Zacks_Analysts' Blog : Newfield Sheds Assets - Analyst Blog

Independent energy company Newfield Exploration Company (NFX) signed an agreement with privately held Momentum Oil & Gas, LLC to sell some its South Texas oil and gas properties. The financial terms of the deal were not disclosed. The transaction is expected to be closed on June 30, 2011.

The assets to be divested include approximately 5,000 net acres in the Fashing Field in Atascosa, comprising interests in 60 wells with current net production of approximately 3.8 million cubic feet of gas equivalent per day. Following the acquisition, Momentum will become the biggest asset holder in the field covering Edwards, Georgetown, and Pearsall Shale formations.

Apart from the Fashing Field, Newfield will also sell off its assets in Karnes Counties Texas. The purchaser company plans to implement advanced technologies and use an efficient team to derive best results from these plays.

Newfield is engaged in the exploration and production of crude oil and natural gas, with domestic operations in Mid-Continent, the Rocky Mountains, onshore Texas and the Gulf of Mexico. The company’s international activities spread across offshore Malaysia and China. At year-end 2010, Newfield had total proved reserves of 3.7 trillion cubic feet equivalent.

We believe that Newfield’s diversified portfolio of assets provides both flexibility and significant growth potential in the long run. Additionally, with the bulk of its projected production hedged at attractive prices and the disposition of low profit generating assets, Newfield remains better positioned than most of its peers, enabling it to support its cash flows.

However, since more than three-fourths of Newfield’s reserves and production accounts for natural gas, the company remains vulnerable to fluctuations in natural gas prices and faces stiff competition from peers such as Cabot Oil & Gas Corporation (COG) and Forest Oil Corp. (FST). Hence, we maintain our long-term Neutral recommendation on the stock.

Newfield shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.