Newfield Exploration: Committed to Growth

On January 15, The Wall Street Transcript interviewed Steve Campbell, Vice President of Investor Relations for Newfield Exploration Company (NFX). Key excerpts follow:

TWST: Would you give us a brief historical sketch of the company and a picture of the things you are doing at the present time?

Mr. Campbell: We were founded in 1989 as primarily a Gulf of Mexico-focused company and since that time, we have dramatically changed our asset base to reflect, one, the changes that are going on in the North American natural gas environment and, secondly, our need for production growth. Today, we are a diversified E&P company with growing assets onshore in South Texas, the Mid-Continent, and the Rocky Mountains. Internationally, we are active in China, Malaysia, and the United Kingdom offshore in the North Sea.

The funding behind this is largely our success from the Gulf of Mexico. So we are still active in the shallow water Gulf and we are growing in deepwater, but our stable base of cash flow still comes from the Gulf of Mexico shallow water and that is the vehicle that has funded growth in all of our other business units.

TWST: Looking company-wide, what are the main things on your overall agenda for the next two to three years?

Mr. Campbell: First, I would say we are committed to growth. Our production growth in 2007 will be up 20%-25% from our 2006 levels. That growth is driven by large development projects in the US and overseas. And then secondly, we are committed to financial stability. We have a very strong balance sheet and we hedge our gas production forward as much as a year to ensure that we are not just accepting a commodity price curve, but we are controlling our destiny. And third, I think we are committed to hiring and retaining the best people in the business. I think everyone tells you they have the best people, but we certainly have a track record with ours of consistently growing production and reserves.

TWST: I understand that you do a lot to incentivize your people.

Mr. Campbell: We do. Our incentives, from a compensation standpoint, are not just based on a base salary, but they are based on a discretionary bonus system that is a function of net income, so in the years that we have net income we all benefit as employees. We find that what technical employees want in job satisfaction is to get their ideas listened to and get their wells drilled. We also have a recruiting program here where we bring in people from the college ranks. We had 30 plus entrants this year that joined us from college.

Essentially for us, that's an extended job interview and we can make hiring assessments on those that fit our culture. We hire college students and we pair them with 20-year experienced geologists and geophysicists. This is the training ground for the next generation of our company.

TWST: What would be the two or three best reasons for the long-term investor to look very closely at Newfield Exploration?

Mr. Campbell: One is growth. There aren't a lot of companies in our peer space that are growing at 20%-25% next year. So, first and foremost it's the growth that we have. Secondly, it's the portfolio that we've assembled. We have an excellent portfolio of opportunities that range from low-risk exploitation ideas to higher-risk, higher-impact exploration ideas. So the portfolio approach should be attractive to an investor. We balance our risks just as they balance risks in a portfolio. And thirdly, it's the consistency of the story. I think that we've delivered as we've transformed this company. We have the people in place to do that again in the future.