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Newfield Exploration's (NYSE:NFX) stock price has been rather volatile recently. It has topped out around $35 per share twice in the last two months, but is now trading right around $25 per share. Investors' concerns with natural gas prices are showing in the company's stock price, along with other companies who rely on natural gas sales to drive cash and profits. But the stock is on the upswing and will begin showing stable growth going forward for the next year. The price of natural gas is rising, and this will soon be reflected in the share price. In addition, the company's recent sales of off-shore assets will improve its balance sheet.

There is a lot of positive news surrounding the company right now. First, Newfield continues to execute well against a plan to move production from 30% oil and liquids it achieved in 2010 to 48% by the end of 2012. The company achieved 47% of total production in oil in the first quarter of 2012 and achieved over 50% of total production in oil in the third quarter of 2012. These are strong results, and much brighter than many energy companies who are still reeling from the downturn in the natural gas market. With the condition of the natural gas market, it makes good sense to focus on growing the company's oil presence, and Newfield is excelling at the process.

Capital investments continue to focus on oil and liquids-rich gas plays within the Uinta and Williston basins, the Anadarko Basin, and offshore Malaysia. The company has a strong balance between domestic and international production. Targets to spend between $1.5 billion to $1.7 billion in 2012 are on track. This type of commitment on liquids plays will bode well for the long-term health of this company. The company will grow substantially in the next year, and its focus on exploration will mean the company stays strong for years to come.

Second, Newfield has successfully completed the sale of over $580 million of non-strategic assets. At least $565 million of these assets were located in the Gulf of Mexico and were sold to W&T Offshore (NYSE:WTI). With the company's focus over the last several years being on oil, it decided to sell gas assets to drive up the production of oil. Because of these sales, the company has increased growth in its liquids production by roughly 20%, and will continue to see gains into 2013.

Because of its emphasis on oil, its holdings in the Gulf of Mexico were considered non-strategic. The strategy was to monetize them to build growth in the liquids sector. This is a strategy that several companies have honed in on. Chesapeake Energy (NYSE:CHK) is in the process of selling many of its gas assets. But one big difference is that Chesapeake has used a significant portion of its cash from these sales to pay down debt, something Newfield has not had to do. Devon Energy (NYSE:DVN) is bringing in partners to help with costs but continuing to increase natural gas production. Newfield has taken the strategy of completely focusing on oil production, and selling its gas assets.

Third, while the company has moved to a focus on oil and liquids, it still does generate substantial revenue from its natural gas production and natural gas prices are on the uptick. Gas prices are at a one year high on the basis of lower than normal temperatures and declining inventories. This rise in prices will prove a boon to the bottom line for Newfield and investors will be able to reap the benefits. As gas prices rise this will provide a somewhat unanticipated boon for the company as its strategy hinted at a belief in depressed prices into the future.

Newfield has proven to be a very smart company and a company that gets results. Its decision over two years ago to focus on liquids has been a decision proven correct given the historically depressed gas market. In addition it showed it has the ability to quickly adapt to a changing market now that it is reaching 50% of total production coming from the liquid sector. It was out in front on the gas issue before giants like Exxon Mobil (NYSE:XOM) were as well as smaller companies that might be more adaptable such as Anadarko Petroleum (NYSE:APC).

The company is also well situated to continue to capitalize on the growth in Asia, particularly the energy-starved Pacific Rim. It has numerous holdings in Malaysia which is a nice balance to its domestic U.S. production capabilities.

I continue to see Newfield's strategy and execution as sound. The company is remaining disciplined in its focus and its spending. By the end of 2012, I expect investors to view Newfield as an oil-producing exploration-and-production firm (E&P) rather than a natural-gas E&P.

Source: Newfield Exploration A Strong Buy For These Reasons