Bloomberg, Canadian Broadcasting Corp: Murphy Oil planning ‘significant’ job cuts in every location
El Dorado-based Murphy Oil Corp. plans “significant” across-the-board job cuts in all of its operations as depressed domestic and international crude oil prices constrains the Arkansas oil company’s cash flow and capital spending in 2016, according to two different news reports this weekend.
In a Bloomberg report on Friday after the close of market, the company is reducing jobs in every location as it trims spending and seeks savings, Murphy spokeswoman Kelly Whitley told the business news service on Friday. The company, which had about 1,300 employees at the end of last year, is “not prepared to quantify” the size of the cuts at this time, the article said.
“Over the course of the past year and a half, Murphy has taken actions to lower costs in direct response to the negative impacts of low commodity prices,” Whitley told Bloomberg. “Head count has been lowered across all functions in every location to match our lower capital spend.”
The Murphy job cuts, however, were originally reported by the Canadian Broadcasting Corp., which reported on Friday that the Arkansas oil giant is making “significant” job cuts across its worldwide operations, including the company’s office in Calgary. According to the Canadian news report, Murphy has oil plays in Northern Alberta, offshore oil operations in Newfoundland and natural gas extraction in British Columbia.
Murphy’s announcement is not surprising given the fact that many of its competitors in the oil industry have done the same. According to the Challenger, Gray & Christmas, more than a quarter (27%) of first-quarter job losses were directly attributed to low oil prices. A total of 50,053 job cuts were made in the oil patch, compared with 47,610 in the first quarter of 2015. Job losses for oil-related jobs accounted for 34% of all job cuts in the first quarter.
MURPHY 2016 CAPITAL BUDGET AT $580 MILLION, DOWN 73% FROM 2015
After posting a loss of more than $1.6 billion in the third quarter, Murphy officials said that the previously announced cost-cutting program would be expanded to 23% of its workforce by the end of fiscal 2015. At the time, Murphy officials said the ongoing cost-cutting program would trim general and administrative expenses by 18% compared to 2014 levels, resulting in savings of $64 million by 2016.
In late January after reporting a huge fourth quarter loss of $587 million, Murphy announced plans to divest its natural gas processing and sales pipeline assets in northeastern British Columbia to Enbridge G&P Limited Partnership. The cash deal upon closing was worth about $538 million in Canadian dollars, which is about $382 million in U.S. currency.
A month later in late February, international rig operator Transocean Ltd. said that it laid off 140 workers after Murphy canceled a deep-water rig contract that explores for oil and gas in the Gulf of Mexico at day rates of more than $600,000.
Murphy officials said the two rigs have now been stacked – an oil industry term for mothballing, storing or taking a drilling rig to harbor for later use – before their contract expiration dates and the remaining obligations owed in 2016 under the contracts were expensed in 2015.
“The rigs were stacked due to a severe drop in commodity prices causing Murphy to plan for a significantly lower capital spending program in 2016, lack of partner support for continued drilling and no available farm-out opportunities,” the company said.
According to the Bloomberg news report, Murphy had about 1,300 employees at the end of 2015. Earlier this year, Murphy said it planned for 2016 capital expenditures for operations of only $580 million, 73.5% lower than the $2.19 billion spent in 2015.
The company said 45% of the capital spend will be allocated toward offshore drilling and exploration, 41% toward the Eagle Ford Shale and 14% for capital investments in the company’s Canada operations. Company officials said the current capital program for 2016 “remains under review for additional downward revisions should lower commodity prices persist.”
Besides Murphy operations in Canada, the Gulf of Mexico and the Eagle Ford Shale play in Texas, the company also has production assets in Malaysia, Vietnam, Brunei and Australia. The company operates from its headquarters in El Dorado, and its production and exploration office in Houston.
Murphy has scheduled its annual meeting on May 11 in El Dorado, where several items involved executive compensation for the company’s executive team is on the agenda. In a recent proxy filing, the Arkansas oil giant revealed that it has frozen the base salaries of Roger Jenkins, company president and CEO; Walter Compton, executive vice president and general counsel; and Kelli Hammock, senior vice president of administration.
In addition, Murphy’s board also cut the company’s annual incentive plan for Jenkins, Compton, Hammock and three other senior level executives because of the company’s “overall disappointing” return to stockholders and failure to reach it earnings performance threshold.
At the close of business Friday, Murphy’s shares closed at $24.26, down 93 cents, or 3.69%, on the New York Stock Exchange. The company’s stock has traded in the range of $14.30 and $51.09 over the past 52 weeks.