NFX Reports Big Beat In Q2; Operations Highligh ts Very Strong

A few key takeaways from the quarterly release and @NFX update before we delve into the quarter:

• They exhibited stellar cost control, better than last quarter and much better than guidance.
  
• They continue to live within cash flow. Their capital budget didn’t come down from last quarter so the cost savings mean more feet of hole is getting drilled. They plan to live within cash flow in 2010 as well.
• They are suggesting full year production will come closer to the upper end of the previously stated 6 to 10% growth range.
• Granite Wash horizontals yielding monster results (see details below) and note the lack of expected significant production decline outlined.

On to the quarter and operational update:

• The 2Q09 Numbers
  
  • Production: 64.6 Bcfe (710 MMcfepd) which was just under the mid point (as usual) of the guidance range of 63 to 69 Bcfe (692 to 758 MMcfepd), and up 2% sequentially. 
    • Note that an additional 1 Bcfe was produced but  not lifted due to timing of liftings in Malaysia. 
    • Note also that production increased despite the deferral of completions in the Woodford.
  • Cash Costs Came Well Below Guidance: ($0.25 per Mcfe below on the recurring cash components):
    • Lifting costs were much better than expected at $0.80 per Mcfe vs:
      • 1Q09 at $0.95 / Mcfe and
      • Guidance for 2Q09 of $0.98
    • Production taxes were $0.23 / Mcfe, well below guidance
    • G&A (the non capitalized portion) were $0.52 per Mcfe, in line with guidance.
    • The are reducing cash cost guidance from prior levels for 3Q (see below).

  • EPS of $1.28 (ex items) vs $1.10 expected
  • CFPS of $3.21 vs $2.70 expected

• Operating Highlights:
  
  • US Onshore:
    • Granite Wash / Stiles Ranch- tight gas sand stacked pay play
      • First seven horizontal completions have had average IPs of 22 MMcfepd. They had kept a lid on the details of these wells until now.