Murphy Oil announces preliminary quarterly and annual financial results

Thursday, January 31, 2013
  • Net income in the fourth quarter of 2012 was improved over the same 2011 quarter principally due to lower impairment expenses and income tax benefits associated with operating losses in two foreign countries in the current period.
  • Operating results in the fourth quarter of the prior year included an impairment charge for Azurite of $368.6 million.

Murphy Oil Corporation (NYSE: MUR) announced that its net income in the fourth quarter of 2012 was $158.7 million ($0.82 per diluted share) compared to a net loss of $113.9 million ($0.59 per diluted share) in the fourth quarter of 2011. Net income in the fourth quarter of 2012 was improved over the same 2011 quarter principally due to lower impairment expenses and income tax benefits associated with operating losses in two foreign countries in the current period. The just completed quarter included total impairment charges of $261.0 million ($239.6 million after taxes) associated with both oil production operations in Republic of the Congo and ethanol production operations in Hereford, Texas. The Congo impairment related primarily to unsuccessful drilling operations in the fourth quarter and the removal of proved oil reserves at year-end 2012 at the Azurite field. The field continues to produce while we evaluate future options. Operating results in the fourth quarter of the prior year included an impairment charge for Azurite of $368.6 million. The Hereford ethanol plant was deemed impaired at year-end 2012 due to an expectation of weak future ethanol crush spreads. Income tax benefits in the upstream business totaled $108.3 million associated with tax deductions for operating losses in Republic of the Congo and Suriname. The 2012 fourth quarter included a loss from discontinued operations of $3.7 million ($0.02 per diluted share), compared to income from discontinued operations of $4.0 million ($0.02 per diluted share) in the 2011 quarter. Income from continuing operations in the fourth quarter of 2012 was $162.4 million ($0.84 per diluted share), but was a loss of $117.9 million ($0.61 per diluted share) a year ago.

For the year of 2012, net income totaled $970.9 million ($4.99 per diluted share) compared to $872.7 million ($4.49 per diluted share) in 2011. Net income included income from discontinued operations of $6.8 million ($0.04 per diluted share) in 2012 and $143.2 million ($0.74 per diluted share) in 2011. Income from continuing operations for the years of 2012 and 2011 totaled $964.1 million ($4.95 per diluted share) and $729.5 million ($3.75 per diluted share), respectively.

Net Income
Three Months Ended Years Ended
December 31,
December 31,
2012
2011
2012
2011
(Millions of Dollars)
Exploration and Production $ 145.0 (144.6) 905.0 614.2
Refining and Marketing 38.5 61.0 157.6 190.3
Corporate (21.1)

(34.3)

(98.5)

(75.0)

Income (loss) from continuing operations 162.4 (117.9) 964.1 729.5
Income (loss) from discontinued operations (3.7)

4.0
6.8
143.2
Net income (loss) $
158.7
(113.9) 970.9 872.7
Income (loss) per Common share – Diluted:
Income (loss) from continuing operations $ 0.84 (0.61) 4.95 3.75
Net income (loss) 0.82 (0.59) 4.99 4.49


Fourth quarter 2012 vs. Fourth quarter 2011

Exploration and Production (E&P)

Income for the Company’s E&P continuing operations was $145.0 million in the fourth quarter of 2012 compared to a loss of $144.6 million in the same quarter of 2011. The improvement in earnings in the fourth quarter 2012 compared to the same period in 2011 was primarily attributable to a larger impairment charge in Republic of the Congo in 2011 and income tax benefits recognized in 2012 totaling $108.3 million associated with operating losses in Republic of the Congo and Suriname. The 2012 quarter also benefited from higher crude oil sales volumes and lower exploration expenses, but these were mostly offset by lower oil and natural gas sales prices and higher overall extraction and administrative expenses. The increase in extraction expenses in the current year was attributable to higher worldwide average crude oil production and higher depreciation unit rates in Malaysia associated with ongoing capital development activities.

E&P Metrics
Three Mos. Ended Years Ended
December 31, December 31,
2012
2011
2012
2011
Oil Production Volume – Bbls. per day 132,918 108,771 112,591 103,160
Natural Gas Sales Volume – MCF per day 473,487 487,991 490,124 457,365
Total BOE Production Volume – BOE per day 211,833 190,103 194,278 179,388
Average Realized Oil Sales Price – $ per Bbl. $92.82 96.67 95.58 94.18
Average Realized North American Natural Gas Sales Price – $ per MCF
$3.34 3.67 2.65 4.08
Average Realized Sarawak Natural Gas Sales Price – $ per MCF
$6.78 7.85 7.50 7.1


Exploration expenses totaled $137.2 million in the fourth quarter 2012, down from $185.6 million in the 2011 quarter. The decrease was primarily attributable to lower dry hole costs associated with unsuccessful exploratory drilling in the 2012 quarter in Canada and Brunei, partially offset by higher dry hole costs in the current quarter in Republic of the Congo.

Additionally, the 2012 quarter had lower leasehold amortization expense in the Kurdistan region of Iraq compared to the prior year.

Worldwide production totaled 211,833 barrels of oil equivalent per day in the 2012 fourth quarter, an 11% increase from the 190,103 barrels of oil equivalent per day produced in the 2011 quarter. Crude oil, condensate and gas liquids production was 132,918 barrels per day in the 2012 quarter compared to 108,771 barrels per day in 2011. The oil production increase in the current year was primarily attributable to an ongoing development drilling program in the Eagle Ford Shale area of South Texas as well as purchase of additional working interests in the Thunder Hawk and Front Runner fields in the Gulf of Mexico during 2012. Natural gas sales volumes averaged 473 million cubic feet per day in quarter four 2012, down 3% from the 488 million cubic feet per day sold in the prior year’s quarter. The 2012 reduction was primarily attributable to lower gas volumes produced at the Tupper area in Western Canada due to a planned shut-in of certain wells and virtually no development drilling in this area in the 2012 quarter because of continued weak North American natural gas sales prices. Natural gas production in 2012 in the U.S. was above 2011 levels primarily due to the development drilling program in the Eagle Ford Shale.

The average sales price for the Company’s crude oil, condensate and gas liquids was $92.82 per barrel for continuing operations in the 2012 fourth quarter, down from $96.67 per barrel in the 2011 quarter. Natural gas sales prices in North America averaged $3.34 per thousand cubic feet (MCF) in the 2012 quarter, down from $3.67 per MCF in the 2011 quarter. Natural gas sold from fields offshore Sarawak, Malaysia, averaged $6.78 per MCF in the 2012 quarter compared to $7.85 per MCF a year ago.

Refining and Marketing (R&M)

The Company’s refining and marketing business generated a quarterly profit from continuing operations of $38.5 million in the fourth quarter 2012 compared to a profit of $61.0 million in the same quarter a year earlier. U.S. R&M continuing operations generated earnings of $22.0 million in the fourth quarter of 2012 compared to earnings of $50.7 million in the 2011 quarter. The earnings reduction for this business in 2012 was principally the result of an impairment charge of $39.6 million after taxes to reduce the carrying value of the Hereford, Texas ethanol plant. The Company’s U.S. ethanol plants experienced weaker operating results in the 2012 quarter compared to the prior year due to depressed ethanol crush spreads. U.S. retail marketing operations reflected improved results as margins for this business averaged 14.1 cents per gallon in the 2012 quarter compared to 13.0 cents per gallon in the 2011 quarter. Retail operations also benefited from improved merchandise margins in the current quarter compared to a year ago. The U.K. R&M operations posted a net profit of $16.5 million in the 2012 quarter compared to a profit of $10.3 million in 2011, with the improved results based on better overall unit margins for this business.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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