Two upstream oil and gas companies reported mixed third-quarter results as the earnings season kicked off.

Newfield Exploration Co. (NYSE: NFX) announced a third-quarter net loss of $33 million, or 24 cents per diluted share, according to unaudited financials. The company said that international production could drop by up to 25% in 2013 due to early field pay-out in Malaysia.

David Tameron, Wells Fargo Securities senior analyst, lowered estimated earnings per share and reduced Kodiak’s stock valuation range to $29-$33 per share from $31-$35.

“The bar is definitely now set low for 2013,” Tameron said.

Newfield, based in The Woodlands, north of Houston, would have reported $65 million in net income in the third quarter had it not been beset by a drop in the value of commodity derivatives and an expense related to redemption of senior subordinated notes, according to the company.

Newfield had a solid quarter outside of the international sector and appears to be making progress in many of its emerging plays, Tameron said. Newfield was hit by an unrealized loss on commodity derivatives of $135 million ($85 million after-tax) and a non-recurring expense of $20 million ($13 million after tax).

Quarterly oil and gas revenues were down 2% compared to 2011, but still 7% more than the year-to-year nine-month period ended Sept. 30, 2011.

Newfield’s biggest problem may be perception: “Investors may feel burned by NFX and hesitant to step back in anytime soon,” Tameron said. He rated the stock at “Market Perform.”

On Oct. 24, Raymond James energy analyst Andrew Coleman rated the stock as “Underperform” due to below-average production growth. But after shares fell, Coleman upgraded the stock to “Market Perform.”

Newfield’s hedge position, liquidity and oil growth merit a look “even given our bearish oil call,” he said. Still, “we have reduced our 2013 growth outlook from 6% to 0%.”

At year-end 2011, Newfield’s proved reserves were 2.3 trillion cubic feet of natural gas (Tcf) and 263 million barrels of oil (MMbo), according to the company’s website.

KOG Production Analysis

A cloud also settled over Kodiak Oil & Gas Corp. (NYSE: KOG), which said it is unlikely to meet its forecasted production, which it had already revised downward.
Kodiak, based in Denver, reported average third-quarter sales of 15,900 barrels of oil equivalent per day (BOE/d), up from the second quarter’s 12,700 BOE/d.

The problem: “Expectations had been set higher with the Street forecasting between 17,000-18,000” BOE/d, Tameron said.

KOG lowered fiscal year production guidance to 15,500-17,500 BOE/d from 17,000-21,000 BOE/d. At estimated production levels of 19,000-21,000 BOE/d, KOG would need to average close to 23,000 BOE/d in sales to hit the low end of its updated guidance, Tameron said.

“We are not quite sure why production has struggled to keep pace with management forecasts, but the story this quarter remains consistent with the past quarters,” Tameron said.

Kodiak operates in the Bakken shale, including the Three Forks area of the formation.