Murphy Oil Corporation (MUR) announced second-quarter 2011 operating earnings of $1.60 per share compared with $1.41 per share in the year-ago quarter. The results of the company were 6 cents short of the Zacks Consensus Estimate.
The year-over-year growth in earnings was attributable to a higher average realized crude oil sales price and better U.S. refining and retail marketing margins.
Total Revenue
Murphy's total revenue for second-quarter 2011 grew 56.0% to $8.72 billion from $5.59 billion reported in the year-ago period. The company experienced year-over-year growth in both the Exploration and Production and Refining and Marketing segments.
The overall top-line growth was driven primarily by robust performance from Refining and Marketing, which grew 64.1% year over year.
Reported quarter revenue was higher than the Zacks Consensus Estimate of $7.57 billion.
Segment Details
Exploration and Production: The second quarter 2011 revenue from this division was $1.05 billion, up 18.3% from $0.89 billion in the year-ago quarter.
Refining and Marketing: Reported quarter revenue from this division grew by 64.1% to $9.4 billion from $5.7 billion in the year-ago quarter. The results were boosted by strong contribution from U.S. Refining & Marketing operations and better performance from its U.K. operations.
Corporate: In the second quarter 2011, revenues from Corporate activities were $8.3 million versus a loss of $0.5 million recorded in the year-earlier period.
Quarterly Highlights
Murphy's total worldwide production in the most recent quarter was 170,457 barrels of oil equivalents per day (boe/d), down 10.2% year over year. The reduction in total output was primarily due to lower crude oil production, whereas natural gas volume grew over the prior-year period.
The decline in crude oil production in the second quarter 2011 was due to lower volumes produced at the Kikeh field, offshore Malaysia, besides lower production in the Gulf of Mexico due to the delay in permission by U.S. government regulators to drill in that area following the Macondo incident in April 2010.
To add to the segment’s woes, output in the Seal area and at Syncrude in Western Canada was affected by forest fires.
Natural gas sales volumes spurred 31.3% year over year due to higher natural gas production offshore Sarawak, Malaysia and in the Tupper area in Western Canada.
Murphy's worldwide crude oil and condensate sales price averaged $99.37 per barrel for the second quarter of 2011 compared with $64.68 per barrel in the second quarter of 2010, reflecting an increase of 53.6%. North American natural gas sales prices improved by 10 cents per thousand cubic feet (MCF) in the quarter to $4.26 per MCF.
Natural gas produced at fields offshore Sarawak Malaysia was sold at an average of $6.40 per MCF in the second quarter 2011, up from $5.10 per MCF in the second quarter 2010.
Exploration expenses during the quarter increased by 130.8% to $122.5 million from $53.1 million recorded in the second quarter 2010. The increase in expenses was due to higher dry hole costs, primarily related to unsuccessful offshore drilling in Indonesia at the Lengkuas prospect in Semai II.
Interest expenses of the company at the end of the quarter were $12.6 million versus $13.9 million at year-ago quarter end. The reduction in interest expenses was attributable to lower average interest rates on borrowed funds and higher amounts of interest capitalized to ongoing oil and natural gas development projects in the current quarter.
Financial Update
Total cash and cash equivalents as of June 30, 2011, were $801.2 million, higher than $398.8 million as of June 30, 2010.
Long-term debts of the company as of June 30, 2011, were $1,184.5 million versus $939.4 million as of December 31, 2010.
Total capital expenditure during the second quarter 2011 was $782.1 million, up 36.1% from $574.7 million in the second quarter 2010.
2011 Guidance
Murphy estimates total production in the third quarter 2011 to average 173,000 boe/d and sales volumes to clock 171,500 boe/d.
Murphy expects the full-year average production to be 185,000 boe/d.
Murphy expects third quarter 2011 earnings in the range of $1.05 to $1.15 per share. This earnings projection takes into account downstream contribution of approximately $60 million, and total exploration expense within a broad range of $100 million to $130 million.
Peer Comparison
BP Plc (BP), which competes with Murphy Oil, reported second-quarter 2011 earnings of $1.76 per American Depositary Share (ADS), well below the Zacks Consensus Estimate of $1.97 but ahead of the year-earlier profit of $1.57.
BP Plc's total operating revenue for second-quarter 2011 was $101.3 billion, up 37.5% from $73.7 billion reported in the year-ago period.
Our View
Despite a reduction in crude oil and gas liquids sale during the reported quarter, the company benefited from higher realized prices and increased natural gas sales volume that ensured healthy top-line growth.
We appreciate Murphy's initiatives to downsize its downstream operations in the U.S. and U.K. with a view to re-focus more on its upstream business. In this regard, the company has entered into an agreement to sell its Superior, Wisconsin refinery and is in the process to spin off its Meraux, Louisiana refinery and U.K. downstream assets.
The shares of Murphy retain a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Based in El Dorado, Arkansas, Murphy Oil Corporation engages in the exploration, production, refining and marketing of oil and gas in the U.S. and the U.K.
BP PLC (BP): Free Stock Analysis Report
MURPHY OIL (MUR): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment