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Jun

NFX Notes

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June 17, 2008 

NFX Raising 2008 Production Guidance to a Range of 22 to 26% vs 2007.

  • Malaysia project startup on schedule. PM 323 recently commenced production, PM 318 will this week.
  • 2008 Production Guidance goes to 232 to 239 Bcfe from prior 224 to 234 Bcfe (always good to eclipse the top of the old range if you can or take the the new low above the old mid point which they did)
  • 2Q production guidance shifts up by 2bcf above the prior mid point of guidance. Production will be about 57 Bcfe for the quarter.
  • Numbers will be coming up for the quarter and the year (again, as this is the second time they’ve upped guidance this year)
  • Woodford and Monument Butte rates growing faster than projected. We knew this but it’s good to hear them reiterate.
  • Shares are set to jump, I may add some more $70 July call exposure.

October 22, 2008

 

NFX 3Q08 Beats Street, Reigns In Capital Spending

  • The 3Q Numbers:
    • Production of 61.4 Bcfe vs guidance of 58.9 to 64.3 Bcfe (which did not include 2 Bcfe of hurricane related deferred production). Production was 73% gas.
    • Revenue of $680 vs $610mm expected
    • EPS of $1.02 (ex items) vs $1.10 expected (I don’t care much about earnings with E&Ps so long as cash costs are in line (they were) and the CFPS number isn’t too shabby (it wasn’t))
    • CFPS of $3.00 vs $2.86 expected
    • LOE per Mcfe of $0.94, this remains well under control
    • Cash costs = (LOE+production taxes+G&A) = $2.51 per Mcfe
    • Field margin = Revenue - Cash costs = $6.61 per Mcfe


  • Guidance: 
    • Remainder of 2008 inched up slightly to get to 25% YoY growth…nobody will care about that unless they subsequently miss the range which is unlikely.
    • 2009 volume guidance now at 8 top 13%.
    • Capex coming down in 2009. This is probably the most important part of the press release. They are matching their capex to their anticipated cash flow of $1.65 billion. This is a pretty stiff 20% reduction from the prior budget.
      • this is important from a "we get it, you don’t want us to spend a lot while prices stink" perspective and
      • in that $1.65 Billion equates to 2009 CFPS of $12.50 (no accident this a nice round number)…the Street is at $13.45 for 2009 so #s will be trimmed but not excessively.

 

  • Operations Update: I’ll just hit the highest of the high points prior to the call.
    • Woodford Shale:
      • Completing first dual lateral (no results yet), about to drill first super length lateral (8 to 10,000 foot)
      • Costs continue to come down as all efforts move to pad drilling
      • 12 rigs now going to 15 in 2009
    • Williston Basin:
      • Disclosed another couple of nice Bakken discoveries close to 600 Bopd IP’s.
      • They hold 160,000 net acres here and plan to run 3 rigs in 2009.
    • Deepwater Discovery: 35% interest in an apparent gas discovery at Dalmatian, way out in DeSoto Canyon. They expect to develop the find via a subsea tieback so it’s not world beater status but they down have leases in 9 offset blocks where they have mapped 5 additional targets.

NFX call theme: Cash is King, Live within cash flow.

  • Flexibility to react to commodity or credit markets
  • Can make further cuts to capex in 2009

Budget breakdown:
#1 Woodford shale. 12 rigs now, goes to 14 by mid 2009, then hold. See 38% growth here in 2009
#2 Monument Butte Oil. 5 rig program planned. >50% IRR at $75 oil
#3 Williston Basin oil. Increase capital and rig program. 3 rigs (2 of those come from former gas rigs in the Rockies)
#4 Deepwater Gomex - most of the projects they currently have under
In 2009 they see drilling 2 deepwater exploration wells. They were going to drill 4 to 5 wells but the rest are
#5 International expenditures all go to development (no exploration), see deve bringing production up 15%

What’s out: Suspending deep gas in Monument Butte. Acreage is primarily HBP so no long term loss.

Balance Sheet:

  • JPM is lead bank of 18 banks.
  • Exit 08 with $750 to 800 mm available on revolver.
  • First bit of debt comes due 2011.

Hedges:

  • Gas 65% of 2009 at good prices, 13 separate counterparties and no knockouts.
  • Oil hedges at $130 for swaps and collars at $107 floors. No problem counterparties.

Budget 2009: $1.55 billion

  • $750 mid con
  • $300 rockies - biggest piece is Monument, then Williston (Bakken)
  • $225 gomex - 70% for the 5 ongoing development projects.
  • $180 onshore gulf coast
  • $90 other

3 analysts asked questions on the Q&A. That’s got to be an all time low for them.

NFX Gets Busier In Asia - 9/9/09

  • Second discovery in shallow water, Pearl River Mouth Basin China (off Hong Kong):
    • The LF (Lufeng) 7-1 tested at 6,000 bopd out of one of several sands. Total pay interval of 250 feet. The production test was constrained by the test equipment.
    • This was an appraisal well to initial discovery well, the LF  7-2 announced as successful with 60 feet of pay but without a test rate back in April 2008.
    • This discovery sets up another test which will likely spud in 2010
    • NFX says they now have > 30 mm boe here on an 8/8ths basis
    • China can opt to back in for a 51% interest in any development.
    • Currently, NFX produces about 2,800 net bopd in China over in Bohai Bay.
    • This is set to be a 2012 production event so NFX continues to firm up their long term production profile. They're targeting production of 15,000 bopd net by Pearl River by 2013. See total co production numbers below.
    •  
  • Malaysia Development Acceleration:
    • Now accelerating Malay development, drilling 3 wells before year end, but staying within original capital budget on a whole company basis. Most likely this is a combination of well cost savings on the domestic front and perhaps some reduced drilling in the mid-con (although that last is pure speculation on my part).
    • Plan to drill 3 more wells in 2010 here.
  • For Comparative Purposes:
    • 2Q Production Was 710 MMcfepd or 118 MBOEpd
    • 2008 YE Reserves were 2,950 Bcfe or 492 mm BOE.
    • NFX trades at 3.6x 2009 and 3.9x 2010 estimated CFPS
    • NFX speaks at Barclays today at 7:45 am EST.
    • This section has been added to the NFX Notes Page.

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