Newfield Exploration Company Q3 2008 Earnings Call Transcript

Newfield Exploration Company (NFX)

Q3 FY08 Earnings Call

October 22, 2008, 4:30 PM ET

Executives

David A. Trice - Chairman, President and CEO

George T. Dunn - VP, Mid-Continent

Gary D. Packer - VP, Rocky Mountains

Analysts

David Kistler - Simmons & CompanyInternational

Joseph Allman - J.P. Morgan Securities Inc.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Presentation

Operator

Good day everyone and welcome to Newfield Exploration's Third Quarter 2008 Conference Call. Just a reminder, today's call is being recorded. And before we get started, one housekeeping matter.

Our discussion with you today will contain forward-looking statements such as estimated production and timing, drilling and development plans, expected cost reductions and planned capital expenditures. Although we believe that the expectations reflected in these statements are reasonable, they are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Please see Newfield's most recent annual report on Form 10-K and quarterly report on Form 10-Q for a discussion of factors that may cause actual results to vary.

In addition, reconciliations of non-GAAP financial measures to GAAP financial measures together with Newfield's earnings release and any other applicable disclosures are available on the Investor Relations page of Newfield's website at www.newfield.com.

At this time for opening remarks and introductions, I would like to turn the call over to the Chairman, President and Chief Executive Officer, Mr. David Trice. Please go ahead, sir.

David A. Trice - Chairman, President and Chief Executive Officer

Thank you Ryan and good afternoon everyone. I have got a number of people here with me today: Steve Campbell, John Jasek, Terry Rathert, Mike Van Horn, Lee Boothby and joining us by call in are Gary Packer and George Dunn. We'll all be available to answer any questions that you have after we've finished remarks this morning, and hopefully, we'll get through those pretty quickly.

Today, we are not going to go into our usual operation updates. All that information is on at @NFX, and we'll take any questions you have about operations also at the end of the call today.

We're going to try to focus today on what we think is most important to Newfield and its shareholders in times like today. We think the benefits of our diverse portfolio are extremely obvious. We have worked really hard over the last 10 years to put this portfolio together and it gives us great flexibility and lots of options to build value.

We have the option to shift dollars between projects and geographic regions. We have the option to slow spending in areas which are held by production and we won't lose the opportunities in those areas. And in the Rockies, we have the option to shift from gas drilling to oil drilling to maximize returns.

Because we have a lot of options within our diverse portfolio, we can make a significant capital spending cut as we announced earlier today and hold growth rates relatively unchanged. And we are also not sacrificing growth into 2010 and beyond.

I don't like the environment we're in today, but I like how Newfield is positioned and I'm confident about our future.

Today, we will review our planned 2009 capital budget and outline what's in and what's out. Despite reduced capital expenditures, we still expect 8% to 13% production growth in 2009. That's 255 Bcfe to 267 Bcfe. Much of the uncertainty in that range depends on the timing of deepwater development projects, and we'll mention those during the call.

We also expect a similar growth rate in 2010, and that growth will come from all divisions, but primarily from those deepwater projects which are being funded in 2009. So our spending cuts in 2009 don't jeopardize the future.

We'll discuss our current financial structure including our borrowing capacity, our hedging program, counterparty exposure and our self-imposed mandate to continue our 20-year of history of financial strength and discipline. As mentioned, if you are looking for detailed project updates, please see @NFX on our website.

Our outlook for 2009 is pretty simple: cash is king. In an environment where capital is constrained, the markets are closed, they are barely open and how long that will last is unknown preserving liquidity is critical. In 2009, we'll stay with our best projects, and those are ones we'll fund and will live within cash flow.

Our portfolio of assets provides us with opportunities and we have the flexibility to quickly react to further changes in commodity or credit markets. We will maintain production growth in 2009, 2010 and beyond. And if prices continue to fall and are not matched by decreases in service costs, we have the ability to make further cuts in CapEx during 2009.

Our proposed budget for 2009 is $1.65 billion. That's about $450 million less than the number we rolled out at our September 9th Analyst Day. With our hedge positions, our cash flow for 2009 is currently estimated at about $1.6 billion. At our Board meeting on November 7th, we'll present this capital budget to our Board for their approval.

Let me just mention that that number includes $100 million of capitalized salaries and interest, so our project budget is $1.55 billion.

Let me go through quickly what's in the budget and I'll follow that with what's out. Our largest investment will remain the Woodford Shale. Still have solid economics. We have lots of wells to drill and we want to put capital to work in the play. We currently are running 12 rigs in the program and expect that to move to 14 by the middle of 2009. We'll hold at that level, but we have the flexibility to do further cuts in the program or add rigs if circumstances so dictate.

With the 14 rig program, we estimate 38% growth in the Woodford Shale production during 2009. Again, most of our acreage is HBP, so in large part, we're in control of the timing of when we drill.

Monument Butte oil is in. We plan to maintain a 5 rig program at Monument Butte at our Green River oil program. It generates one of the highest rates of return in the company, over 50% at $75 oil. The demand for our black wax crudes remains strong in the Salt Lake City refineries and differentials have been relatively constant. We expect to grow our production at Monument Butte 10% to 12% with the 5 rig program in 2009.

Williston Basin oil is in. We have had good success with our Bakken program and recently drilled the Sanish Three Forks well that looks promising. So we intend to increase our capital and our rig program in the Williston Basin in 2009. We'll run a 3 rig program with two of those rigs being transferred from gas drilling and other parts of the Rockies.

The deepwater Gulf of Mexico is in, and as mentioned, provides a lot of our future growth. We have developments underway at Gladden, Anduin West, Fastball, a development well at Glider and soon at our latest discovery, Dalmation, which was announced yesterday, and Dalmation will provide more visible growth in 2010. We have a 37.5% working interest in Dalmation. All of these projects are scheduled to start in the latter part of 2009 or end of 2010 and again we'll provide production growth in both years and beyond.

In 2009, we are currently planning to operate two deepwater exploration wells. We have the rig available for that. And in those prospects, we've sold down our interest on a promoted basis, which allows us to manage capital and risks. We also will participate in another deepwater well in the fourth quarter of 2008. Our prior plans had us drilling four to five deepwater wells previously, but we now plan to defer two of those wells into 2010.

In international, development is in. With the Palace deepwater wildcat obligation well, all international expenditures will go toward development projects and will increase production by about 15% over 2008. All exploration and appraisal drilling will be deferred.

What else is not in 2009? We plan to limit exploration expenses across all business units including investments in land and seismic. At our deep gas program at Monument Butte, since that's held by production, our plans are to suspend our operated program within our 10,700 acre exploitation area.

On the other hand, we do expect RTA will continue to assess the deep gas potential under the 71,000 acre exploration area. We plan to move a rig out of Pinedale and into the Williston Basin where we can focus on the Bakken and Sanish Three Forks oil drilling. Due to our lease terms and HBP acreage, the projects deferred from the 2009 capital program are only deferred and not lost.

Just one final note on the budget. And as we mentioned earlier, we can adjust our capital budget in 2009 in response to changes in commodity prices and we will do so in order to align with cash flow. It's good to have a diverse portfolio. As mentioned, it gives us lots of options. But our key and highest priority for 2009 will be to preserve liquidity.

Our financial position is sound. Our balance sheet is strong and we have ample liquidity. We have 18 members within our bank group with the largest single commitment being 8% of the total credit. Our lead bank is JPMorgan. We have total borrowing capacity under our revolver of $104 billion with $285 million drawn at the end of the third quarter. We expect to exit 2008 with approximately $750 million to $800 million available under the credit facility. The term of our revolver runs until mid-2012.

We have $1.9 billion in long-term debt with our first maturity not coming until March of 2011 and that's a $175 million tranche of debt. We have always maintained a strong balance sheet and our strategy of not being overleveraged has served us well in past periods and it will in the coming times.

With respect to our hedge position, we have nearly 60% of our 2009 gas production hedged at attractive prices. We have no knock-out hedges and we place our exposure across 13 separate counterparties. For natural gas in the first half of the year, 65% of our gas... expected gas production is hedged. A good bit of that is in fixed price swaps averaging $8.40 per MMBtu. The balance is hedged in collars between $8.15 and $11.80.

In the second half of 2009, we have about 50% of our gas hedged at similar prices. Our gas hedging is reduced in November and December of next year and actually stays at that 65% level through about October.

On the oil side, 90% of our domestic oil is hedged with fixed positions near $130 and puts at $107, and those are equal positions. 2010, we have collars covering about 40% of our expected domestic production and those collars were at 130/170. We don't hedge our international oil production, but it's important to note that our PSE terms provide downside protection.

Our largest hedging counterparties are Barclays, Goldman Sachs and JPMorgan. We had no counterparty hedge exposure with Lehman, Wachovia, Merrill Lynch or others who have shown problems of late. All the details of our hedging program can be found at @NFX.

Our financial results have been out in detail since last night. So we are not going to go through any of the details on the financials today, but again, we will take your questions at the end of the call.

I would like to finish up with a quick review of the budget allocations by business region.

Our 2009 project budget will be $1.55 billion. Today we plan to allocate that as follows: $750 million in the Mid-Continent, $300 million in the Rockies, $225 million in the Gulf of Mexico primarily in deepwater, $180 million on the onshore Gulf Coast and $90 million for international.

Mid-Continent is 47% of the total budget and most of that will go to the Woodford Shale. We provided a comprehensive update on the Woodford at our Investor Day on September 9th and all of those slides remain on our website. Our first dual lateral was successfully drilled and we are completing in the second lateral at this time.

We recently permitted and plan to drill an 8,000 to 10,000 foot super extended lateral with up to 20 frac stages. We continue to lower F&D costs through pad drilling, longer laterals and completion optimization. As we've said before, the Woodford is a great play and will be an integral part of Newfield as we grow it over the next decade.

Rocky Mountains is 20% of the total budget. And the largest area of the investment here is the Monument Butte Field and the Green River Sands. That will be about $217 million of the slightly more than $300 million allocated to the Rockies. We'll run five rigs at Monument Butte and expect to drill about 250 wells and again oil production at 10% to 12%.

We continue to have great success in the Williston and drilled three additional successful Bakken wells in the third quarter. Flow rates were consistent with industry average and set up additional development locations. Our inventory is growing and allows as to move additional rigs into the basin in 2009. Our first Sanish Three Forks well was successful and it will be completed within the next week.

We currently have 473,000 acres in the Williston Basin. The Gulf of Mexico is 15% of the total budget and about 70% of that will be allocated to deepwater development projects with the remainder for exploration. We have the five development projects underway that I mentioned. And again, they provide future growth and great returns. Our recent Dalmation discovery will add production growth in 2010. This well found 120 feet of measured depth high quality natural gas pay.

In addition to Dalmation, we own nine other blocks in the area and we have prospects to test that could be tied into a Dalmation development.

The benefits of a diverse portfolio are highlighted in the uncertain times we are experiencing today. We have the ability to both reallocate and reduce capital and at the same time maintain profitable production growth. Because our inventory is extensive and largely HBP, we can make capital reallocations without losing opportunities. Our current budget provides strong levels of production growth in 2009 and 2010 while ensuring that we are able to manage liquidity. In addition, the benefits of having a consistent hedging program and a strong balance sheet are never more apparent than today. Our financial health is strong and we are in a great position to weather the uncertainty of the next few quarters.

With that, we'll be ready to take any questions that you have today.

Question And Answer

Operator

Yes, sir. Thank you. [Operator Instructions]. We'll now take our first question from David Kistler with Simmons & Company.

David Kistler - Simmons & CompanyInternational

Good afternoon, guys.

David A. Trice - Chairman, President and Chief Executive Officer

Hi David.

David Kistler - Simmons & CompanyInternational

Just kind of following up on a lot of these CapEx cuts that we've been hearing about, your most reason ones. Can you walk us through or refresh our memory on kind of your rigs, how they are contracted, when they specifically king of fall off and what that might mean as far as service cost compression or if you are starting to see service cost compression?

David A. Trice - Chairman, President and Chief Executive Officer

I can do that and then George can help out. I'll just tell you that we have... many of our rigs in the Mid-Continent are on term contracts. But well over half of those rigs expire at various times during 2009. So we have lots of options to renegotiate contracts, drop rigs or to continue rigs. So that's basically the situation there and we'll be at a 17 rig count in the Mid-Continent. And again I think eight or nine of those expire in 2009.

In the Rockies, we own three rigs. We can do whatever we want to with those rigs at any time. And our other two rigs I believe are on a well-to-well basis. In South Texas, most of our rigs are on one year contracts, and again, they will be expiring during the course of 2009. So Gary, George, or John, do you have anything to add to that?

Unidentified Company Representative

I do not.

Unidentified Company Representative

Yes, you're good.

David A. Trice - Chairman, President and Chief Executive Officer

Okay.

David Kistler - Simmons & CompanyInternational

As you are planning out your capital spending, obviously, I would imagine some of these companies are coming to you, looking to renegotiate rig rates and lock in these rates over term, are those negotiations taking place? What's the flavor of them? Can you give us some color relative to that?

David A. Trice - Chairman, President and Chief Executive Officer

I think it's too early. I mean if you look out... you haven't really seen a drop in the rig count yet; it's been very minimal. And I think the rig companies are going to have to see rigs start moving out before negotiations get serious. But it's something that... we don't have a rig coming up next month. So we are not actively engaged in discussions right now.

David Kistler - Simmons & CompanyInternational

Okay, great, thanks for that color. Stepping kind of looking at your specific efficiencies and your commentary in @NFX on the pan drilling that's taking place in the Woodford, you all mentioned that your savings are coming between the first and fourth well of anywhere between 25 to as much 75%. Very attractive, but obviously a lot of variability between those two numbers. Can you elaborate a little bit on the variability?

David A. Trice - Chairman, President and Chief Executive Officer

I can't, but I bet George can.

George T. Dunn - Vice President, Mid-Continent

Yes, really, the variability just depends in what area we are in and how many efficiency steps we have been able to make in that area. So as we have said before, it's not a cookie cutter formation as far as drilling goes and we have it sub divided into multiple drilling areas. And so that's why that spread in stats. And if you look back at the September 9th presentation, we provided a couple of slides where you can kind of see some of that variation. But it shows the... well you can see it, we showed multiple pads. So, I think that's... I know that's still out there on the web.

David Kistler - Simmons & CompanyInternational

Okay, great. Thank you so much. And then last one, certainly don't envision this happening, but as we think about the flexibility of your capital program, what percentage of discretionary cash flow would you need to spend to keep production and reserves flat just to give us a sense for kind of how that can swing around?

David A. Trice - Chairman, President and Chief Executive Officer

Keep itflat? We haven't really done that number. It's probably in the $600 million to $700 million range. But we haven't looked at that kind of bare bones budget.

David Kistler - Simmons & CompanyInternational

Okay. Well, I really appreciate it. I will let somebody else hop back on.

Operator

We'll go now to now to Joe Allman with J.P. Morgan.

Joseph Allman - J.P. Morgan Securities Inc.

Yes. Hi everybody. Just following up on David's question on service costs, just besides the rigs, are you seeing any loosening or any tightness in any of the equipment? It wasn't too long ago, we were taking about pipes being fairly tight, prop in or pressure pumping services. Can you just comment on other services and equipment?

David A. Trice - Chairman, President and Chief Executive Officer

We were talking about that before the call started. Again, I think it depends on regions, and I would say right now things are still relatively tight, because the rig count really hasn't dropped all that much, although certainly the expectations are we are going to see 200 to 400 rigs laid down over the next several months. So I think until that happens, things will stay pretty tight. We are having conversations now with pressure pumpers. And it's a little different in the Rockies where things are still hopping. We have oil developments out there and probably a little softer in the Mid-Continent. But I would say in balance, things are still pretty tight because the rig count is still pretty high.

Joseph Allman - J.P. Morgan Securities Inc.

Okay, that's helpful. And then David, are there any areas in your portfolio where the economics, given the current costs and the current pricing, where the economics don't hit your hurdle rate?

David A. Trice - Chairman, President and Chief Executive Officer

They would be out of the budget if they were.

Joseph Allman - J.P. Morgan Securities Inc.

Okay. Cold you talk about any particular areas where that's the case?

David A. Trice - Chairman, President and Chief Executive Officer

There are none that are in the budget. And really they were... we try not to allocate money to the things that aren't economic. So at today's prices with our hedges, we really don't have any plays that are... things we've cut out of the budget are things that we will still do; it's just a question of time.

Joseph Allman - J.P. Morgan Securities Inc.

Okay, got you. And then the Woodford Shale, so could you talk about beyond just where you are right now with the rigs. And you said you're going to ramp up to 14 rigs. What's the plan beyond the mid-year, next year 14 rigs? Because I think previously you were talking about going up to 30 rigs by I think mid-year 2012.

David A. Trice - Chairman, President and Chief Executive Officer

Well, obviously, things changed a lot since September 9th and we've had to re-look at least in the short term on capital allocation and liquidity. So the plan next year was to go to 17 rigs and we've cut that back at this point. Again, as I said, we can move rigs, we can reallocate rigs. The plan was then to move up about two rigs a year or so until we got to 30 rigs. So I think what we have to see to be able to do that is obviously better capital markets than we have today and stabilization in commodity prices. But right now, as we said on the call, our highest priority is to drill our best projects, generate great returns. With that, we can still grow production, but we are managing liquidity. That's absolutely key to us right now.

Joseph Allman - J.P. Morgan Securities Inc.

That makes sense. And then on Dalmation, what's your estimated size of Dalmation?

David A. Trice - Chairman, President and Chief Executive Officer

Our estimated size... I mean it depends on I think Murphy came out with a number of 60, 70 Bs; that's probably an SEC approved number. We get a higher number than that if you take it to the amplitude, probably a bit north of 100 Bcf.

Joseph Allman - J.P. Morgan Securities Inc.

Okay. And you think you need to drill maybe what, two or three or four more wells there or --

David A. Trice - Chairman, President and Chief Executive Officer

No, it will be very similar to our Rigel development. There we've got a single subsea well that's also a very high quality, high porosity sands. And we have had one well there that I think cumed [ph] about 80 Bcf today, isn't that right John? 65, but it's expected to cume [ph] in over 100 Bcf. So we think the well is positioned to where it can drain most of the accumulation, if not all of it.

Joseph Allman - J.P. Morgan Securities Inc.

Got you. And then just lastly, in terms of HBP in the Woodford, what kind of dollar amount do you need to spend in 2009 for HBP?

David A. Trice - Chairman, President and Chief Executive Officer

I think it's about 40% of our rig count, is that right George?

George T. Dunn - Vice President, Mid-Continent

That's correct, so.

Joseph Allman - J.P. Morgan Securities Inc.

Okay.

David A. Trice - Chairman, President and Chief Executive Officer

It'sabout a couple of $100 million.

George T. Dunn - Vice President, Mid-Continent

Correct.

Joseph Allman - J.P. Morgan Securities Inc.

Okay, thanks very much guys.

David A. Trice - Chairman, President and Chief Executive Officer

You bet.

Operator

[Operator Instructions]. We'll go next to David Heikkinen with Tudor, Pickering and Holt.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Good afternoon. Just a question as I look at 2008 production and then the details you gave regionally about 38% growth in '09 in the Woodford. Can you give us the '08 numbers for kind of what to expect production regionally in the Woodford Monument Butte and then international just so we can --

David A. Trice - Chairman, President and Chief Executive Officer

In 2008?

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Yes, so we can get the 38% growth and then the 10% to 12% growth. Just want to make sure we are growing off the right number just so we can get the regional production for '09 in your budget.

David A. Trice - Chairman, President and Chief Executive Officer

Well, I mean we are about 215 or so on the Woodford. Now that's gross and expect to exit the year at 250. And our net in that is about 55% I am giving... I am guessing some numbers now.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Okay.

David A. Trice - Chairman, President and Chief Executive Officer

And so the growth in the Woodford I believe this year is in the 65% range, and it will be 38%, just effectively the law of favorite [ph] numbers is catching up with us as it does in all plays. In the Rockies, we're at about 16,000 barrels a day right now and our net's there about 80%, is that right Gary?

Gary D. Packer - Vice President, Rocky Mountains

Yes, that's right.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Okay.

David A. Trice - Chairman, President and Chief Executive Officer

And that's up this year about 15% and we would expect that to be up in the 10% to 12% range next year. And international, we expect to produce about... it's all oil, but just for the sake of... we are mostly gas, we do it in Bcf terms, I think our expectation is 26 to 28 Bs this year, expect to be up 15% next year.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

And then in the Pinedale where you stopped drilling, it's not a big component of production, you also talked about moving another gas rig from the Rockies to Williston. What are those areas decline in a base year?

David A. Trice - Chairman, President and Chief Executive Officer

In the Pinedale?

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Yes, I am just thinking about since you have reallocated some development capital from those to that area plus one other gas rig.

David A. Trice - Chairman, President and Chief Executive Officer

I mean that's all taken into account in the numbers that we gave you for 2009. But the Pinedale decline first year, Gary, is what, 30%, 40%?

Gary D. Packer - Vice President, Rocky Mountains

Yes, our decline year-on-year by moving the rig out is, it's only about 16% because we are working off a pretty stable base. So it's really not that significant in 2009.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

So, really, as you think about your diversity of assets, I mean you have a... outside the Woodford, really, you've got a pretty stable base of production. So your overall base decline is 25% to 30% off of a total number, is that a fair number or is that too high?

Gary D. Packer - Vice President, Rocky Mountains

We'll have to get back to you. I don't have that number off the top of my head.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

That's fair, okay. And then as you get into the details of cutting CapEx, you've cut big part of your capital budget. One of things that we are trying to understand is efficiency of how capital adds production. I don't know how you'd answer this question other than if you cut another couple of $100 million of capital, I mean is that... do you start cutting into higher productivity just in your portfolio of projects, pulling out the first 150 or so million dollars of development capital per year at a much less efficient base than the overall production? I am trying to think about the next round if you had to cut capital again in 2010, if we stayed in the low gas price environment and your cash flows then are kind of $1.4 billion at a lower price, what would that be?

David A. Trice - Chairman, President and Chief Executive Officer

I think you answered the question.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

You don't have --

David A. Trice - Chairman, President and Chief Executive Officer

It's difficult to answer. I mean our hedges really protect us well at this point in time. And if prices go down, we'll get more production under the PSCs. Our biggest vulnerability would be if gas goes down another buck from where it is now. That would require about another $75 million in cuts. And I would tell you that would be pretty insignificant as far as 2009 concerned. But it would have... it would affect... it would have more effect in 2010 than it would in 2009. And that's about as specific as I can be right now.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

And then just the opportunity to zig when everybody else is zagging, do you think at all about the acquisitions market as some of the... some assets from other companies seem to be potentially going at fire sale prices. I mean it's... I know you want to live within cash flow and not lever up and your equity price is way too to consider issuing. But are there any areas where you think about buying properties or is that not even within the big game plan?

David A. Trice - Chairman, President and Chief Executive Officer

We'll enter 2009 with about $800 million of liquidity.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Yes.

David A. Trice - Chairman, President and Chief Executive Officer

So, obviously, if something wasn't too large, was compelling came along, we would try to figure out a way to do it that kept my Chief Financial Officer from losing the rest of his hair. But we are still looking at deals, but quite frankly right now, they will have to be a very compelling deal for us to use a couple of $100 million of liquidity to buy. And again, it's just the uncertainty of when the windows going to open back up in capital markets.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

And then if we get a cold winter and you get a rebound in commodity prices, how quickly would you start spending back to the higher budget again?

David A. Trice - Chairman, President and Chief Executive Officer

Well,the first thing we'd do is add to our hedge position, and, because as I mentioned, we are relatively lightly hedged in November and December next year and have almost no natural gas hedges into 2010. So we'd build our book there and give us certainty and confidence in it. And I think we'd be in a position to ramp up pretty quickly. But I think everybody will be ramping up that time, so it will be a question of can you secure the rigs at that time.

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, that's helpful. Thanks.

Operator

There are no further questions. I would now like to turn the conference back over to Mr. David Trice for any additional or closing remarks.

David A. Trice - Chairman, President and Chief Executive Officer

I would just thank everybody for calling in today. Again, we all understand these are tough times, but I just want to reiterate that financially, we are strong, we are in a great position to continue to build the company into the future. And we look forward to visiting with you when you are in Houston next, or we see you on the road. Butagain, thanks for calling in today.

Operator

We do appreciate your participation in today's conference. We hope you have a wonderful day. This will conclude today's Newfield Exploration conference. .

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