Murphy Oil Corporation (MUR) reported third-quarter 2014 adjusted earnings of $1.15 per share, surpassing the Zacks Consensus Estimate of $1.01 by 13.9%. Quarterly earnings, however, dipped 5.7% from $1.22 per share in the prior-year quarter, primarily due to higher depreciation, depletion and amortization expenses as well as lease operating expenses. This was partially offset by a decline in shares outstanding and improved revenues.
On a GAAP basis, the company’s quarterly earnings per share stood at $1.37 compared with $1.51 a year ago. The variance between adjusted and GAAP earnings was due to the combined impact of a loss from discontinued operations, gain from tax benefits on investments in foreign areas, mark-to-market gain on crude-oil derivative contracts and foreign exchange gains.
Revenue
In the quarter under review, Murphy Oil’s revenue came in at $1.43 billion, beating the Zacks Consensus Estimate by 1.5%. On a year-over-year basis, the reported revenue increased around 1% mainly due to higher exploration and production revenue from the U.S operations.
Quarterly Highlights
Murphy Oil touched a new hydrocarbons production record of 229,759 barrels of oil equivalent per day (BOE/d) in the third quarter. A 10.8% year-over-year improvement in production was primarily driven by strong contributions from the Eagle Ford Shale, the Gulf of Mexico (GoM) and the offshore Malaysia projects.
Total net hydrocarbons sales volume was 227,822 BOE/d in the quarter, up 12.2% from 203,048 BOE/d a year ago, mainly due to higher net crude oil and condensate, net natural gas and net natural gas liquids sales volumes.
The company’s total costs and expenses were $1,036.5 million, up 8.4% year over year primarily due to an increase in depreciation, depletion and amortization expenses, and lease operating exploration expenses as well as severance and ad valorem taxes.
Quarterly exploration expenses decreased 20.6% year over year to $117.4 million, mainly due to a decline in expenses at other locations.
The company’s interest expenses were around $35 million, up roughly 4% from $33.5 million a year ago.
Financial Condition
At the end of the third quarter of 2014, Murphy Oil had cash and cash equivalents of $0.67 billion versus $1.03 billion in the prior-year period.
Long-term debt was $3.99 billion as of Sep 30, 2014 versus $2.94 billion as of Dec 31, 2013.
Net cash from operating activities during the third quarter was $0.89 billion, lower than $1.01 billion in the year-ago period.
In the reported quarter, the company’s total capital expenditure (continuing operations) was $0.98 billion versus $0.99 billion in the year-ago quarter.
Business Update
On Aug 6, 2014, Murphy Oil authorized a new share repurchase program, worth $500 million.
On Sep 30, 2014, Murphy Oil completed the sale of its UK retail gasoline business. The company has made good progress on the sale of its Milford Haven refinery on Oct 31, 2014.
Guidance
Murphy Oil provided guidance for fourth-quarter 2014 total net production and sales volume of 250,000 BOE/d and 235,000 BOE/d, respectively, considering the impact of the sale of a portion of its interest in Malaysia as of 2014-end.
The company estimates total exploration expense of $80 million in the fourth quarter of 2014.
Murphy Oil has reiterated its guidance for 2014 total production in the range of 220,000–225,000 BOE/d.
Other Company Releases
Anadarko Petroleum Corporation (APC) reported third-quarter 2014 adjusted earnings of $1.16 per share, missing the Zacks Consensus Estimate of $1.30 by 10.8%.
Occidental Petroleum Corporation (OXY) reported third-quarter 2014 earnings of $1.58 per share, lagging the Zacks Consensus Estimate of $1.67 by 5.4%.
Zacks Rank
Murphy Oil currently holds a Zacks Rank #5 (Strong Sell). A better-ranked stock in the same sector worth considering is Midstates Petroleum Company, Inc. (MPO), carrying a Zacks Rank #2 (Buy).
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