Will Newfield Exploration’s Focus on Anarko Basin Be Enough?

Can the Anadarko Basin Turn Newfield Exploration Around in 2016?

(Continued from Prior Part)

Focus on the Anadarko Basin

Newfield Exploration (NFX) is focusing on drilling and developing its asset base, especially the STACK and SCOOP plays in the Anadarko Basin where it has seen a strong performance. The company has allocated more than 80% of its 2016 capex (capital expenditure) budget to this region. In its 4Q15 earnings conference call, Lee Boothby, NFX’s chairman and CEO (chief executive officer), said, “We have a deep, high-quality and economically resilient inventory to attack today in the Anadarko Basin and this is the centerpiece of our 2016 plan.”

Maintaining liquidity and strong capital structure

Early in 2015, NFX raised $815 million through equity offerings. The proceeds helped it pay off its previous credit facility. The company increased its available borrowing capacity under its five-year revolving credit facility by $400 million, to $1.8 billion. It also extended the term by two years, resulting in a new maturity date of June 2020.

Early in 2015, NFX also issued $700 million of 5.4% senior notes, due in 2026. The proceeds were used to redeem its 6.9% notes due in 2020.

Recently, in March 2016, NFX raised another ~$700 million through equity offerings.

In addition to these key management objectives, NFX has also reduced its 2016 capex by ~50% compared to 2015 levels. This came in response to low energy prices. Many upstream companies have been reducing their 2016 capex due to low energy prices (USO) (UNG). ConocoPhillips (COP) and Anadarko Petroleum (APC) lowered theirs by 37% and 50%, respectively, compared to 2015. Marathon Oil’s (MRO) 2016 capex is expected to be less than half its 2015 capex. These companies make up ~8% of the Energy Select Sector SPDR ETF (XLE).

Analyst targets for Newfield Exploration

The above graph notes high, low, and median analyst target prices for NFX. The consensus target price of ~$38 indicates positive returns over the next 12 months of about ~19% compared to current levels.

In the next part, we’ll look at Newfield Exploration’s 4Q15 production volumes and realized prices.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Newfield Exploration Stock Is Up, but for How Long?

• Part 3 - A Look at Newfield Exploration’s 4Q15 Production Volumes

• Part 4 - Newfield Exploration’s Fight to Counter Low Oil Prices