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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: NOVEMBER 26, 2002
(DATE OF EARLIEST EVENT REPORTED)
NEWFIELD EXPLORATION COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 1-12534 72-1133047
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
363 N. SAM HOUSTON PARKWAY E., SUITE 2020
HOUSTON, TEXAS 77060
(Address of Registrant's Principal Executive Offices)
(281) 847-6000
(Registrant's Telephone Number, Including Area Code)
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On November 26, 2002, Newfield Exploration Company ("Newfield")
acquired EEX Corporation ("EEX") pursuant to a stock-for-stock merger (the
"Merger") in which Newfield Operating Company, a wholly owned subsidiary of
Newfield, merged with and into EEX, with EEX surviving as a wholly owned
subsidiary of Newfield. A total of approximately 7.1 million shares of Newfield
common stock were issued in connection with the Merger, representing
approximately 12.7% of the total number of shares of Newfield common stock (on a
fully diluted basis) outstanding following the completion of the Merger.
On November 27, 2002, Newfield filed a Current Report on Form 8-K (the
"Report") providing the foregoing information under Item 2 of such Report and
stating under Item 7 of such Report that the required historical financial
statements and other financial information with respect to EEX and the required
pro forma financial information with respect to the Merger would be filed by an
amendment to the Report. The Report is hereby amended to replace Item 7 of the
Report with the following:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of the business acquired.
The following information is hereby incorporated by reference into
this report:
1. EEX's consolidated financial statements as of December 31,
2000 and 2001 and for each of the calendar years in the
three year period ending December 31, 2001 and related notes
contained in "Item 8. Financial Statements and Supplementary
Data" of EEX's Annual Report on Form 10-K for the year ended
December 31, 2001, and the report of Ernst & Young LLP,
independent auditors, thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt
about EEX's ability to continue as a going concern as
described in Note 2 to the consolidated financial
statements) included therein; and
2. EEX's consolidated financial statements as of September 30,
2001 and 2002 and for each of the three month and nine month
periods then ended and related notes contained in "Item 1.
Financial Statements" of EEX's Quarterly Report on Form 10-Q
for the three months ended September 30, 2002.
(b) Pro forma financial information.
The unaudited pro forma combined condensed financial
statements as of September 30, 2002 and for the nine months ended
September 30, 2002 and the calendar year ended December 31, 2001
that give effect to the Merger and the issuance of the notes
described therein begin on page F-1 of this report.
(c) Exhibits.
23.1 Consent of Ernst & Young LLP
EXPERTS
The consolidated financial statements of EEX appearing in EEX's Annual
Report (Form 10-K) for the year ended December 31, 2001 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
(which contains an explanatory paragraph describing conditions that raise
substantial doubt about EEX's ability to continue as a going concern as
described in Note 2 to the consolidated financial statements) included therein
and incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWFIELD EXPLORATION COMPANY
Date: February 10, 2003 By: /s/ TERRY W. RATHERT
------------------------------------------
Terry W. Rathert
Vice President and Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
2
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On November 26, 2002, Newfield Exploration Company ("Newfield")
acquired EEX Corporation ("EEX") pursuant to a stock-for-stock merger (the
"Merger") in which Newfield Operating Company, a wholly owned subsidiary of
Newfield, merged with and into EEX, with EEX surviving as a wholly owned
subsidiary of Newfield. A total of approximately 7.1 million shares of Newfield
common stock were issued in connection with the Merger. Newfield financed the
EEX debt that became due at the closing of the Merger and a portion of the
transaction costs associated with the Merger with the issuance in August 2002 of
$250 million aggregate principal amount of its 8% Senior Subordinated Notes due
2012 (the "Notes").
The following summary unaudited pro forma combined condensed financial
information combines the historical consolidated balance sheets and income
statements of Newfield and EEX and gives effect to the issuance of the Notes
and to the Merger using the purchase method of accounting.
The unaudited pro forma combined condensed financial information is
based on the following assumptions and adjustments:
o the income statement data assume that the issuance of the Notes and
the Merger were effected on January 1, 2001;
o the balance sheet data assume that the issuance of the Notes and
the Merger were effected on September 30, 2002;
o the balance sheet and income statement data reflect Newfield's use
of the net proceeds from the issuance of the Notes to repay the EEX
debt that became due at the closing of the Merger and to pay a
portion of the transaction costs of the Merger; and
o the historical financial statements of EEX have been adjusted to
conform to the accounting policies of Newfield.
The historical income statement information for the year ended December
31, 2001 is derived from the audited financial statements of EEX and Newfield.
The historical income statement information for the nine-month period ended
September 30, 2002 and the historical balance sheet information as of September
30, 2002 are derived from the unaudited financial statements of EEX and
Newfield. The unaudited pro forma combined condensed financial information
should be read together with the historical financial statements and related
notes of Newfield and EEX.
The unaudited pro forma combined condensed financial information is
presented for illustrative purposes only. The financial results may have been
different if the companies had always been combined or if the transactions had
occurred as of the dates indicated above, nor do they purport to indicate the
future results that Newfield will experience. Further, the unaudited pro forma
combined condensed financial information does not reflect the effect of
restructuring charges that will be incurred to fully integrate and operate the
combined organization more efficiently or anticipated synergies resulting from
the Merger. The restructuring activities to integrate the companies may result
in asset rationalization and other activities.
F-1
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 2002
---------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NEWFIELD EEX ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
Revenues ................................................... $ 462,260 $ 113,864 $ -- $ 576,124
Operating expenses:
Lease operating ........................................ 73,824 19,747 -- 93,571
Exploration ............................................ -- 19,504 (19,504)(A) --
Production and other taxes ............................. 12,906 8,153 -- 21,059
Transportation ......................................... 4,377 -- -- 4,377
Depreciation, depletion and amortization ............... 221,528 35,139 (35,139)(B) 287,453
65,925 (C)
General and administrative ............................. 39,084 13,017 -- 52,101
Gain on sales of property, plant and equipment, net .... -- (858) 577 (F) (281)(F)
--------- --------- --------- ---------
Total operating expenses ........................... 351,719 94,702 11,859 458,280
--------- --------- --------- ---------
Income (loss) from continuing operations ................... 110,541 19,162 (11,859) 117,844
--------- --------- --------- ---------
Other income (expenses):
Interest and other income (expense) .................... (17,009) 1,011 -- (15,998)
Interest expense ....................................... (21,397) (20,190) 1,308 (G) (43,263)
4,932 (H)
8,357 (I)
(16,273)(I)
Dividends on convertible preferred securities
of Newfield Financial Trust I ...................... (7,008) -- -- (7,008)
--------- --------- --------- ---------
Total other income (expenses) ...................... (45,414) (19,179) (1,676) (66,269)
--------- --------- --------- ---------
Income (loss) before income taxes, discontinued
operations, extraordinary items and cumulative
effect of change in accounting principles .............. 65,127 (17) (13,535) 51,575
--------- --------- --------- ---------
Income tax provision (benefit) ............................. 23,160 389 (4,737)(J) 18,812
--------- --------- --------- ---------
Income (loss) before discontinued operations,
extraordinary items, cumulative effect of change in
accounting principles and preferred stock dividends .... $ 41,967 $ (406) $ (8,798) $ 32,763
========= ========= ========= =========
Per share data:
Basic earnings (loss) per share (Y) .................... $ 0.95 $ (0.01) $ 0.64
========= ========= =========
Diluted earnings (loss) per share (Y) .................. $ 0.93 $ (0.01) $ 0.63
========= ========= =========
Weighted average number of shares outstanding for
basic earnings (loss) per share .................... 44,337 41,901 (41,901)(K) 51,489
========= ========= 7,152 (K) =========
Weighted average number of shares outstanding for
diluted earnings (loss) per share .................. 44,910 41,901 (41,901)(K) 52,062
========= ========= 7,152 (K) =========
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
F-2
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NEWFIELD EEX ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
Revenues ................................................... $ 749,405 $ 157,524 $ -- $ 906,929
--------- --------- --------- ---------
Operating expenses:
Lease operating ........................................ 108,491 28,057 -- 136,548
Exploration ............................................ -- 48,116 (48,116)(A) --
Production and other taxes ............................. 17,523 14,731 -- 32,254
Depreciation, depletion and amortization ............... 282,567 49,294 (49,294)(B) 367,355
84,788 (C)
Ceiling test write-down ................................ 106,011 -- -- 106,011
Impairment of long-lived assets ........................ -- 111,030 (28,744)(D) 82,286(D)
General and administrative ............................. 43,955 18,738 (226)(E) 62,467
Gain on sales of property, plant and equipment, net .... -- (12,263) 12,263 (F) --
--------- --------- --------- ---------
Total operating expenses ........................... 558,547 257,703 (29,329) 786,921
--------- --------- --------- ---------
Income (loss) from operations .............................. 190,858 (100,179) 29,329 120,008
--------- --------- --------- ---------
Other income (expenses):
Interest and other income (expense) .................... 28,814 1,232 -- 30,046
Interest expense ....................................... (18,968) (29,736) 627 (G) (54,217)
6,593 (H)
8,955 (I)
(21,688)(I)
Dividends on convertible preferred securities
of Newfield Financial Trust I ...................... (9,344) -- -- (9,344)
--------- --------- --------- ---------
Total other income (expenses) ...................... 502 (28,504) (5,513) (33,515)
--------- --------- --------- ---------
Income (loss) before income taxes, discontinued
operations, extraordinary items and cumulative
effect of change in accounting principles .............. 191,360 (128,683) 23,816 86,493
--------- --------- --------- ---------
Income tax provision (benefit) ............................. 67,612 20,118 (56,869)(J) 30,861
--------- --------- --------- ---------
Income (loss) before discontinued operations,
extraordinary items, cumulative effect of change in
accounting principles and preferred stock dividends .... $ 123,748 $(148,801) $ 80,685 $ 55,632
========= ========= ========= =========
Per share data:
Basic earnings (loss) per share (Y) .................... $ 2.80 $ (3.57) $ 1.08
========= ========= =========
Diluted earnings (loss) per share (Y) .................. $ 2.66 $ (3.57) $ 1.07
========= ========= =========
Weighted average number of shares outstanding for
basic earnings (loss) per share .................... 44,258 41,724 (41,724)(K) 51,410
========= ========= 7,152 (K) =========
Weighted average number of shares outstanding for
diluted earnings (loss) per share .................. 48,894 41,724 (41,724)(K) 52,123
========= ========= 7,152 (K) =========
(3,923)(L)
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
F-3
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
AS OF SEPTEMBER 30, 2002
-----------------------------------------------------------------------------------
NOTES OFFERING EEX MERGER
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
NEWFIELD EEX ADJUSTMENTS ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------ -----------
ASSETS
Current assets........................ $ 145,723 $ 42,904 $ -- $ 14,203 (N) $ 202,830
Oil and gas properties................ 2,688,078 912,764 -- (912,764)(O) 3,259,580
571,502 (P)
Other................................. -- 8,609 -- (8,609)(Q) --
Less - accumulated depreciation,
depletion and amortization........ (1,257,592) (399,280) -- 399,280 (O)(Q) (1,257,592)
----------- ----------- ----------- ----------- -----------
Property, plant and equipment, net.... 1,430,486 522,093 -- 49,409 2,001,988
----------- ----------- ----------- ----------- -----------
Property, plant and equipment
held for sale..................... -- -- -- 35,000 (P) 35,000
Other assets.......................... 16,567 3,035 6,125 (M) 1,740 (Q) 25,132
(2,335)(R)
----------- ----------- ----------- ----------- -----------
Total assets.................. $ 1,592,776 $ 568,032 $ 6,125 $ 98,017 $ 2,264,950
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities................... $ 148,014 $ 283,369 $ (241,795)(M) $ 42,310 (S) $ 231,898(U)
Other liabilities..................... 8,493 12,281 -- 873 (T) 21,647
Commodity derivatives................. 2,596 -- -- -- 2,596
Long-term debt........................ 360,665 128,036 247,920 (M) 23,019 (U) 759,640
Deferred taxes........................ 203,578 -- -- (84,255)(V) 119,323
----------- ----------- ----------- ----------- -----------
Total long-term liabilities... 575,332 140,317 247,920 (60,363) 903,206
----------- ----------- ----------- ----------- -----------
Minority interest third party......... -- 5,000 -- (4,545)(W) 455
Company-obligated, mandatorily
redeemable, convertible preferred
securities of Newfield Financial
Trust ............................. 143,750 -- -- -- 143,750
Stockholders' equity.................. 725,680 139,346 -- 120,615 (X) 985,641
----------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity....... $ 1,592,776 $ 568,032 $ 6,125 $ 98,017 $ 2,264,950
=========== =========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
F-4
NEWFIELD EXPLORATION COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(A) To record the reversal of historical EEX exploration expense recorded in
accordance with the successful efforts method of accounting for oil and
gas activities. No such expense is recorded under the full cost method of
accounting for oil and gas activities, which method is utilized by
Newfield.
(B) To record the reversal of historical EEX depreciation, depletion and
amortization expense recorded in accordance with the successful efforts
method of accounting for oil and gas activities.
(C) To record pro forma depreciation, depletion and amortization expense in
accordance with the full cost method of accounting for oil and gas
activities based on the purchase price allocation to depreciable and
depletable assets.
(D) To record the reversal of historical EEX impairment related to oil and
gas properties recorded in accordance with Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The remaining $82
million impairment represents the historical EEX impairment charge for
non oil and gas assets. Full cost ceiling tests were performed on a pro
forma combined basis resulting in no incremental impairment of oil and
gas properties for the period presented.
(E) To adjust EEX historical results of operations to reflect the
discontinuance of its international operations, which occurred in 2002
prior to the Merger.
(F) To record the reversal of the historical EEX gain on the sales of oil and
gas properties recorded in accordance with the successful efforts method
of accounting for oil and gas activities. The remaining $0.3 million gain
on sales of property, plant and equipment for the nine months ended
September 30, 2002 relates to the sale of non oil and gas assets.
(G) To adjust EEX historical interest expense to reflect the reversal of
amortization of historical debt issuance costs.
(H) To record the capitalization of interest based on the allocation of the
purchase price to unproved oil and gas properties.
(I) To eliminate the historical EEX interest expense of approximately $8.4
million and $9.0 million for the nine months ended September 30, 2002 and
the year ended December 31, 2001, respectively, related to EEX's credit
facility and to reflect the interest expense which results from the
issuance of the Notes with a stated interest rate of 8 3/8%. The Notes
were issued at a discount of 0.832%. Interest expense also includes
amortization of debt issuance costs and the Note discount over the term
of the Notes.
NINE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- ------------
(IN THOUSANDS)
Interest expense - $250 million senior subordinated notes........ $ 15,703 $ 20,937
Amortization of note discount - senior subordinated notes........ 111 138
Amortization of debt issuance costs - senior subordinated notes.. 459 613
--------- ---------
$ 16,273 $ 21,688
========= =========
(J) To record income tax expense on the pro forma adjustments based on the
applicable statutory tax rate of 35%.
(K) To reverse historical EEX common stock and reflect the issuance of 7.1
million shares of Newfield common stock.
(L) To adjust the weighted average number of shares outstanding for the
calculation of diluted earnings per share to exclude the dilutive effect
of the shares underlying Newfield's 6 1/2% quarterly income convertible
trust preferred securities because to include such shares would have been
antidilutive.
F-5
NEWFIELD EXPLORATION COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS--(CONTINUED)
(M) To reflect the issuance of the Notes (net of a discount of 0.832%) and
the application of the net proceeds therefrom for the repayment of EEX
debt that became due at the closing of the Merger and the adjustment
associated with debt issuance costs related to the Notes.
(N) To increase historical EEX current assets related to a lawsuit settlement
and insurance purchased as required by the terms of the Merger.
(O) To reverse historical EEX oil and gas property balances and the related
accumulated depreciation, depletion and amortization recorded in
accordance with the successful efforts method of accounting for oil and
gas activities.
(P) To record the preliminary pro forma allocation of the purchase price of
the acquisition of EEX including acquisition costs to oil and gas
properties using the purchase method of accounting. The following is a
calculation and allocation of purchase price to the acquired assets and
liabilities based on their relative fair values:
CALCULATION OF PURCHASE PRICE (IN THOUSANDS, EXCEPT PER SHARE):
Shares of common stock issued........................................................... 7,152
Newfield stock price................................................................ $ 36.348
---------
Fair value of stock issued.......................................................... $ 259,961
Add: Estimated merger costs (see Note S)........................................... 47,190
Plus fair market value of liabilities assumed:
Other liabilities................................................................... 51,047
Debt................................................................................ 384,691
---------
Total purchase price for assets acquired................................................ $ 742,889
=========
ALLOCATION OF PURCHASE PRICE (IN THOUSANDS):
Oil and gas properties.............................................................. $ 571,502
Property, plant and equipment held for sale......................................... 35,000
Deferred tax asset.................................................................. 84,255
Other assets........................................................................ 52,132
---------
Total................................................................................... $ 742,889
=========
The Newfield stock price included in the table above is calculated based
on the average of the closing prices of Newfield's common stock for the
five day trading period around the announcement of the Merger.
(Q) To reclassify EEX historical furniture, fixtures and equipment and
associated accumulated depreciation, depletion and amortization balances
to conform to Newfield's presentation and adjust to fair value.
(R) To record the reversal of the capitalized debt issuance costs related to
EEX's historical long-term debt.
(S) To accrue for merger costs, consisting primarily of severance costs,
bankers' and other professional fees, and to reverse historical EEX
preferred stock dividends payable, which were converted to shares of
Newfield common stock in the Merger. Severance costs are based on the
change in control provisions in EEX's employment contracts and employee
plans. All such costs are included in the preliminary purchase price
allocation (see Note P). Additionally, the restructuring activities to
integrate the companies may result in asset rationalization and other
activities. However, no adjustments have been made to the pro forma
income statements for such costs.
(T) To increase historical EEX other liabilities by $0.9 million to adjust
the pension and post-retirement benefit liabilities to estimated fair
market value.
F-6
NEWFIELD EXPLORATION COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS--(CONTINUED)
(U) To record an increase in the estimated fair market value of an EEX
forward gas sales obligation. Current maturities of long term debt
included in pro forma combined current liabilities are $14.6 million.
(V) To record the pro forma deferred income tax effects of the Merger using
the purchase method of accounting (see Note P).
(W) To adjust the historical EEX minority interest third party balance to
fair market value in accordance with understandings with such third
party.
(X) To record the pro forma adjustments to stockholder's equity using the
purchase method of accounting. The adjustment amount is calculated as
follows (in thousands):
Fair value of stock issued, as calculated in Note P above................... $ 259,961
Less: EEX historical shareholders' equity.............................. 139,346
---------
Adjustment to stockholders' equity.......................................... $ 120,615
=========
(Y) Calculated by dividing income (loss) before discontinued operations,
extraordinary items, cumulative effect of change in accounting principles
and preferred stock dividends by the weighted average number of shares
outstanding.
F-7
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED SUPPLEMENTARY OIL AND GAS DISCLOSURES
The following pro forma estimated reserve quantities show the effect of
the Merger as if it had occurred on December 31, 2001.
EEX
DISPOSITIONS
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
NEWFIELD EEX ADJUSTMENTS(A) ADJUSTMENTS(B) COMBINED
---------- ---------- -------------- -------------- -----------
Proved:
Oil and condensate (MBbls)....... 36,342 14,560 (10,856) (1,675) 38,171
Gas (MMcf)....................... 718,312 394,987 --- (87,146) 1,026,153
Total (MMcfe)................ 936,364 482,347 (65,136) (97,196) 1,256,379
Proved developed:
Oil and condensate (MBbls)....... 34,534 9,724 (6,644) (1,209) 36,405
Gas (MMcf)....................... 662,879 310,884 --- (50,894) 922,869
Total (MMcfe)................ 870,083 369,228 (39,864) (58,148) 1,141,299
----------------------------------------
(A) To adjust EEX historical reserves for the discontinuance of its
international operations, which occurred in 2002 prior to the Merger.
(B) Represents adjustments to EEX's reserves based on Newfield's estimate of
EEX's reserves as of December 31, 2001. Newfield's estimates vary
significantly from those of EEX.
F-8
NEWFIELD EXPLORATION COMPANY
UNAUDITED PRO FORMA COMBINED SUPPLEMENTARY OIL AND GAS DISCLOSURES
The following pro forma estimated standardized measure of discounted
future net cash flows shows the effect of the Merger as if it had occurred on
December 31, 2001.
EEX
DISPOSITIONS
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
NEWFIELD EEX ADJUSTMENTS(A) ADJUSTMENTS(B) COMBINED
---------- ---------- -------------- -------------- -----------
(IN THOUSANDS)
Future cash inflows.................. $ 2,552,744 $ 1,227,200 $ (194,400) $ (220,367) $ 3,365,177
Less related future:
Production costs............. (686,995) (553,000)(C) 162,600 (C) 153,863 (923,532)
Development and
abandonment costs......... (258,885) -- -- (63,253) (322,138)
------------ ------------ ------------ ------------ ------------
Future net cash flows
before income taxes.............. 1,606,864 674,200 (31,800) (129,757) 2,119,507
Future income tax expense............ (282,460) (4,300) 4,300 (76,974) (359,434)
------------ ------------ ------------ ------------ ------------
Future net cash flows
before discount.................. 1,324,404 669,900 (27,500) (206,731) 1,760,073
10% annual discount for estimating
timing of cash flows............. (352,886) (280,700) 5,500 115,904 (512,182)
------------ ------------ ------------ ------------ ------------
Standardized measure of discounted
future net cash flows............ $ 971,518 $ 389,200 $ (22,000) $ (90,827) $ 1,247,891
============ ============ ============ ============ ============
-------------------------------
(A) To adjust EEX historical reserves for the discontinuance of its
international operations, which occurred in 2002 prior to the Merger.
(B) Represents adjustments attributable to EEX's reserves based on Newfield's
estimate of EEX's reserves as of December 31, 2001. Newfield's estimates
vary significantly from EEX's historical estimates.
(C) Includes related future development costs.
Newfield's estimate of EEX's proved oil and gas reserves at December
31, 2001 is approximately 23% less than EEX's historical estimate. Prior to the
Merger, EEX disagreed with Newfield's estimate and believed that no adjustment
was required with respect to its reported estimate of proved reserves at
December 31, 2001. In general, an estimate of proved reserves depends on the
availability of data needed to develop the estimate and on the experience and
judgment of the reservoir engineer making the estimate. Estimating accumulations
of oil and gas is complex. Estimates prepared by different persons may vary
significantly because of the judgments made in interpreting the data.
F-9
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
23.1 Consent of Ernst & Young LLP