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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 31, 2002
NEWFIELD EXPLORATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-12534 72-1133047
(STATE OR OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) NUMBER) IDENTIFICATION NUMBER)
363 N. SAM HOUSTON PARKWAY E.
SUITE 2020
HOUSTON, TEXAS 77060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 847-6000
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ITEM 5. OTHER EVENTS
On October 31, 2002, Newfield Exploration Company ("Newfield" or the
"Company") announced its financial and operating results for the third quarter
and year-to-date 2002. Set forth below is a portion of the press release.
THIRD QUARTER 2002
For the third quarter of 2002, Newfield reported net income of $18.4
million, or $0.41 per share (all per share amounts are on a diluted basis),
stated before the effect of a non-cash charge related to SFAS 133. Stated after
the effect of the non-cash charge, net income for the third quarter of 2002 was
$9.4 million, or $0.21 per share. This compares to net income in the third
quarter of 2001 of $35.8 million, or $0.76 per share, stated before the effect
of a non-cash gain related to SFAS 133. Stated with the effect of the gain,
earnings for the third quarter of 2001 were $43.0 million, or $0.91 per share.
Revenues in the third quarter of 2002 were $152.6 million compared to $183.3
million in the same period of 2001. Operating cash flow before changes in
working capital for the third quarter of 2002 was $86.2 million, or $1.92 per
share, compared to $129.9 million, or $2.69 per share, in the same period of
2001. Operating cash flow in the third quarter of 2002 was negatively impacted
by lower realized natural gas prices and higher current taxes.
Tropical Storm Isidore adversely impacted financial and operating
results in the third quarter of 2002. Newfield was forced to shut-in a total of
approximately 1.5 billion cubic feet equivalent (Bcfe) of production in the Gulf
of Mexico in late September.
Newfield's total production for the third quarter of 2002 was 44.2
Bcfe, or 481 million cubic feet equivalent per day (MMcfe/d). Production in the
third quarter declined 3% over the third quarter of 2001 primarily due to lower
oil production and weather-related shut-ins in the Gulf of Mexico. Production in
the third quarter of 2001 was 45.7 Bcfe, or 497 MMcfe/d. The following tables
detail quarterly production and average realized prices:
THIRD QUARTER PRODUCTION
3Q02 3Q01 % CHANGE
----------------------------------
United States
Natural gas (Bcf) 34.8 35.0 (1%)
Natural gas (MMcf/d) 378 381 (1%)
Oil and condensate production (MMBbls) 1.18 1.42 (17%)
Oil and condensate production (BOPD) 12,877 15,414 (17%)
Australia
Oil and condensate liftings (MMBbls) 0.388 0.359 8%
Oil and condensate liftings (BOPD) 4,219 3,908 8%
Total
Natural gas (Bcf) 34.8 35.0 (1%)
Oil and condensate (MMBbls) 1.57 1.78 (12%)
Total (Bcfe) 44.2 45.7 (3%)
2
AVERAGE REALIZED PRICES*
3Q02 3Q01 % CHANGE
----------------------------------
United States
Natural gas (per Mcf) $3.19 $3.94 (19%)
Oil and condensate (per Bbl) $24.84 $24.52 1%
Australia
Oil and condensate liftings (per Bbl) $27.39 $25.40 8%
Total
Natural gas (per Mcf) $3.19 $3.94 (19%)
Oil and condensate (per Bbl) $25.47 $24.70 3%
Total per Mcfe $3.41 $3.98 (14%)
---------------------------------------------------
*Prices shown are net of transportation expense and after hedging. The Company
has not entered into hedging transactions specifically relating to Australian
production.
Newfield's LOE in the third quarter of 2002, stated on a unit of
production basis, was $0.57 per thousand cubic feet equivalent (Mcfe). This
compares to $0.66 per Mcfe in the third quarter of 2001. LOE was higher in the
third quarter of 2001 primarily because of a one-time $5.5 million charge
related to workover expense on a Gulf of Mexico well. DD&A expense for the third
quarter of 2002 was $1.64 per Mcfe compared to $1.63 per Mcfe in the same period
of 2001. Newfield's general and administrative expense (including stock
compensation) in the third quarter of 2002 was $0.31 per Mcfe compared to $0.27
per Mcfe in the third quarter of 2001. Higher G&A expense per unit reflects
lower production in the third quarter of 2002 and the Company's growing
workforce. Net interest expense decreased slightly to $0.13 per Mcfe compared to
$0.14 per Mcfe in the third quarter of 2001.
YEAR-TO-DATE 2002
For the first nine months of 2002, Newfield reported net income of
$58.5 million, or $1.29 per share, stated before the effect of a non-cash charge
related to SFAS 133. Stated after the effect of the non-cash charge, net income
for the first nine months of 2002 was $42.0 million, or $0.93 per share. This
compares to net income in the first nine months of 2001 of $152.9 million, or
$3.21 per share, stated before the effect of a non-cash gain related to SFAS
133. Stated with the effect of the gain, earnings for the first nine months of
2001 were $158.1 million, or $3.32 per share.
Revenues for the first nine months of 2002 were $462.3 million. For the
same period of 2001, they were $593.3 million. Operating cash flow before
changes in working capital decreased to $282.6 million, or $6.29 per share, in
the first three quarters of 2002 compared to $415.6 million, or $8.57 per share,
in the same period of 2001. The decreases reflect lower commodity prices and, in
the case of operating cash flow, higher current taxes.
3
YEAR-TO-DATE PRODUCTION
For the Nine Months Ended September 30
YTD 09/02 YTD 09/01 % CHANGE
-------------------------------------
United States
Natural gas (Bcf) 106.5 101.3 5%
Natural gas (MMcf/d) 390 371 5%
Oil and condensate production (MMBbls) 3.86 4.03 (4%)
Oil and condensate production (BOPD) 14,150 14,775 (4%)
Australia
Oil and condensate liftings (MMBbls) 0.964 0.941 2%
Oil and condensate liftings (BOPD) 3,531 3,447 2%
Total
Natural gas (Bcf) 106.5 101.3 5%
Oil and condensate (MMBbls) 4.83 4.97 (3%)
Total (Bcfe) 135.5 131.1 3%
AVERAGE REALIZED PRICES*
For the Nine Months Ended September 30
YTD 09/02 YTD 09/01 % CHANGE
-------------------------------------
United States
Natural gas (per Mcf) $3.22 $4.59 (30%)
Oil and condensate (per Bbl) $23.52 $24.55 (4%)
Australia
Oil and condensate liftings (per Bbl) $25.24 $26.58 (5%)
Total
Natural gas (per Mcf) $3.22 $4.59 (30%)
Oil and condensate (per Bbl) $23.86 $24.93 (4%)
TOTAL PER MCFE $3.38 $4.49 (25%)
---------------------------------------------
*Prices shown are net of transportation expense and after hedging. The Company
has not entered into hedging transactions specifically relating to Australian
production.
For the first nine months of 2002, the Company's LOE averaged $0.54 per
Mcfe compared to $0.56 per Mcfe in the first nine months of 2001. DD&A expense
in the first three quarters of 2002 was $1.63 per Mcfe compared to $1.58 per
Mcfe in the same period of 2001. Year-to-date, G&A expense per Mcfe (including
stock compensation) averaged $0.29 compared to $0.27 in the same period of last
year.
Capital expenditures through the end of the third quarter were $247
million. For the full-year 2002, Newfield expects to invest about $340 million,
excluding the pending acquisition of EEX Corporation.
4
CONSOLIDATED STATEMENT OF INCOME FOR THE FOR THE
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
OIL AND GAS REVENUES $ 152,610 $ 183,259 $ 462,260 $ 593,332
--------- --------- --------- ---------
OPERATING EXPENSES:
Lease operating 25,065 30,245 73,824 73,819
Transportation 1,730 1,325 4,377 4,150
Production and other taxes 5,635 3,311 12,906 15,892
Depreciation, depletion and amortization 72,294 74,259 221,528 206,982
General and administrative 13,045 11,406 37,018 33,332
Stock compensation 731 729 2,066 2,027
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 118,500 121,275 351,719 336,202
--------- --------- --------- ---------
INCOME FROM OPERATIONS 34,110 61,984 110,541 257,130
OTHER INCOME (EXPENSE):
Interest expense (7,049) (6,897) (21,397) (20,520)
Capitalized interest 2,280 2,354 6,553 6,508
Dividends on preferred securities of
Newfield Financial Trust I (2,336) (2,336) (7,008) (7,008)
Unrealized commodity derivative income (expense)* (13,952) 11,101 (25,477) 15,262
Other 1,346 316 1,915 1,458
--------- --------- --------- ---------
(19,711) 4,538 (45,414) (4,300)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 14,399 66,522 65,127 252,830
--------- --------- --------- ---------
Income tax provision 5,028 23,546 23,160 89,972
--------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle 9,371 42,976 41,967 162,858
Cumulative effect of change in accounting principle* -- -- -- (4,794)
--------- --------- --------- ---------
NET INCOME $ 9,371 $ 42,976 $ 41,967 $ 158,064
========= ========= ========= =========
EARNINGS PER SHARE:
BASIC
Income before cumulative effect of change
in accounting principle $ 0.21 $ 0.97 $ 0.95 $ 3.67
Cumulative effect of change in accounting
principle* -- -- -- (0.11)
--------- --------- --------- ---------
Net income $ 0.21 $ 0.97 $ 0.95 $ 3.56
========= ========= ========= =========
DILUTED
Income before cumulative effect of change
in accounting principle $ 0.21 $ 0.91 $ 0.93 $ 3.42
Cumulative effect of change in accounting
principle* -- -- -- (0.10)
--------- --------- --------- ---------
Net income $ 0.21 $ 0.91 $ 0.93 $ 3.32
========= ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
FOR BASIC EARNINGS PER SHARE 44,420 44,219 44,337 44,344
WEIGHTED AVERAGE SHARES OUTSTANDING
FOR DILUTED EARNINGS PER SHARE 44,905 48,798 44,910 49,014
---------------------------------
*Associated with SFAS 133
PRODUCTION DATA FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Average daily production:
Oil and condensate (Bbls) 17,096 19,322 17,681 18,222
Gas (Mcf) 378.0 381.0 390.0 371.0
Average realized price: *
Oil and condensate (Bbls) $ 25.47 $ 24.70 $ 23.86 $ 24.93
Gas (Mcf) $ 3.19 $ 3.94 $ 3.22 $ 4.59
-------------------------------
* Prices Shown are Net of Transportation Expense and After Hedging.
5
CONSOLIDATED BALANCE SHEET SEPTEMBER 30, DECEMBER 31,
(UNAUDITED, IN THOUSANDS OF DOLLARS) 2002 2001
------------- ------------
ASSETS
Current assets:
Cash & cash equivalents $ 23,694 $ 26,610
Accounts receivable, oil and gas 88,936 92,644
Inventories 7,776 7,332
Commodity derivatives * 6,712 79,012
Other current assets 16,276 25,006
Deferred taxes 2,329 --
----------- -----------
Total current assets 145,723 230,604
----------- -----------
Oil and gas properties, net (full cost method) 1,430,486 1,408,579
Furniture, fixtures and equipment, net 6,748 6,807
Commodity derivatives * 663 7,409
Other assets 9,156 9,972
----------- -----------
Total assets $ 1,592,776 $ 1,663,371
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 128,073 $ 131,386
Advances from joint owners 173 10
Commodity derivatives * 19,768 4,217
Deferred taxes -- 29,418
----------- -----------
Total current liabilities 148,014 165,031
----------- -----------
Other liabilities 8,493 6,288
Commodity derivatives * 2,596 1,813
Long-term debt 360,665 428,631
Deferred taxes 203,578 207,880
----------- -----------
Total long-term liabilities 575,332 644,612
----------- -----------
Company-obligated, mandatorily redeemable,
convertible preferred securities of Newfield
Financial Trust I 143,750 143,750
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 453 449
Additional paid-in capital 373,429 364,734
Treasury stock (26,161) (25,794)
Unearned compensation (6,965) (7,845)
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment (6,053) (8,918)
Commodity derivatives * (13,406) 24,936
Retained earnings 404,383 362,416
----------- -----------
Total stockholders' equity 725,680 709,978
----------- -----------
Total liabilities and stockholders' equity $ 1,592,776 $ 1,663,371
=========== ===========
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* Associated with SFAS 133.
6
CONSOLIDATED STATEMENT OF FOR THE FOR THE
CASH FLOWS THREE MONTHS ENDED NINE MONTHS ENDED
(UNAUDITED, IN THOUSANDS OF DOLLARS) SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,371 $ 42,976 $ 41,967 $ 158,064
Depreciation, depletion and amortization 72,294 74,259 221,528 206,982
Deferred taxes (10,122) 23,073 (8,412) 59,011
Stock compensation 731 729 2,066 2,027
Unrealized commodity derivative* 13,952 (11,101) 25,477 (15,262)
Cumulative effect of change in
accounting principle* -- -- -- 4,794
----------- ---------- ---------- ----------
86,226 129,936 282,626 415,616
Changes in assets and liabilities 12,711 (19,387) 12,739 47,475
----------- ---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 98,937 110,549 295,365 463,091
----------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash acquired -- -- -- (264,089)
Additions to oil and gas properties (68,603) (161,968) (233,586) (417,806)
Additions to furniture, fixtures and equipment (692) (1,432) (2,249) (3,468)
----------- ---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (69,295) (163,400) (235,835) (685,363)
----------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 229,000 258,000 490,000 1,110,000
Repayments of borrowings (244,000) (216,000) (558,000) (1,025,000)
Proceeds from issuance of senior notes -- -- -- 174,879
Proceeds from issuances of common stock 1,001 442 5,830 1,795
Purchases of treasury stock (30) (8,316) (366) (25,352)
----------- ---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (14,029) 34,126 (62,536) 236,322
----------- ---------- ---------- ----------
Effect of exchange rate changes on cash
and cash equivalents 424 131 90 694
----------- ---------- ---------- ----------
Increase (decrease) in cash and cash equivalents 16,037 (18,594) (2,916) 14,744
Cash and cash equivalents, beginning of period 7,657 51,789 26,610 18,451
----------- ---------- ---------- ----------
Cash and cash equivalents, end of period $ 23,694 $ 33,195 $ 23,694 $ 33,195
=========== ========== ========== ==========
---------------
* Associated with SFAS 133.
7
ITEM 9. REGULATION FD DISCLOSURE
On October 31, 2002, Newfield issued a press release that contained
estimates of certain significant operating and financial data for the fourth
quarter of 2002 and some preliminary guidance on the impact of the pending
acquisition of EEX Corporation. These estimates and preliminary guidance are
set forth below.
FOURTH QUARTER 2002 ESTIMATES
Below are estimates of certain significant operating and financial data
for the fourth quarter of 2002. Although the Company believes the expectations
reflected in this forward-looking information are reasonable, such expectations
are based upon assumptions and anticipated results that are subject to numerous
uncertainties. THE INFORMATION RELATED TO NEWFIELD'S FOURTH QUARTER EXPECTATIONS
DOES NOT INCLUDE THE EFFECT OF THE COMPANY'S PENDING ACQUISITION OF EEX
CORPORATION, WHICH IS EXPECTED TO CLOSE IN LATE NOVEMBER 2002. Please see the
discussion regarding forward-looking information set forth below.
NATURAL GAS PRODUCTION AND PRICING
Newfield's natural gas production in the fourth quarter of 2002 is
expected to be 34 - 35 Bcf (370 - 380 MMcf/d). The price received by the Company
for its natural gas production from the Gulf of Mexico and onshore Gulf Coast
has typically tracked the Henry Hub Index. Gas from the Company's Mid-Continent
properties has typically sold at a discount of $0.12 - $0.15 per Mcfe to Henry
Hub. Hedging gains or losses will affect price realizations.
CRUDE OIL PRODUCTION AND PRICING
Consolidated oil production in the fourth quarter of 2002 is expected
to be 1.5 - 1.6 million barrels (16,300 - 17,400 BOPD). Australian oil
production during the fourth quarter is expected to be 240 - 250 thousand
barrels (2,600 - 2,700 BOPD). The oil volume estimate for the Company's
Australian production reflects production downtime associated with annual
maintenance on the production facilities and the timing of expected liftings.
Both events will impact reported production and revenues for the fourth quarter
of 2002. The price the Company receives from its Gulf Coast production has
typically averaged about $2 below the NYMEX West Texas Intermediate price. Oil
production from the Mid-Continent has typically sold at a $1.00 - $1.50 per
barrel discount to West Texas Intermediate (WTI). Australian crude oil sales are
based on the Tapis Benchmark, which has historically been comparable to WTI.
Hedging gains or losses will affect price realizations.
For the full-year 2002, the Company expects to produce about 180 Bcfe,
an increase of 3% over 2001 production. Due to recent storms in the Gulf of
Mexico, the Company was forced to shut-in a total of about 4 Bcfe of production.
LEASE OPERATING EXPENSE AND PRODUCTION AND OTHER TAXES
Newfield's LOE, including domestic production and severance taxes and
resource rent tax in Australia, is expected to be $31 - $35 million in the
fourth quarter of 2002 ($0.72 - $0.79 per Mcfe). The Company's domestic LOE,
including taxes, is expected to be $0.62 - $0.68 per Mcfe in the fourth quarter
of 2002. This estimate includes severance taxes of $0.10 - $0.12 per Mcfe. LOE
varies and is subject to impact from, among other things, production volumes and
commodity pricing, tax rates, service costs, the costs of goods and materials
and workover activities.
GENERAL AND ADMINISTRATIVE EXPENSE
Newfield's G&A expense for the fourth quarter of 2002 is expected to be
$12.3 - $13.6 million ($0.28 - $0.32 per Mcfe). This estimate includes accrual
of performance-based pay.
8
INTEREST EXPENSE
The non-capitalized portion of the Company's interest expense for the
fourth quarter of 2002 is expected to be $6 - $7 million ($0.14 - $0.16 per
Mcfe), including a $2.3 million payment on its convertible trust preferred
securities. Current borrowings under Newfield's bank facilities are about $45
million. The remainder of long-term debt consists of two separate issuances of
senior notes that in the aggregate total $300 million. Capitalized interest for
the fourth quarter of 2002 is expected to be about $2.2 million. The proceeds
from the Company's recent $250 million senior subordinated notes offering are
being held in escrow pending the closing of the EEX acquisition, and no interest
expense with respect to the notes will be accrued prior to closing.
INCOME TAXES
Including both current and deferred taxes, the Company expects its
consolidated income tax rate in the fourth quarter of 2002 to be about 35%.
Current taxes for the full-year 2002 are expected to be about $44 million. The
Company expects that the entire tax expense in the fourth quarter will be
current.
KEY FACTS RELATING TO EEX ACQUISITION:
The following is some preliminary guidance on the impact of the EEX
acquisition. Additional guidance will be given following the close of this
transaction.
o The S-4 registration statement was declared effective on October 10
and proxies were mailed to EEX shareholders. EEX shareholders will
vote on the transaction November 26.
o Newfield is planning to drill about 35 development wells and 8-10
exploration wells on EEX's acreage in 2003.
o Newfield expects to reduce EEX's 2003 ongoing G&A expense by at
least 50% versus 2002.
o Newfield expects to invest $70-75 million in 2003 on the properties
acquired from EEX. This is double the current investment level on
these properties. Areas of significant activity are expected to
include:
- The Monte Christo Field: (EEX 20-40% working interest) The
Company is planning to participate in a five-well
development program. One exploration well is also planned.
- Fashing: (EEX 49% working interest) This is a mature field
discovered in the 1950s with cumulative production of more
than 1.5 Tcfe. Newfield is planning to drill seven
development wells in the field next year, work to lower
field reservoir pressure and increase reserve recovery,
and analyze the field's geology for
exploration/exploitation drilling potential.
- Dinn Ranch: (Joint operatorship, 35-50% EEX working
interest) Significant discoveries were made in this field
over the last two years. Current gross production capacity
is about 80 MMcf/d and an active development drilling
program is planned for 2003.
- Vaquillas Ranch: (EEX working interest 100%) Newfield is
planning to drill at least three development wells in the
field in 2003. In addition, a field study is also planned
to identify additional drilling opportunities.
- The Val Verde Basin: (EEX operated, working interest
varies between 45-100%) The Company plans to focus efforts
on the Val Verde Basin of southwest Texas. Newfield is
planning to drill at least one exploration well and at
least five development wells and invest in new seismic
acquisition and processing.
The Company provides information regarding its outstanding hedging
positions in its annual report and quarterly reports filed with the SEC and in
its electronic publication -- @NFX. This publication can be found on
9
the Company's web page at http://www.newfld.com. Through the web page,
interested persons may elect to receive @NFX through e-mail distribution.
FORWARD-LOOKING INFORMATION
Certain of the statements set forth above regarding estimated or
anticipated fourth quarter 2002 results, drilling and operating plans, capital
spending and yearly production volumes are forward-looking and 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, labor conditions and
other factors set forth in our Annual Report on Form 10-K for the year ended
December 31, 2001. In addition, the drilling of oil and gas wells and the
production of hydrocarbons are subject to governmental regulations and operating
risks.
10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 8-K to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWFIELD EXPLORATION COMPANY
Date: November 1, 2002 By: /s/ TERRY W. RATHERT
-------------------------------------------
Terry W. Rathert
Vice President and Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
11