Murphy Oil announces preliminary second quarter earnings

Thursday, August 2, 2012
  • For the first six months of 2012, income from continuing operations was $585.5 million ($3.01 per diluted share), an improvement from $518.5 million ($2.66 per diluted share) in 2011.

Murphy Oil Corporation (NYSE: MUR) announced that income from continuing operations was $295.4 million ($1.52 per diluted share) in the 2012 second quarter, up from $280.0 million ($1.44 per diluted share) in the second quarter 2011. The increase in 2012 earnings from continuing operations was mostly attributable to improved downstream results compared to the prior year's quarter. Net income in the second quarter of 2012 was also $295.4 million ($1.52 per diluted share) compared to net income of $311.6 million ($1.60 per diluted share) in the second quarter of 2011. Net income in the 2011 second quarter included income from discontinued operations of $31.6 million ($0.16 per diluted share), which related to operating results of two U.S. refineries that were sold in the second half of 2011.

For the first six months of 2012, income from continuing operations was $585.5 million ($3.01 per diluted share), an improvement from $518.5 million ($2.66 per diluted share) in 2011. For the six-month period of 2012, net income totaled the same $585.5 million ($3.01 per diluted share), but net income of $580.5 million ($2.98 per diluted share) for the first six months in 2011 included income from discontinued operations of $62.0 million ($0.32 per diluted share).

Net Income

Three Mos. Ended Six Mos. Ended
June 30 June 30
2012 2011 2012 2011
(Millions of Dollars)
Exploration and Production $ 230.1 243.3 551.7 503.7
Refining and Marketing 80.5 60.1 76.3 60.4
Corporate (15.2 ) (23.4 ) (42.5 ) (45.6 )
Income from continuing operations 295.4 280.0 585.5 518.5
Income from discontinued operations 31.6 62.0
Net income $ 295.4 311.6 585.5 580.5
Income per Common share – Diluted:
Income from continuing operations $ 1.52 1.44 3.01 2.66
Net income $ 1.52 1.60 3.01 2.98


Second Quarter 2012 vs. Second Quarter 2011

Exploration and Production (E&P)


The Company's income from E&P operations was $230.1 million in the second quarter of 2012 compared to $243.3 million in the same quarter of 2011. The 2011 quarter included an after-tax gain of $13.1 million associated with the sale of natural gas storage assets in Spain. Income in the 2012 quarter was unfavorably affected by lower average realized sales prices in the current period for the Company's worldwide oil and North American natural gas production. The just completed quarter also had higher extraction costs, primarily due to the higher oil and gas sales volumes, but also due to higher facility and well maintenance costs and increased production in the Eagle Ford Shale area of South Texas, which has higher capital amortization unit costs compared to the Company's average. The second quarter of 2012 had higher sales volumes for crude oil and natural gas compared to 2011. Exploration expenses were $96.6 million in the second quarter of 2012 compared to $122.5 million in the same period of 2011, with the reduction in 2012 mainly attributable to a prior year dry hole at the Lengkuas prospect in Indonesia. Dry hole expense was higher in the U.S. in the just completed quarter due to write-off of the unsuccessful Deep Blue prospect in the Gulf of Mexico.

Worldwide production averaged 188,575 barrels of oil equivalent per day in the second quarter 2012, compared to 170,457 barrels of oil equivalent per day in the same quarter in 2011. Total crude oil and gas liquids production was 104,012 barrels per day in the second quarter of 2012 compared to 94,242 barrels per day in the 2011 quarter. The increase in oil production in 2012 was primarily attributable to higher gross production at the Kikeh field, offshore Sabah, as wells have been brought on stream in association with the ongoing field development and well work program. In addition, 2012 crude oil production in the United States was higher than 2011 levels primarily due to an ongoing development program in the Eagle Ford Shale area. Increases in Eagle Ford production more than offset lower volumes produced at fields in the Gulf of Mexico. Oil production at Syncrude in Western Canada was adversely affected in the 2012 quarter by equipment maintenance. Crude oil production at Terra Nova, offshore Eastern Canada, was also lower in the 2012 quarter primarily due to the start of a 150 day shut-in for equipment maintenance in June 2012. The Azurite field, offshore Republic of the Congo, had lower crude oil production in 2012 due to well decline and one well being offline during the quarter pending a mechanical workover. Crude oil and gas liquids sales volumes averaged 104,768 barrels per day in the second quarter of 2012 compared to 90,004 barrels per day in the 2011 quarter. Natural gas sales volumes averaged 507 million cubic feet per day in the second quarter of 2012 compared to 457 million cubic feet per day in the 2011 quarter. The increase in natural gas sales volumes in 2012 was attributable to higher gas production at the Tupper West area in British Columbia, Canada. The Company's worldwide crude oil and condensate sales prices averaged $94.33 per barrel for the second quarter of 2012 compared to $99.37 per barrel in the second quarter 2011. North American natural gas sales prices averaged $2.15 per thousand cubic feet (MCF) in the 2012 quarter compared to $4.26 per MCF in the same quarter of 2011. Natural gas produced offshore Sarawak, Malaysia was sold at an average price of $7.88 per MCF during the second quarter 2012 compared to an average price of $6.40 per MCF in the second quarter 2011.

E&P Metrics

Three Mos. Ended Six Mos. Ended
June 30 June 30
2012 2011 2012 2011
Oil Production Volume – Bbls. per day 104,012 94,242 105,751 103,725
Natural Gas Sales Volume – MCF per day 507,379 457,288 516,507 435,283
Total BOE Production Volume – BOE per day 188,575 170,457 191,836 176,272
Average Realized Oil Sales Price – Per Bbl. $ 94.33 99.37 97.21 93.04
Average Realized North American Gas Sales Price – Per MCF

$ 2.15 4.26 2.36 4.30
Average Realized Sarawak Gas Sales Price – Per MCF

$ 7.88 6.40 7.80 6.15

The Company previously announced its intent to sell its U.K. R&M assets. Ongoing sale activities related to these assets continue.

The Company's refining and marketing operations generated income from continuing operations of $80.5 million in the second quarter 2012 compared to $60.1 million in the same quarter of 2011. The R&M earnings improvement in the 2012 second quarter occurred primarily in the United Kingdom, where the quarterly profit was $7.2 million in 2012 compared to a quarterly loss of $15.8 million in 2011.

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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