Newfield Exploration Company is in independent oil & gas production company that focuses on the acquisition and drilling of oil & gas producing properties. The company focuses primarily on natural gas acquisitions and drilling opportunities in the Anadarko and Arkoma basins of the mid-US, the Gulf Coast, Rocky Mountains, and Gulf of Mexico. NFX's strategy has been to move increasingly toward low-risk, low-potential natural gas drilling opportunities over time while keeping a small but not insignificant portfolio of higher-risk, higher-reward opportunities. Their onshore continental properties are generally lower risk and the company benefits from efficient use of drilling technology and operational management rather than from reaping the potential rewards of a risky play. Higher risk operations are generally the deepwater and off-coast properties such as those in the Gulf of Mexico.
The company is largely a natural gas producer as gas wells are around 73% of proved reserves and gas accounts for some 78% of production. Rising natural gas prices have been a particular boon to the company, and with this tailwind behind them the company continues to invest largely in the promising Woodford Shale (an area which they entered sooner than competitors), Monument Butte, and Mountain Front Wash plays in the mid-continent while dabbling in international and deepwater plays in Malaysia & China and the Gulf of Mexico, respectively.
Below are relevant operating data for the company. The company has benefited from increasing oil & gas prices, though between 2005 and 2006, the company experienced the effects of a lower average selling price of natural gas, which comprised the majority of its production.
As evidenced by the following chart, the company operated primarily in the low risk areas of the mid-continental US and Gulf Coast, though it also maintained higher-risk properties in the Gulf of Mexico and internationally.
As a seller of a commodity product, the company operates in a highly competitive environment in which all firms are price-takers, selling their oil and gas production at given market prices. Firms generally compete on their ability to drill efficiently and earn high returns on investment through intelligent property acquisition and operational prowess. Scale does matter some, as companies with greater production levels and revenue can generally cover many administrative expenses over a wider base of properties. Below, for instance, is a regression of revenue and operating margin for 14 independent oil & gas companies.
Below is a table comparing several independent oil & gas companies across several metrics. It is worth noting that the Energy Information Administration reports that there exists around 170 trillion cubic feet of natural gas proved reserves in the United States. Given this, an estimated "market share" for Newfield's 1.58 trillion cubic feet gas reserves would be just under 1%, indicative of the dispersion and fragmentation of the natural gas industry in the US.
|Proved Reserves||Square Footage|
|Revenue TTM ($M)||Operating Margin||Production (MMcfe/Day)||Oil (MMBbls)||Natural Gas (Bcf)||LNG (MMBbls)||Gross developed acreage (in thou)||Gross undeveloped acreage||Gross Total|