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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (37)	2/13/2008 6:24:54 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 111

Newfield Exploration (NFX): Woodford and Rockies results positive, could provide 2Q boost - Goldman Sachs - 02/12/08 What's changed Newfield reported 4Q2007 adjusted EPS of $0.64, in-line with First Call consensus but lower than our estimate of $0.68. Total production was 547 MMcfe/d versus our 553 MMcfe/d, though above the midpoint of guidance. Operating cash flow was $257 million versus our $260 million estimate. 2007 adjusted drillbit finding and development costs were $3.01/Mcfe versus $3.59/Mcfe in 2006. Implications The key highlights of Newfield's quarter were further indications that successful downspacing could improve recovery rates in the Woodford Shale and the Monument Buttes field. We believe these fields provide Newfield with multi-year development potential, and the Woodford is expected to represent 19% of total company production in 2008. For Newfield to outperform, we believe we would need to see strong Woodford performance lead to higher total company production guidance or a tightening of the existing range without what is perceived to be too drastic an increase in capital spending. We believe this is possible sometime during 2Q 2008. Valuation Newfield trades at 6.0x 2008 EV/debt-adjusted cash flow versus 6.2x for Noble Energy, 6.4x for Pioneer Natural Resources, 5.5x for Devon Energy, and 6.0x for Anadarko Petroleum. We see 25% upside to a $66 12-month discounted cash flow based target price. We rate Newfield shares Neutral and see a better combination of upside and catalysts among other E&P stocks at present. We update our EPS estimates to reflect the effects of the recent earnings announcement and changes to production estimates, costs, hedges and minor other company adjustments. Key risks Commodity price volatility, drilling results, cost pressures and government pronouncements are key risks.