Murphy Oil Corporation, Q1 2010 Earnings Call Transcript

Murphy Oil Corporation, Q1 2010 Earnings Call Transcript
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Murphy Oil Corporation (MUR)

Q1 2010 Earnings Call

May 06, 2010 01:00 pm ET

Executives

David Wood - President and CEO

Kevin Fitzgerald - SVP and CFO

John Eckart - VP and Controller

Mindy West - VP and Treasurer

Craig Bonsall - Supervisor of IR

Analysts

Ryan Todd - Morgan Stanley

Arjun Murti - Goldman Sachs

Mark Gilman - Benchmark Company

Paul Sankey - Deutsche Bank

Paul Cheng - Barclays Capital

Blake Fernandez - Howard Weil

Gene Gillespie - Gillespie Consulting Group

Pavel Molchanov - Raymond James

Kate Lucas - Collins Stewart

Ray Deacon - Pritchard Capital

Presentation

Operator

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Good afternoon, Ladies and Gentlemen. And thank you for standing by. Welcome to the Murphy Oil Corporation first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. (Operator Instructions) I'd like to remind everyone that this conference call is being recorded today, Thursday, May 6, 2010, at 12 p.m. Central Time.

I'll now turn the conference over to Mr. David Wood, President and Chief Executive Officer. Please go ahead, sir.

David Wood

Thank you, Operator. Good afternoon 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, and Craig Bonsall, Supervisor of Investor Relations

I'll now turn the call over to Craig.

Craig Bonsall

Thanks, 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 first quarter 2010 results. David will then follow with an operational update after which questions will be taken.

Please keep in mind that some of our 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'll now turn the call over to Kevin for his comments.

Kevin Fitzgerald

Thanks, Craig and welcome everyone. Net income in the first quarter of 2010 was $148.9 million or $0.77 per diluted share and this compares to net income in the first quarter of '09 of $171.1 million or $0.89 per diluted share. The 2010 quarter included $41.3 million or $0.21 per diluted share of after-tax losses on transactions denominated in foreign currencies compared to after-tax gains of $26.1 million or $0.14 per share on those transactions in the 2009 quarter.

The 2009 quarter also included income from discontinued operations of almost $100 million or $0.52 per share, as we sold our operations in Ecuador. This income included an after-tax gain of $104 million on that sale. Compared to the 2009 first quarter, the 2010 quarter was favorably impacted by significantly higher worldwide cruel oil prices.

In the downstream part of the business, earnings in the 2010 quarter were negatively affected by significantly lower refining margins and planned shut downs for turnaround in our Monroe, Louisiana and Milford Haven, Wales refineries.

Looking at income by segment, in E&P segment from continuing operations net income in the first quarter 2010 was $247 million compared to income from continuing operations in the first quarter of last year of $50.3 million.

Higher E&P earnings for 2010 were mostly attributable to the previously mentioned higher crude oil prices, which were up about 50%, but higher natural gas sales prices and volumes along with lower exploration expenses also contributed. Crude oil, condensate and gas liquids production for the current quarter averaged approximately 139,100 barrels per day in 2010 slightly lower than the 2009 quarter.

Excluding 2009 production from discontinued operations in Ecuador, quarterly production in 2010 increased 4% over last year. The increase from continuing operations was mostly attributable to production from Thunder Hawk in the Gulf of Mexico and Azurite offshore Republic of Congo, which both started up in the third quarter of last year.

Natural gas volumes were 343 million cubic feet per day in the first quarter of 2010 compared to 111 million cubic feet per day last year. This increase was due to the continued ramp up of production at the tougher field in British Columbia, third quarter 209 of production offshore at Sarawak, Malaysia and higher volumes at Kikeh.

In the downstream segment, a net loss in the first quarter of 2010 was $29.7 million and this compares to net income in the first quarter of last year of $10.8 million. We experienced a pretty good quarter in our US marketing operation, which was reporting net income from that segment of about $9 million and those benefits were more than offset by very poor refining margins of both the US and U.K.

Additionally the manufacturing segment was negatively impacted by significant down time related to turnaround activity at both Monroe and Milford Haven refineries. In order to provide additional insight into our business beginning with first quarter 2010, we've segmented our US downstream operations into its manufacturing and marketing components.

Manufacturing segment includes our two US refineries and an ethanol production facility. The Marketing segment includes retail and wholesale fuel marketing operations along with product supply functions.

In the corporate segment, the net loss in the first quarter of 2010 of $68.4 million and this compares to a net benefit in the first quarter of 2009 of $10.1 million. This unfavorable variance is attributable to losses on transactions denominated in foreign currencies. These losses were generated by a combination of a stronger US dollar compared to the British pound and a weaker US dollar compared to Malaysian Ringgit.

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