Newfield Exploration Company (NFX) Q3 2017 Earnings Conference Call Transcript

Markets Motley Fool

Newfield Exploration Company (NYSE: NFX)
Q3 2017 Earnings Conference Call
Nov. 1, 2017, 11:00 a.m. ET

Continue Reading Below

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Newfield Exploration Third Quarter 2017 Earnings Conference. For opening remarks and other housekeeping items, I'll turn the conference over to Steve Campbell, Vice President of Investor Relations. Please go ahead.

Continue Reading Below

Stephen C. Campbell -- Vice President -- Investor Relations

Thank you, operator. Good morning, everyone. A few of us are still assembled in our Halloween costumes from late last night, but we appreciate you guys dialing in for today's call.

Following this morning's prepared remarks from our Chairman and CEO, Lee Boothby, we'll have members of our leadership team available to take your questions. As always, please limit your time during Q&A to one question, and one follow-up. Let me again remind you today that today's call is being recorded and will be available on our website along with our earnings release, the financial tables, and non-GAAP reconciliations as well as At NFX. We will reference certain non-GAAP measures, so please see the reconciliation in our earnings release and in At NFX.

Today's discussion contains forward-looking estimates and assumptions that are based on our current views and reasonable expectations. In summary, statements in yesterday's news release and At NFX, and on this conference call today regarding our expectations or predictions of the future, are forward-looking statements intended to be covered by the Safe Harbor Provisions under the Federal Securities laws. There are many factors that could cause actual results to differ materially from our expectations including those we've described in the earnings release and At NFX, our 10K and 10Qs, our prior outlook release and other filings with the SEC. Please refer to the Risk Factors in our Earnings Release and At NFX for additional information.

Thanks again, and I'll now turn the call over to our chairman, Lee Boothby.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Thank you, Steve and good morning. I'll open today's call with our key message right up front. Newfield delivered. Our significant ramp in the Anadarko Basin in oil production came through over the past three months. We are seeing strong results from our recent wells with Stack outperforming our quarterly expectations by about 4,000 barrels of oil equivalent per day. We continue to execute very well as we ramp three completion spreads to six, and completed about 40 wells in the Anadarko Basin during the third quarter. We did this with a backdrop of inexperienced crews, and a hurricane that dropped 50 inches of rain on our office and made weather-related issues for our field personnel very challenging. I applaud our operations personnel for making the right things happen, doing the right things, and getting it done, once again.

We're excited to share today's progress report with you this morning, and we appreciate you dialing in. We generated some significant milestones over the past quarter. Here's a short list: we posted more than 25% increase in our oil production in the Anadarko Basin quarter over quarter, to be clear, that's second quarter '17 to third quarter '17, not year-over-year. Our Anadarko Basin production averaged nearly 105,000 barrels of oil equivalent per day during the third quarter. A new record for Newfield, erasing several quarters of relatively flat production as we transition from HBP drilling to pad drilling. Well, performance and execution have been equally strong, and we now expect our Anadarko Basin production to average a hundred and sixteen thousand barrels of oil equivalent per day in the fourth quarter, up another 10%. Sequentially, this number is at the upper end of the range we provided for you back in February.

Our recent oil well and stacks had a 24-hour record for production for 1,000 feet of lateral, coming in at 5,100 barrels of oil equivalent per day over the initial 24-hour period. The oil cut was 67%. This is a good follow-up to our Burgess well, and we now have two of the top five 24-hour oil well IPs and Stack. The Burgess, which was drilled earlier this year, is projecting a type curve well in excess of 3 million barrels of oil equivalent after 120-days. We're still learning with every well we drill and complete.

Our Stark and Freeman pads have shown strong early performance. These NFX operated developments were drilled to test well spacing configurations in the Meramec with all wells completed with 2,100 pounds of propene, 2,100 gallons of water per foot. Average in-fill well performance from both pilots is tracking about our high curve. Production updates on BOE and oil can be found in our At NFX publication. It's early by we remain encouraged and are confident in our resource estimates for Stack.

We invested 316 million in the third quarter, and we're on track to deliver this year's program for our stated 1.1 billion. In today's At NFX you will find a slide that shows Newfield has the best in class driller in every basin where we are active today. The slide shows penetration rates across the three drilling regions. Newfield is the clear leader, and we benefit from a culture of innovation with our teams constantly challenging each other to improve. We expect to see continued efficiency gains in the Anadarko Basin as we progress our development. Our drilling results continue to get better with recent wells averaging 700 feet a day in Scoop, and just under 1,000 feet a day in Stack.

Year 2017 is shaping up to be a very good year for Newfield as we are executing well against our beginning of the year objectives. Our 2017 program was focused on Stack pilots to test various spacing assumptions and advanced completions. We recently completed and turned to sales the Freeman Pilot. The results from the nine in-fill wells in the Meramec looked consistent with our start-pad after 60-days of production. Both pads were completed with Newfield's Gen 17 Completion Design of 2,100 pounds of propene per foot, 2,100 gallons of liquid per foot. Although early, we generally averaged 60-day production from both pads on a no oil equivalent basis is outperforming the company's 1.1 million tight curve.

Our Stark pad which now has 120-days of production is estimated to generate an internal rate of return of over 60% and a $50 flat of ETI price. In addition, the remaining portion of our HBP drilling program continues to show excellent results across our acreage position. During the quarter we provided you with an updated list of wells with accumulative production out to two-years. It was an impressive list that spanned across our acreage. In At NFX today, we provided today we provided data on another eight recent HBP wells and Stack, including the plays for record-setting oil well which commenced production with a 24-hour initial production rate of 5,100 barrels of oil equivalent per day. Some 67% oil from a 7,140-foot lateral.

In Scoop, we commenced sales from two new developments during the quarter. The McClellan pad was our first development with eight in-fill wells drilled in the Woodford. Average 30-day rates for the eight in-fill wells were 1,966 barrels of oil equivalent per day, 36% of which was oil. The McClellan in-fill wells are performing in line with our recent Tina development where production has averaged nearly 1,500 barrels of oil equivalent per day, 41% oil over the first 120-days.

The second development was the Hollingsworth, which had seven in-fill wells in the Woodford, initial 24-hour production per well, averaged 3,193 barrels of oil equivalent per day, 33% of which is oil. Thirty-day production data is not yet available.

Despite some significant weather issues during the quarter, our Williston Basin production averaged nearly 22,000 barrels of oil equivalent per day. The Willison Basin continues to deliver for us. With a single operated rig, we've been able to grow our production through optimized completion and significantly more productive wells. The Williston is expected to deliver more than 100 million of free cash flow for us in 2017. Our recent wells have estimated gross URs of more than 1 million barrels of oil equivalent, and we've raised our type curve in the Williston earlier this year. We estimate that we have about 200 operated locations that deliver strong returns in today's oil price environment. In addition, we have hundreds of non-op locations in the Williston as well.

In preparation for these quarterly updates, I typically go back and reread our prior transcripts. Last quarter, we detailed several key priorities that are present today as they were then, especially in light of the recent discussions we've had with many of you on the road. These priorities are first, we are focused on delivering our three-year plan, which we laid out for you in February. Despite the exuberance for quickly rising oil prices this year, we used $50 per barrel WTI as our base planning assumption in 2017, as well as a flat rig count in the Anadarko Basin. When combined, this base plan was set to deliver double-digit, compound annual growth over the period. Since that time, we have raised our 2017 production growth estimates from 3% to today's 9 to 10% growth outlook without adding increased activity levels. We are executing extremely well today, and our well performance across the organization has been very strong.

But growth by itself is not our goal. That's why my second point on last quarter's conference call would likely occupy the first spot today based on recent discussions. We remain focused on improving our returns. Full stop. Our overarching goal is to transition our company to one that delivers sustainable production growth within our funds for operations. We certainly had this ideal in mind when we set our activity and spending levels for this year, and I am confident that Newfield will be on the short-list of companies that can deliver on this objective. It will be important that investors reward companies focused on these new metrics and not revert to past behaviors which overwhelmingly favored production growth over capital discipline and improved returns. Our leadership is onboard, and we are pursuing creative ways to ensure the ongoing alignment with our owners, from the boardroom all the way to field operations.

Third, we are rapidly advancing our learning curve in Stack, and solving for the optimal returns-focused development well spacing. This year's pilot program is providing us with data that will drive improved returns and margins through optimized operations on the road ahead.

Our fourth objective relates to Score and understanding the vast resource that lies within our own operated HBP acreage position in the Anadarko Basin. Our $100 million this year, we made the assessment of other prospective horizons on our acreage a priority. By year-end, we will have up to ten operated wells in these prospective horizons, and a better understanding of their commerciality, and plans for future development. We remain very encouraged with some of the early results we are seeing in Score.

Before opening the call up to your questions, I'll quickly cover our third quarter financials.

For the third quarter, we vested street estimates for both earnings and cash flow. Net income was $87 million, or $0.44 per share. Earnings were impacted by one-time tax benefits of $17 million, or $0.09 per share driven by carryback of net operating losses; and unrealized derivative loss of $34 million, or $0.16 per share. After adjusting for the effect of these items, net income would have been $104 million, or $0.52 per share.

Revenues for the third quarter were $439 million. Net cash provided by operating activities was 173 million, and discretionary cash flow from operations was 262 million. As I mentioned earlier, we are right on track with our investment plan for 2017. You can find a table At NFX that details our quarterly investment pace, excluding capitalized interest and overhead. Our domestic production in the third quarter was 159,000 barrels of oil equivalent per day, surpassing the upper end of our guidance range. Domestic production for the quarter was 41% oil. Including China, our total company production in the third quarter was 14.9 million barrels of oil equivalent or 162,000 barrels of oil equivalent per day. This is approximately 12,000 barrels per day above the second quarter of 2017. Of the total, 64% was liquids, and 36 was gas.

As a percentage of overall volumes, we expected our fourth quarter mix will reflect slightly higher gas and NGL production. This is primarily due to several large development pads brought online in Scoop. The largest is a non-op development currently producing at very high rates from the condensate window of the play, our net share in that development is over 10,000 barrels of oil equivalent per day, it's very rich gas, but only 11% black oil. Our more normal oil, gas, and NGL split should prevail into 2018.

As you know, our Pearlfield in China remains offline awaiting repairs for our third-party operated storage vessel that we expect to be completed by early next year. We lifted the remaining oil from the vessel during the third quarter, resulting in 239,000 net barrels. No additional liftings are expected until next year.

We continue to add to our hedge position for 2018, and 2019. We are essential insulating a mid-50s oil price and protecting ourselves from the downside. As we move into development in plays like Stack, it will be increasingly more important for us to manage commodity price risks and ensure acceptable returns on our development programs. Newfield has an excellent track record in this regard and expect our behaviors to remain consistent. Please see At NFX for the complete updates on our derivatives positions.

Before closing out our prepared remarks this morning, and moving to your specific questions. Let me make a few broader comments about our business and our near-term focus. Over the last quarter, we've spent some time on the road and met with approximately 15% of our owners. These meetings were done with our lead director and chair of our audit committee. It was a great opportunity to have a dialog about our company, our industry, and gain important insights on how our owners collectively view the future. Be assured that we hear you. Our industry is at an inflection point today where the land grab is behind us. HBP drilling has shored up large contiguous acreage positions and resource plays, and we are now entering the harvest mode. Harvest mode should look different, and historic behaviors of aimlessly chasing production growth at the expense of returns should become a thing of the past.

Newfield is in a unique position today, blessed with a quality inventory of opportunities. We expect to be on the short-list of companies that will transition to delivering improved returns, cash flow growth while living within our means. Simply stated, production growth should become an output of implementing the right development strategies to maximize value creation. On the road ahead, we're focused on delivering double-digit growth while demonstrating improved efficiencies throughout our operations. As always thank you for your interest and investment in Newfield Exploration.

...

Operator, we are now ready to take your questions.

Questions and Answers:

Operator

To pose a question, please press the star key, followed by the digit one on your touch-tone telephone. We ask that you limit your questions to one question and one follow-up. Again, that is star, one for questions.

We'll have our first questions from to Dave Kissler with Simmons Piper Jaffrey.

Dave Kissler -- Simmons Piper Jaffrey -- Analyst

Kind of picking up on your comment about being a little gassier in the fourth quarter. When we look at the McClellan and Tina in-fills and going back to the Q2 slide deck where those are generating 70% rate of returns, is it necessarily bad that mix is getting a little bit more gassy with those types of returns and how do you think about that in your go-forward portfolio?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Dave, hello, and thanks for your question.

I think the short answer is we're returns focused. You can count on team Newfield to pursue the best returns in the portfolio. They're incredibly strong returns; we're excited about the well results. I think we should all become a bit agnostic with regard to product type when you're generating 70 plus percent rates of return. We're very pleased with it. I think it does affect the mix in the short term, as indicated, but we're gonna continue to pursue the high return portion of our portfolio.

Dave Kissler -- Simmons Piper Jaffrey -- Analyst

Okay. I appreciate that clarification.

Then, going back to something you were talking about with respect to the weather interruptions and how you guys were to avert any issues there. Can you talk a little bit about how you have structurally have planned to be able to do that when other operators have been using it as an excuse relative to their performance this quarter?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I can't speak to the other operators, Dave. I'll tell you our team does an amazing job of planning and reacting. We weren't without stress. Obviously, in the weather-related effects and some of the back-up in the system, I certainly don't wanna act like we didn't have stress. There was a lot of stress on our team. They planned effectively and executed extraordinarily. Then, of course, that's all Gulf Coast and related effects that spilled back to pressure in the mid-continent. On top of that our Williston Basin boats were hit with weather and I never heard a peep out of our team. Not one complaint. Not any bellyaching. Nobody is looking to blame any weather on delivering the result. As I said, Team Newfield delivered, I'm proud of them.

Operator

We'll have our next question from Josh Silverstein with Wolfe Research.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Good morning, Josh. Hello?

Josh Silverstein -- Wolfe Research, LLC -- Analyst

You mentioned the 40 wells in the Anadarko Basin this quarter. I just wanted to see if that was a little bit below where you guys were thinking there were some other issues that had some impact there. Then, maybe, going forward what would be the quarterly cadence, or if you wanna look at an annual cadence for how many wells can be turned online with a ten-rig program.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

The 40 was in line with our plan expectations. I would say that's what we built to. We loaded up in the first half of the year with respect to the multi-well pad developments. We did have a handful of HBP activity that continued through the first three quarters, but that was dominated by the multi-well pads.

As far as cadence we'll, in the short term, continue to be some variability as we move rigs between Scoop and Stack to keep the overall development program on track. The ultimate cadence in 2018 forward will be dependent upon where we set our final capital in the budget and plan. We'll come out with that in early February. I would say, in general, based upon the activities that we've seen this year and tight capital budget, you'd expect a more normalized level to be 35 to 40 wells per quarter. We'll advise if we come up with a plan above or below that. That's probably in line with what you might expect on the road ahead.

Josh Silverstein -- Wolfe Research, LLC -- Analyst

Great, that's helpful there. Thanks for the comments on the normal split of the production that's there, and there was no other question on it. Is the normal split around the 35% level where you were this quarter? I realize maybe fourth quarter is a little bit gassier. I understand that there's a bit of rig mix between the two areas, but Stack is over 45%, Scoop's around 25%, I'm just wondering if that 35% is the right one?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

It obviously moves around depending on the pieces you look at. I'd start with a reminder to anybody that if you think about where we're gonna be on domestic oil fourth quarter '17, over fourth quarter '16, we're gonna be up some 25% on oil, so oils growing. We benefited by improving NGL pricing, and we're blessed with having exposure across the phase envelope, and we've been able and complete wells that have really high NGL yield. We benefited there as well. Anadarko Basin, when you isolate on oil, it's up some 30% fourth quarter'17, over '16. Again, strong upward momentum that's gonna carry into 2018. What I would suggest to everybody, and I've tried a couple of times during the course of the last year to suggest this, is to not be so hung up on single percentage fluctuations up or down, quarter over quarter. As we move around in the phase envelope and you turn on eight ten-well pads that have the deliverability we're talking about, that's gonna affect the numbers a percentage point, or so. Ultimately, I would expect that we'll maintain when we say '18 forward you look at the total liquids percentage that we delivered in 2017, we'd say we'll have a similar mix going forward. I don't see that changing materially. We managed to slide upward bias to oil over that time-period, but I'd look at the mix on an annualized basis to be plus or minus a percent or two the numbers that we're posting for 2017.

Operator

We'll go next to Derrek Whitfield from Stifel.

Derek Whitfield -- Stifel -- Analyst

Thank you. Congrats on a strong quarter, guys.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Thanks, Derek.

Derek Whitfield -- Stifel -- Analyst

Lee, at a high level, how would think about spending any capital allocation in a 55 to $60 price environment versus the planned $50 sums you mentioned earlier? Would you be biased to pile cash or sell the increased activity with a focus on returns?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

First and foremost, we're gonna stay returns focused. I think that's where our management and board are focused. That's where operations leadership team is focused, and that's driven all the way down to field-level. We're making decisions today on optimizing returns and delivering cash flow growth. That's the ultimate measure. Clearly, we said that we wanted to move to balance within the time frame that we talked about back in February and that three-year period. Beyond that, our investments will be dictated by the pricing environment, the macro, and the cash available. We haven't changed any of our thinking sitting here today than what we articulated back in February. I think the cool thing is we're ahead of schedule. I think we carry great momentum into 2018. If we see a 55, $60 world develop, then that just gets easier. We kind of like that.

Operator

We'll go next to Ron Mills, Johnson Rice.

Ron Mills -- Johnson Rice -- Analyst

Good morning, Lee. Quick question. As you think about with HBP nearing an end in the Stack and you talk about being agnostic on returns, how do you think about capital allocation between the Scoop and Stack in terms of rig-count given the compelling returns there despite the different product mix?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I think when you get to the HBP point, the team, that's Gary and John, and our operating teams look to optimize on the program, they're gonna focus on where they can generate the best returns within the portfolio. At the end of the day, we'll have capital budget, we'll make the allocation, and their job is gonna be to optimize returns. We'll go to the places that give us those outcomes. I expect that we'll continue to see activity in both Scoop and Stack that's for high returns for both areas. Williston Basin, we've been running a rig for the last couple of years, we've got really strong returns there, you can continue to see activity there. It's all focused on high returns. Let's use the phrase that's popular these days; it's premium inventory, premium returns. That's what we're focused on. We'll go wherever we have to go to get them.

Ron Mills -- Johnson Rice -- Analyst

Great. Is there any marked difference between your Stark and Freeman pads in terms of being over-pressured, and normally pressured? How do you think that plays into your oil results?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I think when you go back, and I think we've been consistent with this over the last several years, if you move from southwest to northeast, across our acreage positions, across the broader Stack play, you go way out to the west you start the dry gas window. As you move back toward Cana, Woodford and up-dip of that area, you get a wet gas, condensate window, then you go through volatile oil, and then into the black oil window. Our acreage position remains 80% plus in the black oil window. We're blessed to have exposure in that wet gas condensate volatile oil window. That's where we in the industry have been focused on a $50 world, because a combination of pressure and yield, and product yield have generated really, really strong returns. We still see strong returns from east to west as long as you're in the liquids window. Wells out wet tend to cost a little bit more, well to the east coast a little bit less. F&D and returns are something that our team looks at. When John and Gary are executing the game plan, they're taking all those factors into account in terms of optimizing the returns.

Operator

We'll go next to Subash Chandra with Guggenheim.

Subash Chandra -- Guggenheim -- Analyst

Hi. Good morning, Lee.

Just a question. First question on the increased density pilots. Were these all two-string?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

The what results that are posted?

Subash Chandra -- Guggenheim -- Analyst

Yeah. Correct. The wells in those pilots.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I believe they're the fine print, and I have to wear glasses these days. I'm pretty sure they're three-string. As is the type curve, Steve added.

Subash Chandra -- Guggenheim -- Analyst

Is a three-string type curve. The cost variance, three to two, is it sort of that quarter-million, half-million range? Or?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Cost variance?

Subash Chandra -- Guggenheim -- Analyst

Yeah. Two string, to three string. Because I guess you're gonna do two string your acreage to the east?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

No. Two stream versus three stream is very simply this. Two stream, when we say two stream, is separator results that we'll have natural gas in liquid volumes.

Subash Chandra -- Guggenheim -- Analyst

Oh. Oh. I'm sorry Lee. A string. Not stream.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

A string!

As you move west, in the deeper sections, there is an extra string of pipe. In general, you're looking at about $750,000 added for that string of pipe.

Subash Chandra -- Guggenheim -- Analyst

Okay. Got it.

But the wells that you're announcing in your pilots, those are two-string?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

The wells to the west will have the extra string in it. Three strings. When you move into the black oil, you can think about that as two strings. Those wells generally have an advantage on cost.

Subash Chandra -- Guggenheim -- Analyst

Okay. Got it.

And the second question, I think you inferred this already. Continued investment in the Williston. What about Euenta, and how do you think about those two assets holding the line on volumes heading into '18?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I think Williston, we've been pretty straight up about where we're at there. We're generating high returns. I love the performance of the team; you should probably plan on seeing a rig continuing to execute there. Euenta, we owe you guys an update in 2018. On our progress out there we've had the JV, that's coming to an end in terms of the activity there. We'll have well results that we can talk about next year, and we'll be able to talk about that in terms of where it fits in the portfolio, respectively. I've been pleased with the progress the team's made the last couple of years in terms of learning curve.

Operator

We'll go next to Brian Singer, Goldman Sachs.

Brian Singer -- Goldman Sachs -- Analyst

Thank you. Good morning.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Brian.

Brian Singer -- Goldman Sachs -- Analyst

I wanted to follow-up on a couple comments that you made in your opening remarks. The first was creative ways of alignment between shareholders and the boardroom. Then there was that work in the field. If you could add some more color on what some of those creative ways or creative options are. The second is on margin improvement. If production mix is flat, can you talk to what impact we could see on the operating cut side of the equation, or whether margin expansion will be more coming from capital costs v. lower F&D, your lower CapEx per barrel?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I'm gonna take the first one. If I forget pieces of the second one, I might ask you to repeat. There were a lot of words there.

On the first point when we talk about alignment, it's having a plan that is certified and blessed at the board level. Goals, which we've been very steadfast in over the last half-dozen years. All of our goals that are part of the annual incentive plan for the entirety of staff, that's management and everybody down to the field level absolutely aligned with the return focus that we're talking about. Everybody's playing off the same page of the playbook and executing. There's good communication. I think that's critical. Oftentimes, if you go back historically, it's easy to talk a game, it's a little bit more difficult to play the game. Our intentions are to not just speak the words but to deliver the results. I think the companies that have a track record of delivering those results, year in and year out, and proven operators, and have proven ability to execute I expect that those will be the winners on the road ahead for the reasons stated in the earlier commentary. Very simply, we've got everybody aligned. It's not a new thing at Newfield, but with emphasis, everybody's aligned on the elements that we've laid out over the course of 2017, and I would expect that alignment to be enhanced on the road ahead.

As far as the second question, I said there was a lot of in there. Can you give the short reminder of all the things you said, and let me make sure I hit on...?

Brian Singer -- Goldman Sachs -- Analyst

Driver of margin improvement is that coming? If production mix is flat, is that an off cost point, or is that a capital cost point?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

We're moving on all fronts. Our teams focused every day and working to improve F&D. There's always a lot of conversations about well cost; it's a bit of a head fix some days. There are all kinds of tight curves and yields when you think about returns; it's an F&D gain. Margin enhancement, you gotta be proving returns. You can do that by lowering costs and improving yield. Our completion folks are working hard to give us better completions that have better yield per foot of lateral. On the other side of the equation, we're working very hard to think about the best locations for the product mix? As the macro shifts, where do you get the best yield of product mix that can optimize the revenue stream and generate the returns?

On the LOE side, I've been absolutely amazed at what our teams been able to achieve over the last several years in terms of driving LOE costs down. Never bet against them, they're gonna stay focused on it. I think that's part of the equation. At a leadership level, we're also focused on making sure that we've got a creative G&A profile that's part of that. When you put all those pieces together, plan forward we'll have a creative profile because we're extracting the efficiencies out of the organization and we're staying focused on driving, improving returns.

The other item that's been helpful in areas like Stack, we're gonna continue to process on all fronts and all operating areas working to lower differentials. Some of our investments and infrastructure, the core-contiguous positions, the operating advantages that that affords, we've been able to see those benefits. I think we've talked about them enough that you can go back and look at the high point there in terms of what we've delivered. You should take it as an expectation going forward by our team that we're gonna continue to find those opportunities and drive them forward.

I touched on one of the earlier questions, we've seen an NGL pricing scenario develop as 2017 has played out. That really drives some incremental cash in that area; it changes some of the positioning for those wells in the portfolio when we were talking about optimizing returns. One of our core values is adaptability, and I think our team has demonstrated that in spades over the last few years, and will continue to adapt, and shift, and lean into some of those developing trends. It's multiple front; it's not single item. Ultimately, as we look forward, it would be my hope that we can all become a little bit more constructive and now worry about so much on where rigs are positioned but more on the results that are being delivered from those rigs. I think that tells you a lot about the quality of the team, the decision making, the consistency of management. Just call that a plea to say look out into the future and become a little more comfortable with the idea that companies are delivering results. They're making good decisions. We're gonna deliver those results, and we'll continue to update you guys on the road ahead.

Operator

We'll go next to John Herrlin, Societe Generale.

John Herrlin -- Societe Generale -- Analyst

Yeah, Lee. Have you and the board had any discussions since you're gonna have more of a returns focus on dividends? Second question, do you think given your book debt load that you've been penalized, even though you're not going to have any real maturity issues until 2022? Do you think I should get more returns focused? That you'll look at de-levering a little bit on a book-basis, or will you just let our earnings carry it out.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Let's start with the first one there John. This is not new dialog for our management with the board. Our view, very simply is, we got asked to deliver. We had to get our acreage HBP'd so we could move toward development. Now that we're finishing the HBP phase, we can optimize development. If we optimize development, we're optimizing returns. We'll keep all of those things on the table on the road ahead. I think that the clearest demonstration of returns focused that's blowing through is going to be growth and cash flow, and the fact that you can do it living within your means. Think about the plan forward, '18 forward, we're gonna look at that and understand what we need to do within whatever price range that we choose to construct the plan on. We'll communicate that actively with the board. Returns focus with the board is not new language. Ultimately, balance, and being able to deliver a balanced plan that delivers growth, demonstrates returns. Beyond that, we'll cross those other bridges when we get there.

As far as penalized, and levered, and this, that, and the other thing. I don't really have a strong opinion. I like where we're at. I think we've got a good net maturity ladder, we've got a strong financial position. I'll give Larry Massaro on the team a lot of credit for keeping us in the fairway there. We'll continue to make smart decisions there, and on the road ahead as we face those decisions, we'll make the right decisions at that time.

Operator

We'll go next to Richard Tullis, Capital One.

Richard Tullis -- Capital One -- Analyst

Thanks. Good morning. Nice quarter, Lee.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Thanks, Richard.

Richard Tullis -- Capital One -- Analyst

Just a couple questions. China oil volumes, obviously, declining but still valuable given international oil prices. What sort of cash flow could you expect from those properties next year, say they're back up and running in first quarter?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Since we're shut in at the moment, we're hoping the reservoir is recharging, that would be the first thing. I'm not suffering decline right now because we've got a shut-in. It has been on decline; my view is that it's been a strong performing asset, we've got two or three years of good production out in front of us when it comes back online. We'll update you on cash flow and what our expectations are when we come up with our plan in February of 2018. We expect it to be back online early next year.

Richard Tullis -- Capital One -- Analyst

Then, secondly, Lee, does the higher current oil price environment hopefully sticks around allows for some meaningful level of dollars to be allocated to call it exploratory efforts next year? What sort of things could you look to do?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I would tell you that we're always thinking about our exploration, new ventures team talks about the opportunity list in terms of hopper and conveyor. The things that we've been doing are de-risking this year score play zones that were already on HBP acreage. That's the obvious place. We've already made that investment. I would say that, respectively, given we are rich with inventory and high return, premium quality inventory, that we're gonna be development focused, but we'll continue to export their ideas, and in time we'll work that into the program. Our programs gonna be strongly development-focused moving forward.

Operator

We'll go next to David Deckelbaum with KeyBank.

David Deckelbaum -- KeyBank Capital Markets -- Analyst

Thanks for taking my questions Lee, and nice job on the quarter.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Thanks, David.

David Deckelbaum -- KeyBank Capital Markets -- Analyst

Just wanted to marry your comments around the balance sheet, this evolution with the industry. How do you view the state of your total asset package right now? You've had some successes in the Williston and the Warrens, keeping a rig there for a couple years. I guess, as we get into next year and have well results from the Euenta, I know you have other assets like the Arkoma. How aggressively are you gonna be pursuing pruning your total asset base to become a little more efficient here?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I'll make it, hopefully, clear.

We have a very healthy perspective on this at a management level, and I would say at a staff level that's been demonstrated over the last several years. Certainly, this carries into the boardroom as well. We call it grow, hold, or divest. Every asset that sits in Newfield's portfolio is tested every day on that basis. We're growing in asset; we know why we're growing the asset, that's generally the asset you'll see active investment in. If we're holding an asset, then we've gotta be able to answer the question on why are we holding that asset, for what purpose. If you can't meet the grow or hold test, then divest is the right answer. I think we've sold in excess of $3 billion of assets over the last several years; we've redeployed that into the portfolio that we have today. So, reinvested in North American resource plays. We've been consistent on this front, that every asset has a life-cycle, so we'll continue to have active dialog in that regard. Clearly, at the right time, and place for the right reasons, we maintain the option of divesting assets to accelerate activity in our portfolio. We'll stay focused on that, and it's gonna continue to be part of our daily decision making.

Operator

We have time for one last question. That will come from Leo Mariani, NatAlliance Securities.

Leo Mariani -- NatAlliance Securities -- Analyst

Hey guys. Just wanted to, maybe, ask the oil cut question for the fourth quarter a little bit differently. I think you've described it well, Lee, in saying that the gas cut goes up a little bit because you've got some very prolific pads coming online, the Scoop play that are gassier. I guess alternatively, maybe, are there fewer Stack pads coming online in the fourth quarter, which are obviously oily there? Obviously, you had a huge third quarter in terms of Stack pads turned online. I'm just trying to get a sense of maybe there are just less oily properties also coming online as well.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Leo, I'm gonna give you a gold star. That's spot on.

Just in terms of the sequencing and where things fit in, we do have a decrease in completed and popped wells, put on production wells, and Stacked in the fourth quarter. We'll build that cadence again as we move into 2018. That's one of those variables that we're working to manage. I think that we have taken steps to move toward a consistent frack fleet in terms of count, we're reducing volatility in frack fleet. Gary and the team are working every day, very hard to make sure that we're balancing out all those demands. Consistent activity in the frack fleet, 2018 forward but no way around it, we turned on a bunch of pads which represent a bunch of drilling activity and capital investment Stack in the third quarter. We have fewer Stack wells coming online in the fourth quarter. Spot on.

Leo Mariani -- NatAlliance Securities -- Analyst

That makes sense, for sure.

In terms of a quick follow-up here. Obviously, you guys are now in full pad development mode at Stack, do you guys see a potential for continued well cost reductions? Maybe you could just give us a sense of what well costs are now? And maybe you could give us some projection as to where that might go over the next six-months barring any service cost increases?

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

I would say that the costs that we're experiencing at present are in line with what we've talked about here over the last few months. I don't have any new color to give you there; I think you can pull that out. We're working hard on the 2018 plan, and since we haven't presented the preliminaries to the board, I'll just go ahead and stay silent on that until early in February. Yeah, February of '18 when we come up with our plan. What I will say is our team is working every day, per the earlier conversation, to drive down costs and that's on all fronts. We have to do it; it's an imperative. It's something that they do exceptionally well. We demonstrated how that plays out on the drilling front in the At NFX publication, so, we said at the beginning of our transition to North American resource focus and our shift to oil that we ultimately needed to be a leader on the operating front and any area we chose to deploy capital. I think that drilling performance demonstrates that. We're attacking completions, in the same way; we attack field level operations the same way, we attack margins the same way, our team is relentless in that regard. You can count on them to deliver. I'll promise I'll give you as much color as I can, and that you need when we come up with our plan in 2018. Again, we feel really good about our 2017 results and really excited about the 2018 forward game plan.

...

Operator

That does conclude the question and answer session. We'll turn the conference back over to Mr. Boothby for any additional or closing remarks.

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Again, thank you all for dialing in this morning. I appreciate the questions. We're very pleased with where we sit closing out the third quarter, excited about getting into 2018 and executing that forward plan. I look forward to visiting with you on the road in the weeks and months ahead. Thanks for your investment and your interest in Newfield. Thanks for your time today. Have a good day.

Operator

That does conclude today's conference. Thank you for your participation. You may now disconnect.

Duration: 47 minutes

Call participants:

Lee K. Boothby -- Chairman, President, and Chief Executive Officer

Stephen C. Campbell -- Vice President -- Investor Relations

Dave Kissler -- Simmons Piper Jaffrey -- Analyst

Josh Silverstein -- Wolfe Research, LLC -- Analyst

Derek Whitfield -- Stifel -- Analyst

Ron Mills -- Johnson Rice -- Analyst

Subash Chandra -- Guggenheim -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

John Herrlin -- Societe Generale -- Analyst

Richard Tullis -- Capital One -- Analyst

David Deckelbaum -- KeyBank Capital Markets -- Analyst

Leo Mariani -- NatAlliance Securities -- Analyst

More NFX analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

10 stocks we like better than Newfield Exploration
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Newfield Exploration wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.