Murphy Oil sees 1Q profit of $168 million on strong production, improving oil prices

by Wesley Brown ([email protected]) 148 views 

El Dorado-based Murphy Oil Corp. posted Wednesday (May 2) strong first quarter results as improving international oil prices lifted the Arkansas oil company’s expanding global exploration and production program.

For the period ended March 31, the El Dorado-based oil and gas concern reported profits of $168.2 million, or 96 cents per share, compared to net income of $58.4 million, or 34 cents per share, in the same period of 2017. Total revenue, however, fell 12.5% to $585.6 million, compared to $676.6 million a year ago.

Adjusted earnings, which exclude discontinued operations and other one-time items, resulted in a net gain of $40 million, or 23 cents per share. Those adjustments include an after-tax gain of $120 million associated with the 2017 U.S. corporate tax reform package and a $12 million after-tax gain on foreign exchange, partially offset by a mark-to-market after-tax loss on crude oil derivative contracts of $11 million.

Wall Street analysts expected the Arkansas independent oil company to report first quarter earnings of 27 cents per share on revenue of $579 million, according to Thomson Reuters. Murphy Oil President and CEO Roger Jenkins attributed the first quarterly profit in 12 months on “strong production results” from the company’s offshore assets in Malaysia and the Gulf of Mexico and onshore Canadian operations.

“We were also able to achieve competitive margins across our oil-weighted assets for the U.S. and Malaysia operating areas,” said Jenkins. “We continue to maintain our key balance sheet metrics while delivering on our 2018 plans. Our diverse, high margin portfolio coupled with the recent improvement in oil prices allows Murphy to generate free cash flow above our dividend this year.”

In the first quarter, Murphy Oil’s production averaged 168,000 barrels of oil equivalent per day (boepd), exceeding the company’s earlier guidance. The improving production was largely driven by Gulf of Mexico wells that are now back in production after Murphy and other oil companies stopped drilling and production activities due to plummeting oil prices.

In the first three months of 2018, however, Murphy and its partners were the high bidder for two blocks during a Gulf of Mexico lease sale. Murphy, ExxonMobil and a Brazil-based national oil firm were also successful bidders on two blocks in that South American country’s Sergipe-Alagoas deep-water basin. These two blocks are strategically located next to existing Murphy offshore acreage.

“We continue to execute on our focused exploration strategy by increasing our acreage in plays where we envision adding low-cost resources with meaningful upside,” Jenkins said.

Murphy is forecasting production for the second quarter 2018 to be in the range of 166 to 169 million barrels of oil equivalent per day (mboepd) with updated full year 2018 production guidance in the range of 167 to 170 mboepd. The low end of the full year production guidance is increasing by 1,000 barrels of oil equivalent per day from the previous guidance.

Murphy is also increasing its full year capital expenditure guidance from $1.06 billion to $1.11 billion. Nearly three-quarters of the additional cap ex is attributable to the increased working interest to drill the Samurai appraisal well and workovers at the Medusa field in the Gulf of Mexico, and working interest in Vietnam, company officials.

As of March 31, Murphy had $2.8 billion of outstanding long-term debt and $939 million in cash on hand. Company officials said there were no borrowings on the $1.1 billion unsecured line of credit at the end of the quarter.

At the close of business Wednesday, Murphy’s shares were up 19 cents at $29.82 on the New York Stock Exchange. The El Dorado-based oil company’s shares have traded in the range of $22.21 and $35.16 over the past 52 weeks.

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