Murphy Oil profits jump on improved oil and gas prices

Despite a decision to suspend a major deepwater development in the Gulf of Mexico, Murphy Oil Corp. ended the second quarter in the black as continental oil and natural gas prices start to ratchet up, the company said Thursday.

“Although our Gulf of Mexico exploration program has been deferred due to the government imposed drilling moratorium, we have continued to remain very active onshore North America," said Murphy President and CEO David Wood.

For the period ended June 30, Murphy reported second quarter net income of $272.3 million, or $1.41 per diluted share, up 71% from net income of $158.8 million, 83 cents per share, a year ago.

Second quarter revenues rose 23 percent to $5.59 billion compared to $4.55 billion in the same period a year ago. Wall Street analysts, on average, expected the El Dorado-based oil giant to report a second-quarter profit of $1.21 per share, according to Thomson Reuters.

Murphy continues to stay focused on growing its operations in the second quarter, which began and ended in a whirlwind of activity that included the BP oil spill in the Gulf of Mexico.

In response to the Obama administration’s moratorium on deepwater drilling in the Gulf of Mexico, Murphy and drilling partner Diamond Offshore Drilling Inc. recently announced a new multi-well deal to relocate the deepwater drilling rig Ocean Confidence to the Republic of Congo.

In late July, Murphy announced it will completely exit the refining business, a major sector of its operations that has seen struggles in recent years.

Company officials said refineries at Superior, Wisc.; Meraux, La., and Milford Haven, Wales along with the retail system in the United Kingdom, are for sale. The company anticipates a transaction being completed in the first quarter of 2011.

Earlier this week, the Amarillo Globe-News reported that Murphy is on the hunt for renewable fuel assets to add to its portfolio. The West Texas newspaper said Murphy officials recently asked county officials about tax credits to possibly purchase a bankrupt $200 million ethanol plant near Heresford, Texas, formerly owned by Panda Energy International.

Still, Murphy was able to grow its worldwide production to 189,951 barrels of oil equivalent per day in the second quarter 2010, a 33% boost from the same quarter in 2009.

Murphy’s worldwide crude oil and condensate sales prices averaged $64.68 per barrel for the second quarter, up 21% compared to $53.55 per barrel a year ago. Natural gas sales volumes averaged a record 348 million cubic feet per day in the second quarter, more than doubling last year’s volumes of 147 million cubic feet per day.

Going forward, Murphy officials estimated that total production in the third quarter of 2010 should average 180,000 barrels of oil equivalent per day. However, sales volumes are projected to fall slightly due to production delays in its deepwater developments in Malaysia and the Republic of the Congo.

Due to those same issues, Murphy has also lowered its our 2010 yearly average production forecast to 194,000 barrels of oil equivalent per day. The Arkansas oil firm forecasts third quarter earnings to be in the range of $1.10 and $1.15 per diluted share, well below Wall Street average estimates between $1.30 and $1.50 per share.

Murphy officials said the earnings projection includes a contribution from the refining and marketing business of nearly $70 million, and total exploration expenses of $80 to $90 million.

At the opening bell Thursday, Murphy shares (NYSE: MUR) were trading at $56.73, well off its 52-week high of $65.12. Murphy officials will hold a second quarter conference call today, beginning at noon.