Murphy Oil sees small profit of two cents, beats Wall Street expectations

by Wesley Brown ([email protected]) 126 views 

Murphy Oil Corp. beat Wall Street’s second quarter expectations and eked out a small profit as the Arkansas oil company benefitted from sales of its Canadian natural gas processing and pipeline assets and moves closer to being a pure play oil and gas producer.

For the period ended June 30, the El Dorado-based oil and gas giant reported second quarter earnings of $3 million, or two cents per share, compared to losses of $73.8 million, or -42 cents per share, in the same period of 2015.

Earnings, adjusted for one-time items, ended at 36 cents per share. Second quarter revenues were down nearly 41% to only $437 million, compared to $738 million a year ago. Wall Street analysts had forecasted Murphy Oil to report second quarter losses of 39 cents per share on revenue of $503 million, according to Thomson Reuters.

Company President and CEO Roger Jenkins said the Fortune 500 company continues to reposition itself as an unconventional shale play producer by selling non-core assets and strengthening its balance sheet to compete in the industry’s current low-price commodity environment.

“During the second quarter, we continued progressing our 2015 repositioning efforts as we closed the Syncrude non-core asset sale, along with the Montney processing assets, and entered into a new North American unconventional play and further strengthened our balance sheet,” Jenkins said. “We will continue to focus on costs and capital allocation while pursuing new exploitation efforts in our three significant onshore unconventional plays and maintaining our original capital plan with adjusted production levels accounting for asset purchases and sales.”

In the second quarter, Murphy officials said production averaged approximately 168,600 barrels of oil equivalent per day (boepd), lower than anticipated primarily due to downtime from a third party gas operated plant servicing assets in Block K, Malaysia, and downstream natural gas pipeline restrictions in onshore Canada.

Also, company officials said eight completions in the expansive Eagle Ford Shale were rescheduled to the second quarter from the third quarter, which shut-in production from offset wells during completion operations. These new wells were brought online and began producing early in the third quarter.

The El Dorado oil and gas producer said it received about $1.15 billion in net proceeds during the quarter from the sale of its interest in Syncrude and its Montney natural gas processing and sales pipeline assets. The divestiture proceeds were used to reduce outstanding borrowings by $971 million during the quarter and to fund $207 million for the Kaybob Duvernay and Placid Montney joint venture acquisition in Alberta, Canada.

“These actions significantly improved the company’s liquidity profile,” Murphy officials said in the second quarter financial report, citing that the company had zero drawn on its revolving credit facility that expires in June 2017.

For the remainder of 2016, Murphy said capital spending for the year will stay at $620 million, excluding the acquisition cost for the Canadian joint venture announced in May. Production for the third quarter 2016 is estimated in the range of 167,500-169,500 boepd and full-year 2016 is estimated in the range of 173,000-177,000 boepd, officials said.

On the financial front, Murphy said it paid down the entire outstanding amount drawn on the company’s revolving credit facility and exited the second quarter with total debt of $2.46 billion and $399 million in cash. The company also lowered general and administrative expenses by 15%, year-over-year, officials said.

At Wednesday’s closing bell on the New York Stock Exchange, Murphy’s shares were down 3.6%, or $1.05 at $27.80. The company’s shares have traded at $14.30 per share on the low end and $37.48 as a 52-week high.