Murphy Oil trims 1Q losses, continues to hold down spending in ‘low commodity’ environment

by Wesley Brown ([email protected]) 147 views 

Murphy Oil Corp. trimmed losses from a year ago as the El Dorado oil producer tries to wait out the fallout from low crude oil and natural gas prices with a bare bones budget that mothballs most of the company’s capital-intensive exploration and production program.

For the period ended March 31, 2015, Murphy reported a fourth-quarter net loss of $198.8 million, or $1.16 per share, compared to last year’s huge loss of $14.4 billion, or two cents per share, in the same period of 2014.

On an adjusted basis, the El Dorado oil company reported a loss of $112.8 million, or 66 cents per share loss, compared to earnings of $198.5 or $1.11, a year ago. The adjusted losses exclude the results of discontinued operations and certain other items that affect comparability of results between periods. Revenues fell 53% to $430.2 million in the first quarter, compared to year-ago sales of $921.7 million.

Those adjusted earnings beat Wall Street expectations for a fourth quarter loss of 71 cents per share on revenue of $446.2 million, according to a survey of analysts by Thomson Reuters.

According to Murphy officials, the Arkansas oil company saw average production of nearly 196,600 barrels of oil equivalent per day (boepd), ahead of the company’s first quarter production guidance range. The higher oil production totals resulted from the better than expected output in the Eagle Ford area in Texas, increased uptime at Syncrude, higher natural gas production from the Montney area in Western Canada, and improved offshore oil production in Sabah, Malaysia and deepwater Canada, company officials said. These increases were partially offset by delays in bringing on the Kodiak well in the Gulf of Mexico, as well as increased downtime for natural gas at both Sarawak and Kikeh in offshore Malaysia.

“Murphy remains focused on driving down operating and administrative costs across all segments of our business as demonstrated with our first quarter results. The leaner organization and reduced costs better position the company to weather a possible ‘lower-for-longer’ commodity price environment. We had strong first quarter production while executing on our aggressive capital reduction plan,” said Murphy President and CEO Roger Jenkins.

The Murphy boss also said the El Dorado-based oil company will maintain its capital spending budget at only $580 million for the remainder of 2016, 73.5% lower than the $2.19 billion spent in 2015. Murphy also will update its production guidance of 180,000 to 185,000 barrels of oil equivalent, which has not yet been adjusted for a pending asset divestment and assets to be acquired.

“We will provide updated guidance upon the closing of these recently announced transactions,” Jenkins said.

A week ago, Murphy announced that its Canadian subsidiary will sell its Syncrude Canada operation to Suncor Energy Inc. for $746 million. The sale will allow Murphy to divest its 5%, non-operated stake in Syncrude, a joint venture company located in Alberta, Canada, that produced an averaged 15,600 barrels of oil equivalent per day in first quarter 2016.

On April 1, Murphy closed the previously announced agreement for the sale of natural gas processing and sales pipeline assets in northeastern British Columbia for about $419 million. These proceeds will add to the company’s quarter-end current cash position, officials said.

Murphy also said it continues to progress on its previously announced purchase and sale agreement on Jan. 27 between Murphy’s Canadian subsidiary and affiliates of Athabasca Oil Corp. That deal, which will add $729 million in process to Murphy’s cash flow, is expected to close in this quarter. Going forward, Murphy officials have 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.

Murphy officials said the company “continues to take a proactive approach towards improving Murphy’s efficiency and cost structure as a direct response to the low commodity price environment.”

Besides capital lease obligations, Murphy said it had $3.2 billion of outstanding debt consisting of $2.25 billion of long-term, fixed-rate bonds with a weighted average maturity of 9.16 years and a weighted average coupon of 4.07%. That average coupon rate will increase slightly to 4.73% in June, the company said.

The El Dorado oil giant also drew down $925 million from its $2 billion revolving credit facility at the end of the first quarter, and another $46 million was drawn on other short-term facilities. In addition, the company had cash and liquid invested securities totaling $569.2 million at quarter end.

At the end of the first quarter 2016, Murphy implemented key organizational changes including lowering staffing levels across the company. These actions reduced head count by nearly 20%, the company said.

Murphy has scheduled its annual meeting on May 11 in El Dorado, where several items involving executive compensation for the company’s executive team is on the agenda.

In a recent proxy filing, the Arkansas oil giant said it has frozen the base salaries of Jenkins, company president and CEO; Walter Compton, executive vice president and general counsel; and Kelli Hammock, senior vice president of administration.

At the close of business Wednesday, Murphy’s stock (NYSE: MUR) closed up 1.8% or 62 cents at $32.81, as 5.4 million shares traded hands. The Arkansas oil giant’s shares have traded in the range of $14.30 and $47.72 over the past year.