Murphy Oil Corporation Q2 2010 Earnings Call Transcript

Murphy Oil Corporation Q2 2010 Earnings Call Transcript
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Murphy Oil Corporation (MUR)

Q2 2010 Earnings Call Transcript

August 5, 2010 1:00 pm ET

Executives

David Wood – President and CEO

Craig Bonsall – Supervisor, IR

Kevin Fitzgerald – SVP and CFO

Mindy West – VP and Treasurer

Analysts

Arjun Murti – Goldman Sachs

Ryan Todd – Morgan Stanley

Anthony Guegel – Upstream Newspaper

Blake Fernandez – Howard Weil

Paul Sankey – Deutsche Bank

Gene Gillespie – Gillespie Consulting Group

Danielle Diamond – Barclays Capital

Mark Gilman – Benchmark Company

John Herrlin – Societe Generale

Ray Deacon – Pritchard Capital

William Ferer – W.H. Reaves & Company

Presentation

Operator

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» Murphy Oil Corporation, Q1 2010 Earnings Call Transcript
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Good afternoon, ladies and gentlemen, and welcome to the Murphy Oil Corporation second quarter 2010 earnings conference call. Today’s call is being recorded. I’d now like to 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 will 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 second 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 will now turn the call over to Kevin for his comments.

Kevin Fitzgerald

Thanks, Craig. Net income for the second quarter of 2010 was $272.3 million or $0.41 per diluted share and this compares to net income in the second quarter of last year of $158.8 million or $0.83 per diluted share.

For the six months of 2010, we had net income of $421.2 million or $2.18 per diluted share and this compares to net income for the six months period of ‘09 of $329.9 million or $1.72 per diluted share.

There were no unusual items of significance in the 2010 quarter or for the 2010 six months period. However, net income in the second quarter of 2009 included combined net charges of $13.4 million or $0.07 per diluted share for several items.

We had an anticipated reduction of our working interest in the Terra Nova field, offshore Eastern Canada and proposed closing settlements related to the sale of our Ecuador properties which was partially offset by insurance settlements related to property damage at the Meraux, Louisiana refinery.

But in 2009 six months period, the net income number included the above-mentioned Terra Nova redetermination and insurance settlements along with income from discontinued operations, primarily related to the sales of Ecuador properties.

Looking at net income by segment; from the E&P segment, net income from continuing operations in the second quarter of 2010 totaled $219.1 million compared with net income in the corresponding 2009 quarter of $118.3 million. Higher E&P earnings for the 2010 quarter primarily attributable to higher crude oil and natural gas price realization and higher sales volumes.

The 2009 quarter included the previously mentioned Terra Nova redetermination charge. Crude oil and gas liquids production for the current quarter were just shy of 132,000 barrels per day as compared to approximately 118,100 barrels per day in the corresponding 2009 quarter, an almost 12% increase.

This was mostly attributable to production from Thunder Hawk in the Gulf of Mexico and Azurite offshore Republic of the Congo, both of which came on stream in the third quarter of 2009.

Natural gas sales volumes were a company record 348 million cubic feet per day in the second quarter of 2010 compared to 147 million cubic feet per day in the second quarter of last year.

This increase was attributable to the third quarter 2009 start up of production from our field offshore Sarawak, Malaysia, continued ramp up of production at Tupper in British Columbia, and higher third-party demand for our gas at Kikeh.

In the R&M segment, we had net income in the second quarter of 2010 of $83.8 million compared to net income in the second quarter of last year of $27.8 million. The earnings increase in the 2010 quarter was primarily attributable to the U.S. Retail segment where fuel margins averaged $16.02 per gallons, up from $7.08 in the 2009 quarter.

In the Corporate segment, in the second quarter of 2010, we had net charges of $30.6 million and this compares to a net benefit in the second quarter of 2009 of $14.8 million.

These higher charges were attributable to a combination of unfavorable foreign exchange results in 2010, relative with the gains realized in the second quarter of 2009, and also had higher net interest expense due to lower amounts capitalized to development projects. As of June 30, 2010, Murphy’s long-term debt amounted to a bit over $1.2 billion, which is approximately 13.8% of total capital employed.

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