Newfield Exploration’s Debt Position: Does It Make a Difference?

Can the Anadarko Basin Turn Newfield Exploration Around in 2016?

(Continued from Prior Part)

Net debt to EBITDA

Newfield Exploration’s (NFX) net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) has mostly remained under 2x in the past nine quarters.

NFX’s 4Q15 net-debt-to-adjusted-EBITDA multiple was ~1.9x. Its EBITDA levels have mostly remained consistent since 4Q13 but saw lower levels in 3Q15 and 4Q15 compared to the previous quarters. NFX’s net debt was mostly declining until 2015, and then it stayed flat. So lower EBITDA levels in 3Q15 and 4Q15 explain the slightly higher net-debt-to-EBITDA ratios in these periods.

NFX’s 4Q15 net debt was ~$2.5 billion. Its trailing-12-month adjusted EBITDA as of 4Q15 was ~$5.3 billion. A year ago, in 4Q14, net debt stood at $2.9 billion, and the trailing 12-month EBITDA was ~$5.8 billion.

Peer comparison

Unlike NFX, many upstream companies such as Hess (HES), Marathon Oil (MRO), and ConocoPhillips (COP) saw significantly lower EBITDA levels last year compared to 2014 due to lower crude oil prices (USO). Below are these companies’ 4Q15 EBITDAs for the trailing 12 months, compared to 4Q14:

• Hess (HES): fell 56%

• Marathon Oil (MRO): fell 38%

• ConocoPhillips (COP): fell 65%

These companies make up ~5% of the Energy Select Sector SPDR ETF (XLE).

Liquidity and financial position

NFX noted that it had $5 million in cash and cash equivalents as of December 31, 2015. It also has a revolving credit facility of $1.8 billion. The company’s total long-term debt comes due between 2020 and 2026.

In the next part of our series, we’ll see how Newfield Exploration has achieved a positive free cash flow.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Newfield Exploration Stock Is Up, but for How Long?

• Part 2 - Will Newfield Exploration’s Focus on Anarko Basin Be Enough?

• Part 3 - A Look at Newfield Exploration’s 4Q15 Production Volumes