Murphy Oil Corporation (MUR) reported fourth-quarter 2014 adjusted earnings of 39 cents per share, surpassing the Zacks Consensus Estimate of 25 cents by 56%. Quarterly earnings however decreased 41.8% year over year primarily due to higher depreciation, depletion and amortization expenses. This was partially offset by a decline in shares outstanding and improved revenues.
On a GAAP basis, quarterly earnings per share stood at $2.10 versus 40 cents a year ago. The variance between adjusted and GAAP earnings was due to the combined impact of losses from discontinued operations, assets impairments and write-off of previously suspended exploration wells, mark-to-market loss on crude-oil derivative contracts, gains on sale of 20% interest in Malaysia and tax benefits on investments in foreign areas, and foreign exchange gains.
For 2014, Murphy Oil’s adjusted earnings per share of $3.39 lagged the Zacks Consensus Estimate of $3.47 by 2.3% and decreased 20.2% from $4.25 a year ago.
Reported annual GAAP earnings were $5.03 per share compared with $5.94 in 2013.
Revenues
In the quarter under review, Murphy Oil’s revenues came in at $1.41 billion, beating the Zacks Consensus Estimate by 17%. On a year-over-year basis, reported revenues increased 4.4% mainly due to higher exploration and production revenues from the U.S operations, and corporate and other sales.
The company’s 2014 revenues of $5.48 billion beat the Zacks Consensus Estimate by 4.2% and increased around 1.7% from $5.39 billion a year ago.
Quarterly Highlights
Murphy Oil touched a new hydrocarbons production record of 258,868 barrels of oil equivalent per day (BOE/d) in the fourth quarter. A 25.5% year-over-year improvement in production was primarily driven by higher-than-projected oil production at the Gulf of Mexico (GoM) and offshore Canada, coupled with increased gas production at Montney, Canada and Sarawak, Malaysia.
Total net hydrocarbons sales volume was 252,170 BOE/d in the quarter, up around 21% from 208,459 BOE/d a year ago, mainly due to higher net crude oil and condensate, net natural gas and net natural gas liquids sales volumes.
Murphy Oil’s total costs and expenses increased 3.3% year over year to $1,190.6 million.
Exploration expenses in the fourth quarter stood at $122.9 million, down 21.8% year over year mainly due to lower expenses at the U.S. and other locations.
The company spent $34.8 million as interest expenses, up 1.5% from $34.3 million a year ago.
Financial Condition
At the end of 2014, Murphy Oil had cash and cash equivalents of $1.19 billion versus $0.75 billion in the prior-year period.
Long-term debt was $2.54 billion as of Dec 31, 2014 versus $2.94 billion as of Dec 31, 2013.
Net cash from operating activities during the fourth quarter was $0.71 billion, lower than $0.99 billion in the year-ago period.
In the reported quarter, the company’s total capital expenditure (continuing operations) was $0.92 billion versus $1.01 billion in the year-ago quarter.
Business Update
During the fourth-quarter earnings call, Murphy Oil reported above 180% of total proved reserves replacement in 2014.
In the quarter, Murphy Oil realized first oil from three new deepwater fields at the Siakap North-Petai and Kakap-Gumusut main projects in Malaysia, and Dalmatian in the GoM. The company authorized a new share repurchase program worth $500 million and completed the sale of its UK-based retail gasoline business.
Guidance
Murphy Oil guided first-quarter 2015 total net production and sales volume of 221,000 BOE/d and 230,000 BOE/d, respectively.
The company estimates total exploration expense of $108 million in the first quarter of 2015.
Murphy Oil provided its guidance for 2015 total production in the range of 195,000 to 207,000 BOE/d.
In 2015, the company plans to invest around $2.3 billion as capital expenditure.
Upcoming Release
Marathon Oil Corporation (MRO) is slated to release its fourth-quarter 2014 earnings on Feb 18. The Zacks Consensus Estimate is pegged at 4 cents.
Zacks Rank
Murphy Oil currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the same sector include Midstates Petroleum Company, Inc. (MPO) and Tesoro Corporation (TSO), each carrying a Zacks Rank #2 (Buy).
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