Murphy Oil CEO Discusses Q3 2010 Results – Earnings Call Transcript
Murphy Oil Corporation (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 1:00 pm ET
Executives
David Wood – President and CEO
Barry Jeffery – IR
Kevin Fitzgerald – SVP and CFO
Analysts
Arjun Murti – Goldman Sachs
Mark Polak – Scotia Capital
Mark Gilman – Benchmark Company
Blake Fernandez – Howard Weil
Evan Calio – Morgan Stanley
Pavel Molchanov – Raymond James
Gene Gillespie – Gillespie Consulting Group
Presentation
Operator
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Previous Statements by MUR
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Murphy Oil Corporation Q2 2010 Earnings Call Transcript
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Murphy Oil Corporation, Q1 2010 Earnings Call Transcript
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Murphy Oil Corp. Q4 2009 Earnings Call Transcript
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Murphy Oil Corporation Q3 2009 Earnings Call Transcript
Good afternoon, ladies and gentlemen, and welcome to the Murphy Oil Corporation third quarter 2010 earnings announcement. Today’s conference is being recorded. I would now like to turn the call over to Mr. David Wood, President and Chief Executive Officer. Please go ahead, sir.
David Wood
Thank you, operator. Good afternoon, everyone, and thank you for joining us on our call today. With me are Kevin Fitzgerald, Senior Vice President and Chief Financial Officer; John Eckart, Vice President and Controller; Mindy West, Vice President and Treasurer; Barry Jeffery, Director of Investor Relations; and Craig Bonsall, Supervisor of Investor Relations. I will now turn the call over to Barry.
Barry Jeffery
Thank you, David. Welcome everyone and thank you for joining us. Today’s call will follow our usual format. Kevin will begin by providing a review of third quarter 2010 results. David will then follow with an operational update, after which questions will be taken.
Please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, see Murphy’s 2009 annual report on Form 10-K filed with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements.
I will now turn the call over to Kevin for his comments.
Kevin Fitzgerald
Thanks, Barry. Net income in the third quarter of 2010 was $202.8 million or $1.05 per diluted share, and that compares to net income in the third quarter of ‘09 of $188.9 million or $0.98 per diluted share. For the nine months 2010, we had net income of $624 million or $3.24 per diluted share compared to net income for the nine months of ‘09 of $518.8 million or $2.70 per diluted share.
There were no unusual items of significance in the 2010 quarter or for the 2010 nine months period. The 2009 nine month period did however include $97.8 million or $0.51 a share of income from discontinued operations. This was mostly related to a gain on the sale of our operations in Ecuador in March last year.
Looking at net income by segments; the E&P segment, income from continuing operations in the third quarter of 2010 was $186.7 million compared to net income of $184.1 million in the third quarter of last year.
Slightly higher earnings for the 2010 quarter were primarily due to higher crude oil and natural gas price realizations and higher natural gas sales volumes, partially offset by lower crude oil sales volumes and higher exploration and extraction costs.
Crude oil and liquids prices averaged $65.45 per barrel in the third quarter of this year versus $61.13 last year. North America natural gas prices averaged $4.24 per MCF this year, compared to $3.01 last year, while in Sarawak third quarter 2010 natural gas price realizations averaged $5.71 per MCF compared to $3.31 per MCF last year, an increase of over 72%.
Crude oil and gas liquids production from continuing operations for the current quarter was just under 120,000 barrels per day compared to approximately 131,600 barrels per day in the corresponding 2009 quarter. The decrease was mostly due to lower production from Kikeh offshore Malaysia ahead of our planned rig program.
Natural gas sales volumes more than doubled to 371 million cubic feet per day in the third quarter of this year, compared to 182 million per day in the third quarter of last year. The increase was primarily due to production from gas fields offshore Sarawak, Malaysia, and higher production from the Tupper area in Western Canada.
In the downstream segment, third quarter 2010 net income of $50.6 million compared to net income third quarter of last year of $37.2 million. In North America an earnings increase of approximately $18 million was primarily due to earnings from our ethanol plant in North Dakota, which was acquired in the fourth quarter of 2009, has a higher merchandising and fuel margins in our retail business. U.K. earnings reduction of about $4.7 million was mostly attributable to lower refining margins.
In the corporate segment, we had net charges in the third quarter 2010 of $34.5 million compared to net charges in third quarter of last year of $32.4 million. The increase in these charges is primarily due to higher administrative costs.
As of September 30, 2010, our long-term debt was a little over $1 billion, 11.4% of total capital employed. I would like to make a final comment regarding our fourth quarter earnings guidance in the press release. We have a rather wide range of $0.50 to $1.15 per share as a result of our ongoing very active exploration program.
Also keep in mind that due to the timing of listings, our projected sales volumes are approximately 10,000 barrels of oil equivalent per day lower than our projected (inaudible) productions, which of course has a direct effect on projected fourth quarter net income.
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