Murphy Oil Beats 4Q Estimates

Zacks

Murphy Oil Corporation (MUR) announced fourth-quarter and full-year 2012 results. The company’s fourth quarter pro forma earnings of $2.07 per share surpassed the Zacks Consensus Estimate of $1.30. The results also improved from the year-ago earnings of $1.30 per share aided by a higher top line and a decline in exploration impairment expenses.

On a GAAP basis, the company’s fourth-quarter earnings were 82 cents compared with a loss of 59 cents in the year-ago quarter. The variance between GAAP and pro forma earnings was due to charges of 2 cents and $1.23 for discontinued operations and impairment.

Murphy Oil’s full-year 2012 pro forma earnings of $6.18 per share exceeded the Zacks Consensus Estimate of $5.46 and year-ago figure of $5.64.

Reported GAAP earnings of $4.99 per share in 2012 compared favorably with $4.49 per share in 2011. The difference between GAAP and pro forma earnings was due to a charge $1.23 for impairment and income of 4 cents related to discontinued operations.

Total Revenue

Murphy Oil's total revenue for fourth-quarter 2012 grew 8.8% year over year to $7.4 billion. The company experienced significant growth in both Exploration and Production, and Refining and Marketing segments. Quarterly revenue was also higher than the Zacks Consensus Estimate of $6.9 billion.

Murphy Oil’s full-year 2012 top line was $28.6 billion, up 3.6% from the year-ago figure of $27.6 billion. Annual revenue surpassed the Zacks Consensus Estimate of $28.3 billion.

Segment Details

Exploration and Production: Fourth-quarter 2012 revenues from this division were $1.3 billion, up 8.3% year over year.

Refining and Marketing: Reported quarterly revenues from this division grew 9% year over year to $6.1 billion.

Corporate: In the fourth quarter, revenues from Corporate activities were $6.1 million versus a loss of $10.3 million in the year-ago period.

Quarterly Highlights

Murphy Oil's total worldwide production, in the quarter under review, was 211,833 barrels of oil equivalents per day (Boe/d), up 11.4% year over year. The increase in total output was primarily attributable to a 22.2% year-over-year rise in oil production, partially offset by a 3% year over year drop in natural gas production.

Natural gas sales volumes decreased 3% year over year to 473.5 million cubic feet per day as gas production at the Tupper area in Western Canada showed a decline.

Murphy Oil's worldwide crude oil and condensate sales price averaged $92.82 per barrel compared with $96.67 per barrel in the year-ago quarter, reflecting a decrease of 4%.

North American natural gas sales prices decreased 33 cents per thousand cubic feet (Mcf) to $3.34 per Mcf. Natural gas-produced offshore Sarawak Malaysia was sold at $6.78 per Mcf on average, down from $7.85 per Mcf in the prior-year quarter.

Exploration expenses fell 26.1% year over year to $137.2 million thanks to lower dry hole costs related to unproductive exploratory drilling in Brunei and Canada.

In 2012, the company’s net interest expense was lower year over year driven by more interest capitalization in development projects.

Financial Update

Murphy Oil's cash balance as of Dec 31, 2012, was $947.3 million versus $513.9 million a year ago.

Long-term debt was $2.2 billion at the year-end compared with $0.2 billion in the prior year.

Net cash provided by operating activities during fourth-quarter 2012 was $940.6 million compared with $268.6 million in the year-ago quarter.

Total quarterly capital expenditure was $1.5 billion versus $0.9 billion in the year-ago period.

Guidance

Murphy Oil estimates total production in the first quarter of 2013 to average 200,000 Boe/d and sales volumes to clock 202,000 Boe/d as it expects to work on the initiatives taken in 2012. In the Eagle Ford Shale operation, the company expects annual production to increase to 30,000 net barrel equivalents per day from the full-year 2012 daily level of 15,000 net barrels.

Murphy expects first-quarter 2013 earnings in the range of 55 cents to 90 cents per share. This earnings projection takes into account the loss of approximately $10 million from downstream operations, and total exploration expense within a range of $70–$140 million.

Our Take

In the quarter under review, Murphy Oil reported strong results attributable to favorable performances by most of its segments.

We have identified several value drivers including significant progress in offshore drilling activities in Kurdistan and Eagle Ford Shale, natural gas discoveries in Malaysia and Brunei, and completion of wells at the Three Forks zone of Southern Alberta, which may fuel its future performance.

In addition, Murphy Oil’s U.S. retail business signed a new agreement with Wal-Mart Stores Inc. (WMT). We expect this pact to offer the company strong financial growth for the next couple of years.

Murphy Oil Corporation currently has a short-term Zacks Rank #3 (Hold).

El Dorado, Arkansas-based Murphy Oil Corporation is a global oil and gas exploration and production company with refining and marketing operations in the U.S. and the UK. Other players from the sector -- Penn Virginia Corporation (PVA) and Total SA (TOT) -- have yet to announce their quarterly results.

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