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TheStreet Open House

Murphy Oil Announces Preliminary Quarterly Earnings

Stocks in this article: MUR

Murphy Oil Corporation (NYSE: MUR) announced today that income from continuing operations in the third quarter of 2012 was $228.9 million ($1.17 per diluted share) compared to $347.3 million ($1.79 per diluted share) in the third quarter of 2011. Net income, which includes the results of discontinued operations, was $226.7 million ($1.16 per diluted share) in the third quarter 2012 compared to $406.1 million ($2.09 per diluted share) in the 2011 third quarter. Earnings in the 2012 quarter were below prior year levels primarily due to the effects of lower North American natural gas sales prices, weaker U.S. retail marketing margins, an income tax benefit in the 2011 quarter, and an unfavorable variance from foreign exchange.

During the third quarter of 2012, the Company’s Board of Directors agreed to sell the Company’s exploration and production operations in the United Kingdom. The sale of these assets is expected to be completed near year-end 2012. The results of these operations in both years, as well as the results of U.S. refining operations in 2011, are presented as discontinued operations. The results of discontinued operations was a loss of $2.2 million ($0.01 per diluted share) in the 2012 third quarter compared to income of $58.8 million ($0.30 per diluted share) in the 2011 quarter.

For the first nine months of 2012, income from continuing operations was $801.7 million ($4.12 per diluted share) compared to $847.4 million ($4.36 per diluted share) in 2011. The decline in continuing operations income in 2012 was primarily attributable to weaker U.S. retail marketing margins and an unfavorable variance in the effects of foreign exchange in the current year. Net income in 2012 totaled $812.2 million ($4.17 per diluted share) compared to $986.6 million ($5.07 per diluted share) for the same period in 2011. Net income in the current year included discontinued operations income of $10.5 million ($0.05 per diluted share) compared to discontinued operations income of $139.2 million ($0.71 per diluted share) in 2011.

Net Income

       
Three Months Ended

Nine Months Ended

September 30 September 30

2012

2011

2012

2011

(Millions of Dollars)
Exploration and Production $ 221.1 273.4 760.0 758.8
Refining and Marketing 42.8 68.9 119.1 129.3
Corporate   (35.0 ) 5.0 (77.4 ) (40.7 )
Income from continuing operations 228.9 347.3 801.7 847.4

Income (loss) from discontinued operations

  (2.2 ) 58.8 10.5   139.2  
Net income $ 226.7   406.1 812.2   986.6  
 
Income per Common share – Diluted:
Income from continuing operations $ 1.17 1.79 4.12 4.36
Net income 1.16 2.09 4.17 5.07
 

Third Quarter 2012 vs. Third Quarter 2011

Exploration and Production (E&P)

The Company’s income contribution from E&P continuing operations was $221.1 million in the third quarter of 2012 compared to $273.4 million in the same quarter of 2011. The decline in earnings in the 2012 quarter compared to 2011 was primarily attributable to lower sales prices for North American natural gas, higher depreciation expense related to oil and natural gas volumes sold, and lower income tax benefits. Higher crude oil sales volumes in the current quarter partially offset these unfavorable variances. Depreciation expense rose in 2012 due to higher sales volumes, primarily in the Eagle Ford Shale of South Texas and at the Kikeh field, offshore Malaysia. The 2011 quarter included a tax benefit of $25.6 million in Malaysia based on a determination that past costs incurred in Block P are deductible against taxable income of Block K.

E&P Metrics

       
Three Mos. Ended Nine Mos. Ended
September 30 September 30

2012

2011

2012

2011

Oil Production Volume – Bbls. per day 105,796 96,437 105,766 101,269
Natural Gas Sales Volume – MCF per day 454,573 470,183 495,711 447,044
Total BOE Production Volume – BOE per day 181,558 174,801 188,385 175,776
 
Average Realized Oil Sales Price – Per Bbl. $ 96.09 95.95 97.13 94.36
Average Realized North American
Natural Gas Sales Price – Per MCF $ 2.61 4.20 2.43 4.26
Average Realized Sarawak
Natural Gas Sales Price – Per MCF $ 7.59 7.54 7.79 6.76
 

Exploration expenses totaled $94.0 million in the third quarter 2012, up from $85.5 million in the 2011 quarter. The increase was primarily attributable to dry holes on the Central Dohuk license in the Kurdistan region of Iraq and in Malaysia during the 2012 quarter. These dry holes were partially offset by prior year costs that did not repeat for 3D seismic acquisition on Block CA-2, offshore Brunei, and other geophysical costs for licenses in the Kurdistan region of Iraq.

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