Revenue . . . . . . . . . . . . . . . . . . $118,878 $65,851 $219,417 $123,279
Income from operations. . . . . . . . . . . 49,004 12,561 81,894 15,372
Net income. . . . . . . . . . . . . . . . . 29,561 5,200 47,714 3,647
Basic earnings per common share . . . . . . $0.70 $0.13 $1.13 $0.09
Diluted earnings per common share . . . . . $0.66 $0.13 $1.08 $0.09
</TABLE>
The proforma financial information does not purport to be indicative of
the results of operations that would have occurred had the acquisition taken
place at the beginning of the periods presented or future results of
operations.
-6-
<PAGE> 9
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
(3) 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, cash flows or results of
operations of the Company.
Management believes that the Company is in substantial compliance with
current applicable U.S. federal, state and local environmental laws and
regulations and that continued compliance with existing requirements will not
have a material adverse effect on the Company's financial position, cash flows
or results of operations. The Company's foreign operations are potentially
subject to similar governmental controls and restrictions relating to the
environment. Management believes that the Company is in substantial compliance
with any such foreign requirements pertaining to the environment. There can be
no assurance, however, that current regulatory requirements will not change,
currently unforeseen environmental incidents will not occur or past
non-compliance with environmental laws or regulations will not be discovered.
-7-
<PAGE> 10
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
(4) Geographic Information
<TABLE>
<CAPTION>
OTHER
UNITED STATES AUSTRALIA INTERNATIONAL TOTAL
------------- ---------- ------------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Three months ended June 30, 2000
------------------------------------
Oil and gas revenues................ $ 107,313 $ 11,565 $ --- $ 118,878
Operating expenses:
Lease operating................... 12,052 3,966 --- 16,018
Production and other taxes........ 1,297 (1,401) --- (104)
Depreciation, depletion and
amortization.................... 45,231 1,566 --- 46,797
Allocated income taxes............ 17,056 2,528 ---
--------- --------- ---------
Net income from oil and
gas operations............... $ 31,677 $ 4,906 $ ---
========= ========= =========
General and administrative
(exclusive of stock
compensation).................. 6,257
Stock compensation................ 906
---------
Total operating expenses.. 69,874
---------
Income from operations.............. 49,004
Interest expense, net............. (4,842)
---------
Income before income taxes.......... $ 44,162
=========
Total Long-Lived Assets............. $ 766,581 $ 14,335 $ 11,944 $ 792,860
========= ========= ========= =========
Additions to Long-Lived Assets...... $ 45,086 $ 5,840 $ 1,386 $ 52,312
========= ========= ========= =========
Three months ended June 30, 1999
-----------------------------------
Oil and gas revenues................ $ 60,072 $ --- $ --- $ 60,072
Operating expenses:
Lease operating..................... 9,472 --- --- 9,472
Production and other taxes........ --- --- --- ---
Depreciation, depletion and
amortization................... 37,060 --- --- 37,060
Allocated income taxes............ 4,739 --- ---
--------- --------- ---------
Net income from oil and
gas operations............... $ 8,801 $ --- $ ---
========= ========= =========
General and administrative
(exclusive of stock
compensation)................. 3,193
Stock compensation................ 461
---------
Total operating expenses.. 50,186
---------
Income from operations.............. 9,886
Interest expense, net............. (2,984)
---------
Loss before income taxes............ $ 6,902
=========
Total Long-Lived Assets............. $ 542,507 $ --- $ 10,493 $ 553,000
========= ========= ========= =========
Additions to Long-Lived Asset....... $ 24,762 $ --- $ 574 $ 25,336
========= ========= ========= =========
</TABLE>
-8-
<PAGE> 11
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
<TABLE>
<CAPTION>
OTHER
UNITED STATES AUSTRALIA INTERNATIONAL TOTAL
------------- --------- ------------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Six months ended June 30, 2000
------------------------------------
Oil and gas revenues................ $ 189,850 $ 24,067 $ --- $ 213,917
Operating expenses:
Lease operating................... 23,526 7,499 --- 31,025
Production and other taxes........ 1,989 (504) --- 1,485
Depreciation, depletion and
amortization.................... 84,317 3,640 --- 87,957
Allocated income taxes............ 28,006 4,567 ---
--------- --------- ---------
Net income from oil and
gas operations............... $ 52,012 $ 8,865 $ ---
========= ========= =========
General and administrative
(exclusive of stock
compensation)................. 12,603
Stock compensation................ 1,495
---------
Total operating expenses.. 134,565
---------
Income from operations.............. 79,352
Interest expense, net............. (8,923)
---------
Income before income taxes.......... $ 46,684
=========
Total Long-Lived Assets............. $ 766,581 $ 14,335 $ 11,944 $ 792,860
========= ========= ========= =========
Additions to Long-Lived Assets...... $ 220,135 $ 13,859 $ 1,514 $ 235,508
========= ========= ========= =========
Six months ended June 30, 1999
-----------------------------------
Oil and gas revenues................ $ 112,986 $ --- $ --- $ 112,986
Operating expenses:
Lease operating..................... 18,767 --- --- 18,767
Production and other taxes........ --- --- --- ---
Depreciation, depletion and
amortization................... 73,850 --- --- 73,850
Allocated income taxes............ 7,129 --- ---
--------- --------- ---------
Net income from oil and
gas operations............... $ 13,240 $ --- $ ---
========= ========= =========
General and administrative
(exclusive of stock
compensation) ................ 6,256
Stock compensation................ 991
---------
Total operating expenses.. 99,864
---------
Income from operations.............. 13,122
Interest expense, net............. (6,361)
---------
Loss before income taxes............ $ 6,761
=========
Total Long-Lived Assets............. $ 542,507 $ --- $ 10,493 $ 553,000
========= ========= ========= =========
Additions to Long-Lived Asset....... $ 46,757 $ --- $ 1,329 $ 48,086
========= ========= ========= =========
</TABLE>
-9-
<PAGE> 12
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
(5) Hedging Transactions
As of July 27, 2000, the Company had entered into commodity price hedging
contracts with respect to its 2000 through 2002 natural gas and oil production,
some of which were entered into subsequent to June 30, 2000, as follows:
<TABLE>
<CAPTION>
NATURAL GAS Swaps Collars
-------------------- ---------------------------
Weighted NYMEX
Average Contract
NYMEX Price
Contract per MMBtu
Volume in Price Volume in ----------------
PERIOD MMMBtus per MMBtu MMMBtus Floors Ceilings
--------------------------- ------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
July 2000-September 2000... 8,460 $2.87 6,420 $3.45 $3.95
October 2000-December 2000. 11,260 $3.00 1,110 $2.69 $3.24
January 2001-March 2001.... 10,050 $3.05 630 $2.75 $3.21
April 2001-June 2001....... 5,640 $2.80 2,480 $3.21 $3.80
July 2001.................. --- --- 1,000 $3.25 $3.85
</TABLE>
<TABLE>
<CAPTION>
OIL Swaps Collars Floor Contracts
-------------------- ------------------------------ --------------------
Weighted Weighted
Average NYMEX Average
NYMEX Contract Price NYMEX
Contract Per Bbl Contract
Volume in Price Volume in ------------------ Volume in Price
PERIOD Bbls per Bbl Bbls Floors Ceilings Bbls per Bbl
------------------------------ --------- -------- ------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
July 2000-September 2000...... 736,000 $22.38 92,000 $18.28 $21.00 --- ---
October 2000-December 2000.... 736,000 $22.09 184,000 $25.00 $30.05 --- ---
January 2001-March 2001....... 540,000 $21.99 180,000 $25.00 $30.05 45,000 $22.17
April 2001-June 2001.......... 364,000 $21.70 182,000 $25.00 $30.05 45,500 $22.17
July 2001-September 2001...... 276,000 $22.57 --- --- --- 46,000 $22.17
October 2001-December 2001.... 276,000 $22.17 --- --- --- 46,000 $22.17
January 2002-March 2002....... --- --- 90,000 $22.00 $25.75 --- ---
April 2002-June 2002.......... --- --- 91,000 $22.00 $25.75 --- ---
</TABLE>
-10-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
As an independent oil and gas producer, our 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 our 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 our
financial position, results of operations, cash flows, quantities of oil and
gas reserves that may be economically produced and access to capital.
Our results of operations and cash flows 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 we receive and
other factors, and, the results of operations and cash flows for any one
quarter may not be indicative of results for the full fiscal year.
We use the full cost method of accounting. Under this method, all costs
incurred in the acquisition, exploration and development of oil and gas
properties are capitalized into cost centers that are established on a
country-by-country basis. For each cost center, at the end of each quarter,
the net capitalized costs of oil and gas properties are limited to the lower of
unamortized cost or the cost center ceiling, defined as the sum of the present
value (10% discount rate) of estimated future net revenues from proved
reserves, based on period-end oil and gas prices; plus the cost of properties
not being amortized, if any; plus the lower of cost or estimated fair value of
unproved properties included in the costs being amortized, if any; less related
income tax effects. If net capitalized costs of oil and gas properties exceed
the ceiling limit, we are subject to a ceiling test writedown to the extent of
such excess. A ceiling test writedown is a non-cash charge to earnings. If
required, it would reduce earnings and impact stockholders' equity in the
period of occurrence.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The statement, as amended, requires companies to
report the fair value of derivatives on the balance sheet and record in income
or other comprehensive income, as appropriate, any changes in the fair value of
the derivative. Statement No. 133 will become effective for us on
January 1, 2001. We are currently evaluating the impact of this statement.
Explanation of some commonly used oil and gas terms can be found under the
caption "Commonly Used Oil and Gas Terms" at the end of Management's Discussion
and Analysis.
-11-
<PAGE> 14
RESULTS OF OPERATIONS
The following table presents information about our oil and gas operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRODUCTION:
UNITED STATES
Natural gas (Bcf)........................ 26.8 22.2 49.5 43.3
Oil and condensate (MBbls)............... 961 802 1,875 1,710
Total (Bcfe)............................. 32.6 27.0 60.8 53.6
AUSTRALIA*
Oil and condensate (MBbls)............... 343 --- 791 ---
Total (Bcfe)............................. 2.1 --- 4.7 ---
TOTAL
Natural gas (Bcf)........................ 26.8 22.2 49.6 43.3
Oil and condensate (MBbls)............... 1,304 802 2,666 1,710
Total (Bcfe)............................. 34.7 27.0 65.5 53.6
AVERAGE REALIZED PRICES:
UNITED STATES
Natural gas (per Mcf).................... $ 3.21 $ 2.17 $ 2.97 $ 2.10
Oil and condensate (per Bbl)............. 22.01 15.02 22.88 13.03
AUSTRALIA
Oil and condensate (per Bbl)............. $33.73 --- $30.42 ---
TOTAL
Natural gas (per Mcf).................... $ 3.21 $ 2.17 $ 2.97 $ 2.10
Oil and condensate (per Bbl)............. 25.09 15.02 25.11 13.03
</TABLE>
----------------
* In July 1999, we acquired oil producing assets offshore Australia.
PRODUCTION
NATURAL GAS. During the second quarter of 2000, natural gas volumes
increased 21% over the second quarter of 1999. Increases in gas production
were primarily related to the success of our drilling program at West Cameron
522 and 617, Eugene Island 198/199/202, onshore South Louisiana at our
Broussard prospect, the acquisition of South Pass 41 in August 1999 and the
acquisition of three producing gas fields in South Texas in February 2000.
Gains in production were partially offset by natural declines from
other producing properties.
For the first six months of 2000, our natural gas volumes increased 14%
over the first six months of 1999. The increase was primarily related to the
success of our drilling program at West Cameron 522 and 617, Eugene Island
198/199/202, Ship Shoal 69 and onshore South Louisiana at our Broussard
prospect, the acquisition of South Pass 41 in August 1999 and the acquisition
of three producing gas fields in South Texas in February 2000. Gains in
production were partially offset by natural declines from other producing
properties.
CRUDE OIL AND CONDENSATE. Our oil production increased 63% in the first
quarter of 2000 over the comparable quarter of 1999. The primary reason for
the increase was the acquisition of interests in two oil fields in the Timor
Sea, offshore Australia, during the third quarter of 1999. Increases in
domestic oil production were mainly due to the acquisition of an oil producing
property at Main Pass 138 in the Gulf of Mexico in August 1999 and production
from drilling success at Eugene Island 198/199/202. These increases were
offset by natural production declines from other producing properties.
-12-
<PAGE> 15
Our oil production increased 56% in the first six months of 2000 over the
comparable quarter of 1999. The primary reason for the increase was the
acquisition of interests in two oil fields in the Timor Sea, offshore
Australia, during the third quarter of 1999. Increases in domestic oil
production were mainly due to the acquisition of an oil producing property
at Main Pass 138 and production from drilling success at Eugene Island
198/199/202, Ship Shoal 69 and South Marsh Island 160. These increases were
offset by natural production declines from other producing properties.
REALIZED PRICES
NATURAL GAS. Our average realized gas price in the second quarter of 2000
was $3.21 per Mcf, an increase of 48% over an average realized price of $2.17
per Mcf in the second quarter of 1999. Hedging activities in the second
quarter of 2000 resulted in a price that was 92% of what otherwise would have
been received. Hedging activities in the second quarter of 1999 resulted in a
price that was 101% of what otherwise would have been received.
Our average realized gas price in the first six months of 2000 was $2.97
per Mcf, an increase of 41% over an average realized price of $2.10 per Mcf in
the first six months of 1999. Hedging activities in the first six months of
2000 resulted in a price that was 96% of what otherwise would have been
received. Hedging activities in the first six months of 1999 resulted in a
price that was 109% of what otherwise would have been received.
CRUDE OIL AND CONDENSATE. Crude oil and condensate prices in the second
quarter of 2000 averaged $25.09, an increase of 67% over the average price of
$15.02 per barrel in the second quarter of 1999. Our average crude oil price
in the second quarter of 2000 was 86% of what would have been received without
hedging activities. Our average crude oil price in the second quarter of 1999
was 96% of what would have been received without hedging activities.
Crude oil and condensate prices in the first six months of 2000 averaged
$25.11 per barrel, an increase of 93% over the average price of $13.03 per
barrel in the comparable period of 1999. Our average crude oil price in the
first six months of 2000 was 87% of what would have been received without
hedging activities. Our average crude oil price in the first six months of 1999
was 101% of what would have been received without hedging activities.
NET INCOME AND REVENUES
For the second quarter of 2000, we reported net income of $29.6 million,
or $0.66 cents per diluted share. This compares to net income of $4.4 million,
or $0.10 per diluted share, in the second quarter of 1999. Revenues for the
second quarter of 2000 increased 98% to $118.9 million compared to revenues of
$60.1 million in the second quarter of 1999. The increase in net income and
revenues in the second quarter of 2000 was primarily due to sharp increases in
commodity prices coupled with higher production volumes.
For the first six months of 2000, we reported net income of $46.7 million,
or $1.06 cents per diluted share. This compares to net income of $4.2 million,
or $0.10 per diluted share, in the comparable period of 1999. Revenues for the
first six months of 2000 increased 89% to $213.9 million compared to revenues
of $113.0 million in the comparable period of 1999. The increase in net income
and revenues in the first quarter of 2000 was primarily due to sharp increases
in commodity prices coupled with higher production volumes.
-13-
<PAGE> 16
OPERATING EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
AVERAGE COSTS (PER MCFE):
UNITED STATES
Lease operating........................... $0.37 $0.35 $0.39 $0.35
Depreciation, depletion and amortization.. 1.38 1.37 1.39 1.38
General and administrative (exclusive of
stock compensation). ................... 0.19 0.12 0.21 0.12
AUSTRALIA
Lease operating........................... $1.93 --- $1.58 ---
Depreciation, depletion and amortization.. 0.76 --- 0.77 ---
General and administrative (exclusive of
stock compensation)..................... 0.01 --- 0.01 ---
TOTAL
Lease operating........................... $0.46 $0.35 $0.47 $0.35
Depreciation, depletion and amortization.. 1.35 1.37 1.34 1.38
General and administrative (exclusive of
stock compensation)..................... $0.18 $0.12 $0.19 $0.12
</TABLE>
During the second quarter of 2000, our operating expenses increased 39% to
$69.9 million from $50.2 million for the second quarter of 1999. Our operating
expenses for the first six months of 2000 increased 35% to $134.6 million from
$99.9 million for the comparable period in 1999. Operating expenses during
the three and six month periods ended June 30, 2000 were impacted by the
following:
- Lease operating expense, stated on a unit of production basis, increased
32% to $0.46 per Mcfe in the second quarter of 2000 compared to $0.35
per Mcfe in the second quarter of 1999. Domestic lease operating
expense increased 6% on a unit of production basis to $0.37 per Mcfe in
the second quarter of 2000 compared to $0.35 per Mcfe in the second
quarter of 1999. Lease operating expense stated on a unit of production
basis, for the first six months of 2000 increased 35% to $0.47 per Mcfe
compared to $0.35 per Mcfe for the first six months of 1999. This
increase reflects the impact of higher operating cost properties
acquired in the Gulf of Mexico in 1999 and the relatively higher
Australian lease operating expenses associated with the high cost of
operations and maintenance of the two floating, storage and off-loading
vessels.
- Depreciation, depletion and amortization expense for the second quarter
of 2000 decreased 2% on a unit of production basis to $1.35 per Mcfe.
Our domestic DD&A rate increased 1% to $1.38 per Mcfe as compared to the
second quarter of 1999. Depreciation, depletion and amortization
expense for the six months of 2000 decreased 3% on a unit of production
basis to $1.34 per Mcfe. Our domestic depreciation, depletion and
amortization expense increased 1% on a unit of production basis to
$1.39. The Australian DD&A rate was $0.76 per Mcfe for the second
quarter and $0.77 for the first six months of 2000.
- General and administrative expense for the second quarter of 2000
increased $3.1 million compared to the second quarter of 1999, or 96%,
due primarily to an increase in some non-recurring expenses and our
growing workforce. During the first six months of 2000, general and
administrative expenses increased 101% to $12.6 million from $6.2
million over the comparable period in 1999. This increase is primarily
due to an increase in performance based pay, some non-recurring expenses
associated with a transition to more sophisticated business systems and
our growing workforce.
-14-
<PAGE> 17
Additionally, production and other taxes in the second quarter of 2000
were ($0.1) million. This credit is due to a production tax adjustment
associated with our Australian oil production from July 1999 to June 2000,
offset by production taxes associated with our newly acquired South Texas
properties. For the first six months of 2000, production taxes were $1.5
million. The increase is primarily due to the acquisition of three producing
gas fields in South Texas in February 2000 partially offset by the Australian
production tax credit.
INTEREST EXPENSE AND DIVIDENDS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2000 1999 2000 1999
----- ----- ----- ------
(In millions)
<S> <C> <C> <C> <C>
Gross interest expense................................ $ 4.3 $ 3.6 $ 7.7 $ 7.5
Capitalized interest.................................. (1.4) (0.5) (2.6) (0.9)
----- ----- ----- -----
Net interest expense.................................. 2.9 3.1 5.1 6.6
Dividends on preferred securities..................... 2.3 --- 4.7 ---
----- ----- ----- -----
Total interest expense and dividends.................. $ 5.2 $ 3.1 $ 9.8 $ 6.6
===== ===== ===== =====
</TABLE>
Our net interest expense decreased as a result of the issuance of $143.8
million of 6.5% convertible preferred securities by Newfield Financial Trust
I in August 1999 (a portion of the proceeds of which were used to repay
borrowings) and a higher percentage of total interest costs being capitalized
during the second quarter and first six months of 2000, partially offset by
higher average debt levels during the second quarter and first six months of
2000. In total, interest expense and dividends increased in the second quarter
and first six months of 2000 over the comparable periods of 1999 because of the
higher average levels of financing that were subject to interest or dividends
during the second quarter and first six months of 2000, partially offset by a
higher percentage of total interest costs being capitalized during the second
quarter and first six months of 2000. The higher average levels of financing
were primarily the result of funding several acquisitions in the second half
of 1999 with the remaining proceeds of the 6.5% convertible preferred
securities and funding our February 2000 South Texas acquisition with
borrowings under our credit facility.
The effective tax rate for the three and six month periods ended
June 30, 2000 was 33% and 34%, respectively. The effective tax rate was less
than the statutory tax rate because the valuation allowance on the Australian
net operating loss carryforwards was reduced by approximately $0.9 million.
Based on estimates of future taxable income, we believe it is more likely than
not that the Australian net operating loss will be fully utilized. Estimates
of future taxable income can be significantly affected by changes in oil and
natural gas prices, estimates of the timing and amounts of future production,
and estimates of future operating and capital costs. The valuation allowance
could be increased in the near term if our estimates of future taxable income
are significantly reduced. If sufficient taxable income is not generated in
the future through operating results, a valuation allowance adjustment would
be recorded as a charge to income.
LIQUIDITY AND CAPITAL RESOURCES
We had working capital of $27.9 million at June 30, 2000. This compares
to working capital of $35.2 million at December 31, 1999. Long-term debt
increased to $209.7 million at June 30, 2000 from $124.7 million at
December 31, 1999. The $7.3 million decrease in working capital and the
increase in long-term debt is primarily due to the acquisition of producing
properties in South Texas in February 2000 for $137 million. Working capital
balances may fluctuate from quarter to quarter to the extent we increase or
decrease borrowings under our revolving credit facility. Historically, we have
funded our oil and gas activities through cash flow from operations, equity
capital from private and public sources, public debt and bank borrowings.
-15-
<PAGE> 18
We maintain our reserve-based revolving credit facility with Chase Bank
of Texas, National Association, as agent. As of June 30, 2000, there was
$85.0 million outstanding under the credit facility. The credit facility
provides a $225 million revolving credit maturing on October 31, 2002. The
amount available under the credit facility is subject to a calculated borrowing
base determined by a majority of the banks participating in the credit
facility, which is reduced by the aggregate principal outstanding on our senior
unsecured notes (currently $125 million). The borrowing base is redetermined
at least semi-annually and, after reduction for the senior unsecured notes, is
currently $255 million. No assurances can be given that a majority of the
banks will not elect to redetermine the borrowing base in the future. We have
an option, subject to the borrowing base, to increase the facility to $250
million.
We have also established money market lines of credit with various banks
in an amount limited by the credit facility to $25 million. As of
June 30, 2000, there were no borrowings outstanding under these lines of
credit. At July 28, 2000, without so increasing the facility, we have
approximately $184 million of available capacity under the credit facility
and money market lines.
CASH FLOW FROM OPERATIONS. Our net cash flow from operations for the six
months ended June 30, 2000 increased 52% over the comparable period of 1999 to
$113.0 million. This increase in cash flow is primarily due to sharply higher
commodity prices for oil and gas and higher production volumes. Net cash flow
from operations before changes in operating assets and liabilities for the six
months ended June 30, 2000 was $145.4 million compared to $81.6 million in the
comparable period of 1999. The increase in net cash flow from operations
before changes in operating assets and liabilities is primarily attributable
to sharply higher commodity prices and production volumes offset slightly by
increased operating expenses.
CAPITAL EXPENDITURES. We made capital expenditures of $236.0 million in
the first six months of 2000. This includes $50.0 million for exploration,
$49.0 million for exploitation and development projects and $137.0 million for
property acquisitions. We have budgeted $124 million for capital spending for
the remainder of 2000. Approximately $38 million has been budgeted for
domestic exploration projects and $74 million for domestic exploitation and
development drilling and the construction of platforms, facilities and
pipelines. International spending is estimated at $12 million for the
remainder of 2000. Acquisitions are opportunistic and are generally not
budgeted under our capital program. We continue to pursue attractive
acquisition opportunities, however, the timing, size and purchase price of
acquisitions 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.
Our February 2000 South Texas acquisition was funded with working capital
and borrowings under our credit facility. We anticipate that our remaining
capital expenditure budget for 2000 will be funded principally from cash flow
from operations and working capital. We do not anticipate additional borrowings
under our credit facility and money market lines of credit during 2000 unless
we make another significant acquisition.
-16-
<PAGE> 19
HEDGING
We utilize and expect to continue to utilize hedging transactions with
respect to a portion of our oil and gas production. These derivative financial
instruments are used to hedge our exposure to changes in the market price of
natural gas and crude oil and to achieve more predictable cash flow. 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 our
hedging transactions to date were carried out in the over-the-counter market.
We account 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 July 27, 2000, we had entered into commodity price hedging
contracts with respect to our 2000 and 2001 natural gas production as set forth
below. Some of these contracts were entered into subsequent to June 30, 2000.
<TABLE>
<CAPTION>
Swaps Collars
--------------------- ---------------------------
Weighted
Average NYMEX
NYMEX Contract Price
Volume in Contract per MMBtu
PERIOD MMMBtus Price Volume in ----------------
per MMBtu MMMBtus Floors Ceilings
---------------------------- --------- --------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
July 2000-September 2000.... 8,460 $2.87 6,420 $3.45 $3.95
October 2000-December 2000.. 11,260 $3.00 1,110 $2.69 $3.24
January 2001-March 2001..... 10,050 $3.05 630 $2.75 $3.21
April 2001-June 2001........ 5,640 $2.80 2,480 $3.21 $3.80
July 2001................... --- --- 1,000 $3.25 $3.85
</TABLE>
These hedging transactions are settled based upon the average of the
reported settlement prices on the NYMEX for the last three trading days or,
occasionally, the penultimate trading day of a particular contract month (the
"settlement price"). With respect to any particular swap transaction, the
counterparty is required to make a payment to us in the event that the
settlement price for any settlement period is less than the swap price for
such transaction, and we are required to make payment to the counterparty in
the event that the settlement price for any settlement period is greater than
the swap price for such transaction. For any particular collar transaction,
the counterparty is required to make a payment to us if the settlement price
for any settlement period is below the floor price for such transaction, and
we are required to make payment to the counterparty if the settlement price
for any settlement period is above the ceiling price for such transaction.
For any particular floor transaction, the counterparty is required to make a
payment to us if the settlement price for any settlement period is below the
floor price for such transaction. We are not required to make any payment in
connection with the settlement of a floor transaction.
We believe that we have no material basis risk with respect to gas swaps
because substantially all of our natural gas production is sold under spot
contracts that have historically correlated with the swap price.
-17-
<PAGE> 20
As of July 27, 2000, we had entered into commodity price hedging
contracts with respect to our 2000 through 2002 domestic oil production as set
forth below. Some of these contracts were entered into subsequent to
June 30, 2000.
<TABLE>
<CAPTION>
OIL Swaps Collars Floor Contracts
-------------------- ------------------------------- --------------------
Weighted Weighted
Average NYMEX Average
NYMEX Contract Price NYMEX
Contract Per Bbl Contract
Volume in Price Volume in ------------------- Volume in Price
PERIOD Bbls per Bbl Bbls Floors Ceilings Bbls per Bbl
------------------------------ --------- -------- -------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
July 2000-September 2000...... 736,000 $22.38 92,000 $18.28 $21.00 --- ---
October 2000-December 2000.... 736,000 $22.09 184,000 $25.00 $30.05 --- ---
January 2001-March 2001....... 540,000 $21.99 180,000 $25.00 $30.05 45,000 $22.17
April 2001-June 2001.......... 364,000 $21.70 182,000 $25.00 $30.05 45,500 $22.17
July 2001-September 2001...... 276,000 $22.57 --- --- --- 46,000 $22.17
October 2001-December 2001.... 276,000 $22.17 --- --- --- 46,000 $22.17
January 2002-March 2002....... --- --- 90,000 $22.00 $25.75 --- ---
April 2002-June 2002.......... --- --- 91,000 $22.00 $25.75 --- ---
</TABLE>
Because substantially all of our domestic oil production is sold under
spot contracts that have historically correlated to the NYMEX West Texas
Intermediate price, we believe that we have no material basis risk with respect
to these transactions. The actual cash price we receive in the U.S., however,
generally is about $2.00 per barrel less than the NYMEX West Texas Intermediate
price when adjusted for location and quality differences.
-18-
<PAGE> 21
Drilling Activity
Year-to-date, we have drilled or participated in a total of 32 wells
(17 in the Gulf of Mexico, 10 onshore U.S. Gulf Coast, five internationally).
Today, we have six company-operated rigs running in the Gulf of Mexico and
four operated rigs running onshore. In addition, six outside-operated wells are
currently active, including one in China's Bohai Bay. A summary of our
year-to-date drilling results by focus area is outlined below.
Gulf of Mexico
To date in 2000, we have drilled or participated 12 successful wells and
two dry holes. In addition, we have deepened one well drilled by another
operator as a cost effective method to test a deep prospect that extended onto
Newfield's operated South Timbalier 138. The operation did not result in a
discovery. Two exploration wells are currently drilling. The wells include:
<TABLE>
<CAPTION>
Working
Well Name Status Interest Operator
---------------------- ------------------ --------- ----------
<S> <C> <C> <C>
East Cameron 38 #8 successful* 65% NFX
High Island A-521 successful* 41% NFX
Ship Shoal 139 #1 successful* 82% NFX
Ship Shoal 139 #2 successful* 82% NFX
South Timbalier 107 #2 successful* 30% NFX
Grand Isle 103 #2 successful 48% NFX
East Cameron 64 #H-6 successful /producing 18% NFX
West Cameron 532 #A-12 successful /producing 33% outside
Ship Shoal 28 #39 successful /producing 33% outside
Grand Isle 103 #3 successful 48% NFX
Ship Shoal 76 #2 successful 83% NFX
Viosca Knoll 738 #1 drilling 48% NFX
Brazos 542 drilling 16% outside
Viosca Knoll 739 #1 successful 25% outside
Vermilion 215 #7 dry hole 75% NFX
Eugene Island 199 #10 dry hole 75% NFX
</TABLE>
----------
*Under development
We plan to drill at least 25 wells in the Gulf of Mexico in 2000.
-19-
<PAGE> 22
U.S. Onshore Gulf Coast
Year-to date, we have drilled or participated in four successful onshore
wells and one dry hole. This includes two development wells on two of the
fields acquired in the first quarter acquisition of three producing fields
in South Texas. Four wells are currently drilling. Results follow:
<TABLE>
<CAPTION>
Working
Prospect Location Status Interest Operator
-------- -------- ------------------ -------- --------
<S> <C> <C> <C> <C>
Cash Texas successful 75% NFX
Real Texas successful /producing 75% NFX
Davis A-5 Texas development well /producing 35% outside
McCoy Texas evaluating 33% outside
Wright Louisiana successful 60% NFX
Davis A-6 Texas development well /drilling 35% outside
Perry Point Louisiana drilling 22% outside
Perry Point Louisiana drilling 71% NFX
SK East #6 Texas development well /drilling 100% NFX
Koehl #1 Texas dry hole 50% NFX
</TABLE>
We plan to drill 12-15 additional wells in the coastal regions of Texas
and Louisiana during 2000.
-20-
<PAGE> 23
International Update
Year-to-date, we have drilled or participated in six international wells
(four in Australia and two in China).
In Australia, we have drilled four unsuccessful wells (two infill wells,
two wildcats) in the first half of the year. A third, non-operated exploratory
well may be drilled late this year. A gas lift optimization program has been
implemented in our two producing oil fields - Jabiru and Challis - and
production is expected to average about 4,300 BOPD (net) in the second half
of 2000.
On Block 05/36 in China's Bohai Bay, the CFD-12-1 #1 wildcat well was a
discovery, testing more than 2,500 BOPD of 34-degree gravity crude from two
intervals in the Guantao section. The discovery is located in 70 feet of water.
The CFD 12-1 #2 appraisal well, located about 2.5 kilometers northwest of the
discovery, was spud on July 12 and has recently reached total depth. Additional
information will be made available in the next two to three weeks. A 3-D
seismic program is expected to begin mid-August. The results of the 3-D
seismic data and future appraisal drilling will be used to help determine
commerciality. We own a 35% interest in Block 05/36, which is operated by
Kerr McGee.
Forward Looking Information
Certain of the statements set forth in this document regarding planned
capital expenditures, drilling plans, other capital activities and the
financing of capital expenditures 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.
-21-
<PAGE> 24
Commonly Used Oil and Gas Terms
Below are explanations of some commonly used terms in the oil and gas
business.
Basis risk. The risk associated with the sales point price for oil or gas
production varying from the reference (or settlement) price
for a particular hedging transaction.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume of
crude oil or other liquid hydrocarbons.
Bcf. Billion cubic feet.
Bcfe. Billion cubic feet equivalent, determined by using the ratio
of six Mcf of natural gas to one Bbl of crude oil, condensate
or natural gas liquids.
Btu. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 degrees to
59.5 degrees Fahrenheit.
MBbls. One thousand barrels of crude oil or other liquid
hydrocarbons.
Mcf. One thousand cubic feet.
Mcfe. One thousand cubic feet equivalent, determined using the
ratio of six Mcf of natural gas to one Bbl of crude oil,
condensate or natural gas liquids.
MMBbls. One million barrels of crude oil or other liquid
hydrocarbons.
MMbtu. One million Btus.
MMMbtu. One billion Btus.
MMcf. One million cubic feet.
MMcfe. One million cubic feet equivalent, determined using the ratio
of six Mcf of natural gas to one Bbl of crude oil, condensate
or natural gas liquids.
NYMEX. The New York Mercantile Exchange
-22-
<PAGE> 25
Part II
Item 4. Submission of Matters to a Vote of Security Holders
At the May 4, 2000 Annual Meeting of Stockholders, the Company's
stockholders voted on six matters; 41,765,124 shares of common stock
were outstanding and entitled to vote as of the March 10, 2000 record
date.
(1) Election of Eleven Directors:
The stockholders elected the eleven nominees for directors
until the next annual meeting by the following vote:
<TABLE>
<CAPTION>
Nominee Elected For Withheld
----------------- ----------- ------------
<S> <C> <C>
Joe B. Foster 34,616,848 307,915
David A. Trice 34,616,848 307,915
Robert W. Waldrup 34,616,848 307,915
Charles W. Duncan, Jr. 34,615,633 309,130
Howard H. Newman 34,487,613 437,150
Thomas G. Ricks 34,616,848 307,915
C.E. (Chuck) Shultz 34,616,788 307,975
Terry Huffington 34,489,073 435,690
Dennis R. Hendrix 34,396,169 528,594
Philip J. Burguieres 34,616,798 307,965
John C. Sawhill 34,615,988 308,775
</TABLE>
(2) Approval of the Newfield Exploration Company 2000 Omnibus
Stock Plan:
The stockholders approved the adoption of the Newfield
Exploration Company 2000 Omnibus Stock Plan by the following
vote:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
---------- -------------- ----------------
<S> <C> <C>
17,482,689 14,646,444 2,795,630
</TABLE>
(3) Approval of the Newfield Exploration Company 2000 Non-Employee
Director Restricted Stock Plan:
The stockholders approved the adoption of the Newfield
Exploration Company 2000 Non-Employee Director Restricted
Stock Plan by the following vote:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
---------- -------------- ----------------
<S> <C> <C>
27,587,634 4,527,748 2,809,381
</TABLE>
-23-
<PAGE> 26
(4) Approval of amendment to the New Newfield Exploration Company
1993 Employee Stock Purchase Plan:
The stockholders approved the amendment of the Newfield
Exploration Company 1993 Employee Stock Purchase Plan by the
following vote:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
---------- -------------- ----------------
<S> <C> <C>
34,357,182 66,293 501,288
</TABLE>
(5) Approval of the Newfield Exploration Company 2001 Employee
Stock Purchase Plan:
The stockholders approved the adoption of the Newfield
Exploration Company 2001 Employee Stock Purchase Plan by the
following vote:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
---------- -------------- ----------------
<S> <C> <C>
32,032,295 89,598 2,802,870
</TABLE>
(6) Appointment of Independent Public Accountants:
The stockholders ratified the appointment of Pricewaterhouse-
Coopers LLP as the Company's independent auditors for the year
2000 by the following vote:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
----------- ----------- ----------------
<S> <C> <C>
34,902,744 18,984 3,035
</TABLE>
-24-
<PAGE> 27
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10 Employment Agreement between the Registrant and Joe B. Foster
dated January 31, 2000
27 Financial Data Schedule (included only in the electronic
filing of this document)
(b) Reports on Form 8-K:
On March 9, 2000, the Company filed a Current Report on Form 8-K
reporting the acquisition of interests in three producing gas fields
in South Texas on February 25, 2000. The Report was subsequently
amended by a Form 8K/A dated May 5, 2000 for the sole purpose of
including the financial statements required by Item 7 of Form 8-K.
The following financial statements were filed with such amendment:
Financial Statements of the Acquired Property:
Report of Independent Accountants
Statement of Revenues and Direct Operating Expenses of the
Acquired Properties for the Year Ended December 31, 1999
Notes to the Statement of Revenues and Direct Operating
Expenses
Supplementary Oil and Gas Disclosures for the Acquired
Properties (Unaudited)
Unaudited Pro Forma Combined Financial Statements:
Explanatory Note
Pro Forma Combined Statement of Income for the year
ended December 31, 1999 (Unaudited)
Pro Forma Combined Balance Sheet as of December 31, 1999
(Unaudited)
Notes to Pro Forma Combined Financial Statements (Unaudited)
Pro Forma Combined Supplementary Oil and Gas Disclosures as of
December 31, 1999 (Unaudited)
-25-
<PAGE> 28
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 28, 2000 By: /s/ TERRY W. RATHERT
Terry W. Rathert
Vice President and Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
-26-
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
--------- -----------------------
<S> <C>
10 Employment Agreement between the Registrant and
Joe B. Foster dated January 31, 2000
27 Financial Data Schedule (included
only in the electronic filing of
this document)
</TABLE>
