Murphy Oil trims 4Q losses, ups 2017 capex by 53% on higher crude oil forecasts

Cost-cutting Murphy Oil Corp. narrowed fourth quarter losses from a year ago and upped its capital budget for fiscal 2017 by 53% on the expectation that international crude oil prices will remain above $50 per barrel.

For the period ended Dec. 31, the El Dorado oil and gas concern reported a net loss of $64 million, or 37 cents per share, compared to losses of $583 million, or $3.39 per share, in the same period a year ago. Revenues in the year-ending quarter fell 23.3% to $505.8 million, compared to $658 million in the 2015.

A survey of 15 Wall Street analysts had forecasted the Arkansas oil company report a net loss of 16 cents per share on revenues of $481.6 million, according to Thomson Reuters. For the full year, Murphy reported a net loss of $276 million, or $1.60 per share, compared to a net loss of $2.25 billion, or $13.03 per share in 2015. Yearly revenue fell 37.7% to $1.87 billion from $3 billion in 2015.

“2016 was a year of improving the company’s North American onshore portfolio while surviving one of our industry’s worst commodity price collapses. We successfully monetized non-core assets, including Montney midstream and Syncrude, while entering into a new unconventional liquids play in the Kaybob Duvernay,” said Murphy President and CEO Roger Jenkins. “The company is now set up with a solid balance sheet, ample liquidity and stabilized production levels while maintaining our top quartile dividend yield within cash flow.”

Overall, Murphy’s production in the fourth quarter 2016 averaged 168 thousand barrels of oil equivalent per day (Mboepd). Stronger production compared to previous quarterly guidance is attributed to shorter downtime and better well performance following the planned Kikeh and Sarawak turnarounds, in addition to stronger results from new wells brought online in the Catarina area of the Eagle Ford Shale, company officials said.

Murphy entered into an agreement during the fourth quarter to sell its heavy oil Seal asset in Western Canada to Baytex Energy Corp. for $65 million. The sale, which was subject to closing adjustments and other conditions typical of transactions of this nature, closed on Friday (Jan. 20). In July 2015, regulators in the Canadian province of Alberta shut down 33 heavy oil well sites operated by Murphy after a 17,000 barrel oil spill and other environmental issues at the Seal heavy oil project.

Murphy also participated in a joint venture in November led by its Mexican subsidiary that was the high bidder on a project located in the Salinas deep-water basin in the Gulf of Mexico. Murphy and its partners were the successful bidder in Mexico’s fourth phase, round one deepwater auction on Block 5, the most competitive block of the country’s first-ever deepwater oil and gas auction.

Over the course of 2016, Murphy said it has strategically divested non-core assets to reduce overall complexity and streamline its North American onshore portfolio.

“This will allow the company to focus on leveraging its expertise between three unconventional onshore plays along with concentrated offshore areas,” the company said.

In fiscal 2017, Murphy is planning expenditures to be $890 million which assumes a West Texas Intermediate oil price of $52 per barrel and Henry Hub natural gas price of $3.10 per thousand cubic feet. That is up 53.4% from last year’s capex of $580 million, which was adjusted downward from $825 million in May 2016.

Nearly 65% of the total capital spend is being allocated towards the onshore unconventional businesses with a majority in the Eagle Ford Shale and Kaybob Duvernay. Offshore expenditures are focused on short-cycle projects that maintain existing assets and other activities expected to increase value-added production in future years. Field development and development drilling accounts for 85% of the annual capital expenditures, company officials said.

Production for the first quarter 2017 is estimated in the range of 166 to 170 Mboepd with full year 2017 production to be in the range of 162 to 168 Mboepd. The North American onshore unconventional production is expected to be 55% of full year guidance. Full year production assumes an expected reduction following approval of the redetermination in the non-operated Kakap-Gumusut field in Malaysia.

At the close of business Wednesday, Murphy’s shares (NYSE: MUR) closed up 22 cents at $32.18. In the past 52 weeks, the company stock has traded in the range of $15.23 as a yearly low to a high of $37.48 per share.