Shareholders of Newfield Exploration (NFX) finally got something to feel good about this morning when the company delivered results. The stock had fallen to $20 a share from its recent high of around $30 a share earlier in the year. I have been averaging down during the decline and these results should get this cheap E&P concern moving in the right direction again. The stock is up more than 7% in mid-day trading, which is the highest intraday move in these shares since July 2009 and NFX should continue to go higher in the months ahead.
Positives from 1st quarter results:
- EPS after adjustments came in at 45 cents a share, two cents a share above the consensus.
- Net production of 11.7M boe (barrels of oil equivalent) was at the high end of forecasts.
- Domestic liquids production rose 9% Q/Q, and the company expects another 12% gain in the next quarter.
- The company said it's on track to boost domestic oil and liquids output by about 39 percent this year, adjusted for 2012 asset sales.
- Newfield also said it planned to explore the possible sale of its international assets, which include offshore oil and natural gas projects in Malaysia and China.
Newfield Exploration Company is an independent energy company that produces natural gas, oil and other liquids. Its main properties include acreage in the Rocky Mountains, Mid-Continent, Malaysia and offshore China.
4 additional reasons to buy NFX at $21 a share:
- The stock is woefully under analysts' price targets. The median price target held by the 17 analysts that cover the stock is $36 a share.
- NFX is selling at 95% of book value and under 3x operating cash flow (Under 5x if you want to measure by enterprise value).
- The stock is selling at the bottom of its five year valuation range based on P/E, P/S and P/B.
- Given production growth in core properties and asset divestitures, Newfield is undervalued at around 9x 2014's projected earnings.