Newfield Exploration (NFX), like many of the oil and gas firms working U.S. shale plays, has been stung by steep declines in the price of natural gas, with its share price falling sharply over the past 12 months as a result. The company is working to overcome that concern by reorienting its budgets to higher-priced oil and liquids, NFX management says.

Newfield Exploration is an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. Its principal domestic areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. Internationally, Newfield focuses on offshore oil developments in Malaysia and China.

“Over the last several years, we have diversified our portfolio of assets and therefore our exposure to the unique risks our industry faces, such as geologic, geographic and commodity price risks (crude oil and natural gas),” Newfield management said in a recent filing.

“We believe that our diverse asset portfolio helps us mitigate these risks and provides us with the flexibility to respond quickly to the volatility in the oil and gas industry.”

Strategies to achieve this include growing oil and liquids-rich production to half of total production and allocating substantially all of the company’s $1.5 billion to $1.7 billion in capital investments to these activities while cutting natural gas activities.

“Our oil and liquids production is expected to grow more than 20 percent in 2012. Conversely, our natural gas production will decrease as much as 15 percent in 2012 due to natural field declines and reduced investments,” management said.

Newfield Exploration has a market cap of $3.72 billion in a sector, oil, gas and consumable fuels, where the average company size is $44.46 billion. Its trailing 12-month P/E ratio is 5.54 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.64, compared to 1.18 for the sector.

Its projected earnings per share growth for the coming year is 14.75 percent, compared to a sector average of 15.72 percent.

Long-term driver

Analysts are generally positive on NFX shares, with buy or outperform calls in from RBC Capital Markets, Stifel Nicolaus, Jefferies, and Friedman, Billings, Ramsey & Co. Raymond James rates the stock at underperform.

“Its diversified portfolio seems to be the long-term growth driver. However, because of its sensitivity to gas-price volatility, as well as costs, geopolitical risks and project timing delays, we see limited upside potential for shares,” said the analysts at Zacks Investment Research at the end of March, rating the stock at neutral.

Newfield Exploration next reports on July 18.