Newfield Exploration Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Newfield Exploration (NYS: NFX) fell 12% today after the company released fourth-quarter earnings and its 2012 capital investment program.

So what: Oil and gas revenues grew to $677 million from $528 million a year ago. Net income more than tripled to $68 million, or $0.51 per share. On an adjusted basis, which excludes a large derivative loss, earnings per share were $0.95, below the $1.01 per share in earnings analysts expected.

Now what: Newfield is trying to transition to more liquids production, like most of the industry, but is finding costs hard to control. The other downside is that increased liquids production is barely expected to make up for the loss in natural gas revenue, making investors a bit uneasy. The company is only trading at 8.3 times 2012 earnings estimates, so there could be some upside potential, but I would like to see costs controlled and an earnings beat before jumping into this stock.

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At the time thisarticle was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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