Murphy Oil Corporation (MUR) posted third-quarter 2013 earnings of $1.34 per share from continuing operation, below the Zacks Consensus Estimate of $1.49 by 10.1%. However, the reported number jumped 24.1% from the year-ago profit level of $1.08 buoyed by higher crude oil production.
Earnings, including the discontinued operation, were $1.51 per share, increasing 30.2% from $1.16 a year ago. On Aug 30, Murphy Oil completed the spin-off of its U.S. downstream subsidiary, Murphy Oil USA, Inc. (“Murphy USA”). Hence, its U.S. downstream unit was reported as discontinued operations for all periods presented, and are excluded from Murphy Oil`s net income after the separation date.
Total Revenue
The company’s top line came in at $2,957.9 million that missed the Zacks Consensus Estimate of $5,375.0 million. However, the reported figure improved 11.8% from the year-ago number of $2,646.7 million.
Quarterly Highlights
Murphy Oil's total worldwide production was 207,281 barrels of oil equivalents per day (Boe/d), up 14.2% year over year, primarily attributable to a rise in oil production at the Eagle Ford Shale in the U.S.
The company produced 138,075 barrels of crude oil, condensate and gas liquids per day (b/d), up 30.5% from the year-ago level of $105,796 b/d, on the back of higher contribution from the Eagle Ford Shale area. This was accompanied by increased production in both Canada and Malaysia, with the improvements attributable to more uptime at the Terra Nova field, offshore Newfoundland, and field start-ups at Kakap under the early production system and at Serendah, offshore Sabah and Sarawak.
Natural gas sales volumes decreased 8.7% year over year to 415.2 million cubic feet per day. This was primarily due to the impact of deferred development drilling operations at the Tupper area in British Columbia and a decline in sales at the Kikeh field in Malaysia.
The company sold crude oil and gas liquids worldwide at an average price of $96.80 per barrel, up 0.7% year over year. North American natural gas sales prices increased 14.9% year over year to $3.00 per thousand cubic feet (Mcf). Natural gas produced at offshore Sarawak, Malaysia was sold at $6.69 per Mcf on average, down from $7.59 per Mcf in the prior-year quarter.
Murphy Oil's exploration expenses were $147.8 million, up 57.2% year over year mainly due to a dry hole drilled at the Eboni deepwater prospect offshore Cameroon. Additionally, higher seismic acquisition costs for prospective areas in Southeast Asia also added to the cost.
Financial Update
Murphy Oil's cash balance as of Sep 30, 2013 was $1,033.9 million versus $816.7 million a year ago. As of Sep 30, 2013, long-term debt was $2,583.2 million versus $2,245.2 million as of Dec 31, 2012.
Net cash provided by operating activities during the third quarter was $1,009.5 million, higher than $754.1 million in the year-ago comparable period.
Total capital expenditure from continuing operations was $994.1 million versus $1,190.0 million in the third quarter 2012.
Guidance
For fourth-quarter 2013, Murphy Oil anticipates total worldwide production to average 199,000 Boe/d and sales volumes to likely average 191,000 Boe/d. The company also estimates total exploration expense to range between $50 million and $150 million for the fourth quarter 2013.
Other Company Releases
Occidental Petroleum Corporation (OXY) reported third-quarter 2013 adjusted earnings of $1.97 per share, surpassing the Zacks Consensus Estimate by 6 cents. Quarterly earnings also jumped 15.9% from the year-ago figure primarily due to an increase in the top line and lower interest expenses as well as operating expenses.
Hess Corporation (HES) reported adjusted third quarter 2013 earnings of $1.18 per share, lagging the Zacks Consensus Estimate of $1.45. The underperformance was mostly due to lower production resulting from various asset sales.
Marathon Oil Corporation (MRO) is slated to release its third-quarter earnings on Nov. 4. The Zacks Consensus Estimate is 78 cents.
Our Take
We appreciate Murphy Oil's effort toward expansion of its domestic as well as international assets backed by a strong financial position. The company has made significant drilling activities in Eagle Ford Shale and has tested success. 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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