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Murphy Oil Beats Earnings, Misses Sales

Zacks Equity Research

Murphy Oil Corporation's (MUR) second-quarter 2013 pro forma earnings of $1.75 per share surpassed the Zacks Consensus Estimate by 20 cents. Quarterly earnings increased 16.7% year over year due to improved performance in the U.S. oil and gas business backed by a rise in oil production at the Eagle Ford Shale in South Texas.

On a GAAP basis, quarterly earnings per share were $2.12 compared with $1.52 a year ago. The variance between GAAP and pro forma earnings was due to an after-tax gain of 37 cents associated with discontinued operations following the sale of the Mungo and Monan fields in the United Kingdom.

Total Revenue

Murphy Oil reported revenues of $7,217.8 million, missing the Zacks Consensus Estimate by $95.2 million. Reported revenues increased 0.8% year over year due to a rise in sales at the company's Exploration and Production and Corporate segments. This was partially offset by a decline in revenues at the Refining and Marketing segment.

Quarterly Highlights

Murphy Oil's total worldwide production was 207,401 barrels of oil equivalents per day (Boe/d), up 10% year over year, primarily attributable to a rise in oil production at the Eagle Ford Shale in the U.S, Syncrude in Western Canada and Azurite field in offshore Republic of the Congo.

Natural gas sales volumes decreased 15% year over year to 431 million cubic feet per day. This was primarily due to the impact of deferred development drilling operations at the Tupper area in Western Canada and a decline in sales at offshore Sarawak in Malaysia.

Murphy Oil's worldwide crude oil and gas liquids sales price averaged $91.50 per barrel, down 3% year over year. North American natural gas sales prices increased 68.8% year over year to $3.63 per thousand cubic feet (Mcf). Natural gas-produced at offshore Sarawak, Malaysia was sold at $6.98 per Mcf on average, down from $7.88 per Mcf in the prior-year quarter.

Murphy Oil's exploration expenses were $88.8 million, down 8.2% year over year mainly due to a decline in lease expenses at the Eagle Ford Shale.

Financial Update

Murphy Oil's cash balance as of Jun 30, 2013 was $1 billion versus $0.7 billion a year ago.

As of Jun 30, 2013, long-term debt was $3 billion versus $2.2 billion as of Dec 31, 2012.

Net cash provided by operating activities during second-quarter was $748 million, higher than $356.1 million in the year-ago comparable period due to a decline in operating working capital.

Total capital expenditures increased to $1 billion from $0.9 billion in the prior-year quarter due to a rise in investments in the exploration and production and refining and marketing segments, and an increase in expenses for collection of seismic data in Australia, Cameroon and Indonesia.


In third-quarter 2013, Murphy Oil anticipates total worldwide production to average 190,000 Boe/d and sales volumes will be flat with production level. The company also estimates full-year 2013 production volumes of 203,000 Boe/d.

Other Company Releases

Occidental Petroleum Corporation (OXY) reported second-quarter pro forma earnings of $1.58 per share, missing the Zacks Consensus Estimate by 3 cents.

Hess Corporation (HES) reported adjusted second-quarter earnings of $1.51 per share, comfortably beating the Zacks Consensus Estimate of $1.41.

Marathon Oil Corporation (MRO) is slated to release its second-quarter earnings on Aug 7. The Zacks Consensus Estimate is 71 cents.

Our Take

We appreciate Murphy Oil's effort toward expansion of its domestic as well as international footprint backed by strong financial position. The company has already made significant drilling activities in Eagle Ford Shale and experienced positive outcome out of it. In addition, Murphy Oil is strengthening its presence in Asia, Africa and Australia. We believe these steps will improve the company’s reserves, which will subsequently boost forthcoming results.

However, we are cautious about stringent drilling regulations and volatile commodity pricing, which may to some extent challenge the company’s future performance.

El Dorado, Ark.-based Murphy Oil Corporation is an oil and gas exploration and production company with refining and marketing operations in the U.S. The company currently has a Zacks Rank #3 (Hold).

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