Murphy Oil 3Q losses top $66 million; ups capex to $940 million to grow deep-water oil, gas business

Murphy Oil Corp., which last month announced a strategic deal to enter Brazil’s fast-growing deep-water offshore oil and gas sector, reported Wednesday (Nov. 1) a third quarter loss as the El Dorado-based company struggles to regain profitability.

For the period ended Sept. 30, Murphy Oil reported a third quarter loss of $66 million, or 38 cents per share, compared to a loss of $16.1 million, or eight cents per share, a year ago. The loss from continuing operations included an after-tax foreign exchange loss of $44 million, primarily related to inter-company loans, and a loss of $12 million from mark-to-market of open crude oil hedge contracts.

Excluding discontinued operations and certain other items, the independent energy company reported third quarter earnings of $6 million or three cents per share. Total revenues were slightly up 2.7% to $498.3 million, compared to $485 million a year ago. Wall street analysts had expected the company to report a third quarter loss of 15 cents per share on revenue of $462 million, according to Thomson Reuters.

Murphy Oil President and CEO Roger Jenkins said the company successfully executed its annual strategic plan, despite the disappointing results.

“We have quickly recovered from the impacts of Hurricane Harvey on our Eagle Ford Shale business, as well as issues in third-party midstream and offshore non-operated Canada assets. I am pleased with our continued cost focus that has helped to maintain our high cash balance through the year,” Jenkins said in a statement. “I am excited by our two strategic low-cost entries, which add new assets to each of our onshore and offshore businesses. These opportunities provide us with future capital allocation flexibility, which should enhance the profitability of our business.”

In late September, Murphy announced that its wholly owned Brazilian union entered into a farm-in agreement with Brazilian oil giant Queiroz Galvão Exploração (QGEP) to acquire a 20% working interest in two oil and gas blocks located in the deep-water Sergipe-Alagoas Basin just off the coast of the South American country. QGEP will retain a 30% stake in the blocks, and in a related but separate transaction, ExxonMobil’s Brazilian affiliate has farmed into the remaining 50% interest as the operator. The blocks are located 80 to 100 kilometers off the coast of Brazil and cover a total area of approximately 1,500 square kilometers, or about 580 square miles.

Murphy and its partners were also the high bidders in Brazil’s lease sale for two other blocks adjacent to the QGEP properties. ExxonMobil will serve as the operator, and the partners will maintain the same stake in each of the blocks. The new acreage positions are near several major discoveries Petrobras, the national oil company of Brazil.

The Brazilian play is Murphy Oil’s second successful bid in the past year in two highly anticipated deep-water oil and gas auctions in South and North America as the Arkansas energy giant looks to rebound from its three-year long slump since oil prices began collapsing in late 2014. In December, Murphy Oil’s Mexican subsidiary was the high bidder on a project located in the Salinas deep-water basin in the Gulf of Mexico.

“I am enthusiastic about the long-term opportunities presented with our entry into the Sergipe-Alagoas Basin following our earlier entry into offshore Mexico,” Jenkins said. “I expect the plays will add full cycle, low break-even resources to our offshore portfolio.”

During the third quarter, Murphy Oil officials said hurricane-impacted production averaged 154 thousand barrels of oil equivalent per day (Mboepd). The North American onshore business, which includes the Eagle Ford Shale and Midland Basins in Texas and the Tupper Montney natural gas development in Canada, produced 86 Mboepd in the third quarter, with 51% oil and gas liquids.

The company’s offshore business, which includes developments in Malaysia, Vietnam, Gulf of Mexico, Brazil and the east coast of Canada, produced over 68 Mboepd for the third quarter, with 73% oil and gas liquids.

Murphy’s production for the fourth quarter 2017 is estimated in the range of 170 to 172 Mboepd. The spike in fourth quarter production guidance is due to minimal scheduled downtime in offshore operations and additional online wells in North American onshore, including a seven-day Gulf of Mexico shut-in due to Hurricane Nate. The company is tightening its full-year 2017 production guidance to be in the range of 164 to 165 Mboepd. As a result of the Midland Basin and Brazil entries, along with the acquisition of the Clipper Field, full year capital expenditure guidance was increased by nearly $50 million to $940 million, company officials said.

At the close of business Wednesday, Murphy’s shares (NYSE: MUR) closed up 64 cents, or 2.3% at $27.39. In the past 52 weeks, the company stock has traded in the range of $22.21 as a yearly low to a high of $35.19 per share.