Ethanol production, retail ops move Murphy Oil profits higher

Murphy Oil Corp.’s profits rose 7.4 percent in the third quarter primarily due to better earnings from U.S. retail marketing and ethanol production operations, the El Dorado oil giant reported Wednesday (Nov. 3).

For the period ended Sept. 30, Murphy reported second quarter net income of $ $202.8 million or $1.05 per share, up 71% from net income of $188.9 million, or 98 cents per share, a year ago.

Third quarter revenues rose 17% to $6.06 billion compared to $5.18 billion in the same period a year ago. Wall Street expected the El Dorado oil giant to report third quarter profit of $1.10 a share on $6.28 billion revenue, according to Thomson Reuters.

Overall,  Murphy’s worldwide crude oil, condensate and natural gas liquids sales prices averaged $65.45 per barrel for the 2010 third quarter compared to $61.13 per barrel in the same quarter of 2009. Natural gas sales volumes nearly double to 371 million cubic feet (Mcf) per day in the third quarter 2010 compared to 182 Mcf a year ago.

The huge spike was due to ramp up in production at natural gas fields in Malaysia and Western Canada, company officials said. Additionally, North American natural gas volumes were sold at an average of $4.24 per Mcf in the third quarter, up 42 percent from $3.01 per Mcf during the 2009 quarter.

Murphy’s exploration and production business contributed income from continuing operations of $186.7 million in the third quarter compared to $184.1 million in the same quarter of 2009.  The company’s refining and marketing operations generated a quarterly profit of $50.6 million in the third quarter, up 36% compared to a profit of $37.2 million in the 2009 third quarter.

The earnings improvement in 2010 was primarily attributable to profits generated at the Hankinson, N.D., ethanol plant that was acquired in the fourth quarter 2009, company officials said. Also, U.S. marketing operations profits jumped 21% to $54.2 million on the strength of higher merchandising and fuel margins for the retail marketing business during the 2010 quarter.

Going forward, Murphy President and CEO David M. Wood said the company’s exploration program is very active with three more wells coming online offshore Republic of the Congo. The El Dorado oil giant has also started its first drilling activities in deepwater Suriname and Indonesia.

“During the (third) quarter we completed the acquisition of our second ethanol plant at Hereford, Texas,” Wood said. “We expect construction of the unfinished Hereford plant to be completed and the plant in operation by the end of the first quarter 2011. The process of selling our U.S. refining businesses, along with U.K. marketing operations, continues on track.”

Wood added that Murphy’s oil and natural gas production in the fourth quarter is expected to average 198,000 barrels of oil equivalent per day, but sales volumes are projected to average 188,000 barrels of oil equivalent per day. Fourth quarter earnings is projected in the range of 50 cents to $1.15 per diluted share to a significant amount of exploration drilling in the three-month period.

“These earnings are based on total exploration expense ranging from $50 to $190 million and projected profits of $23 million from our refining and marketing business,” Wood said, explaining the wide range. “Projected results for the fourth quarter could be affected by commodity prices, drilling results, timing of oil sales and refining and marketing margins.”

At Wednesday’s closing bell, Murphy’s shares were trading at $65.72, down 13 cents. The Arkansas oil explorer touched a 52-week high of $67.24 on Oct. 25 as crude oil prices moved closer to $90 a barrel.