Murphy Oil 2Q profits well ahead of 2017 on higher oil prices, ramps up drilling program

by Wesley Brown (wesbrocomm@gmail.com) 114 views 

Murphy Oil Corp.’s second quarter financial results exceeded year ago and Wall Street expectations as the Arkansas oil firm ramps up its international oil drilling and exploration program as crude oil prices continue to improve heading into the second half of 2018, company officials announced after the close of market on Wednesday (Aug. 8).

For the period ended June 30, the El Dorado oil and gas firm reported net income of $46 million, or 26 cents per share, compared to losses of $17.6 million, or 10 cents in the same period a year ago. Adjusting for discontinued operations that include derivative and after-tax losses on foreign currency exchanges, the Arkansas publicly-traded concern reported profits of $63 million, or 36 cents per share.

Revenues for the quarter also jumped 21.6% to $618.2 million, compared to $508.3 million in the same period a year ago. Wall Street had expected the independent oil and gas company to report second quarter earnings of 35 cents on revenue of $620.5 million, according to Thomson Reuters.

According to company officials, the Arkansas-based oil and gas explorer produced an average of 171,000 barrels of oil equivalent per day (BOEPD) in the second quarter, which exceeded the high end of the company’s earlier guidance.

Company officials said the improved production was primarily driven by the performance of its high-margin Front Runner, Clipper, Thunder Hawk and Kodiak Fields projects in the Gulf of Mexico. In onshore Canada, new wells in the Kaybob Duvernay Field and less planned downtime at Tupper Montney also contributed to production exceeding guidance, officials said.

“We continue to implement our 2018 plan, with annual production guidance being increased for the second consecutive quarter. Our high-margin offshore fields continue to lead the way in production performance,” said Murphy Oil President and CEO Roger Jenkins. “By successfully executing our operating and financial goals, we are able to deliver cash to our shareholders through our competitive dividend yield and generate significant cash returns on our invested capital.”

In the company’s North American onshore business — which includes the Eagle Ford Shale in West Texas, the Tupper Montney and Kaybob Duvernay operations in Canada — Murphy Oil said it produced 95 thousand barrels of oil equivalent per day (MBOEPD) in the second quarter, a 10% increase year-over-year.

Murphy’s global offshore drilling program, which includes oil and gas liquids drilling operations in Malaysia, the Gulf of Mexico and Canada, produced over 76 MBOEPD in the second quarter. On the exploration end of the business, Murphy said it spud the Samurai-2 appraisal well in the Gulf of Mexico at a depth of just over 32,000 feet. To date, the company has discovered resources exceeding its mean pre-drill expectation of 75 million barrels of oil equivalent.

Murphy Oil also discovered oil pay in additional zones that were not tested in Samurai-1. Murphy and its partner are evaluating options to sidetrack the well into the adjacent block that Murphy also operates with a 50% working interest. The potential sidetrack is expected to further define the outlook on that discovery, officials said.

“I am thrilled to report the commercial pay success in the Samurai-2 well, which is the first well drilled under our new, focused exploration strategy,” said Jenkins. “We have encountered multiple high-quality, oil-bearing reservoirs, which will generate meaningful value as we move into development. I look forward to continued evaluation of the successful Samurai-2 well during the third quarter.”

Operationally, Murphy Oil received approval from the Mexican government to begin spudding its first exploration well in that country’s deepwater development block in the Gulf of Mexico. In offshore Vietnam, Murphy Oil also said it has secured all approvals for another deepwater exploration well that is expected to be drilled in the fourth quarter.

Going into the third quarter, the company said production is expected to be in the range of 166,500 to 168,500 BOEPD, which is lower than the previous quarter due to the annual turn-arounds at the non-operated offshore Canada fields and execution of capital projects in Malaysia, officials said.

However, the El Dorado oil exploration company is increasing estimated full year 2018 production guidance to be in the range of 168,500 to 170,500 BOEPD. The increase is supported by year-over-year production growth of 8% in Murphy Oil’s North American onshore assets.

Stronger drilling and exploration programs are benefitting the company due to improved crude oil prices. At the close of business on the New York Mercantile Exchange, crude futures for West Texas Intermediate touched a seven-week low at $66.94 per barrel, down 3.2%. That price is still up more than 35% from a year ago, when U.S. light, sweet crude was selling below $50 a barrel.

Murphy Oil has also upped its full year capital expenditure guidance by 6% $1.114 billion to $1.179 billion. Nearly $55 million of the additional capital is being allocated to Onshore Canada, primarily in the Kaybob Duvernay play to drill eight and bring four additional wells online and build the required facilities and road work for future wells. The remainder is being allocated to further evaluate the successful Samurai-2 appraisal well.

At the close of business Wednesday, Murphy’s shares were down 87 cents, or 2.6% at $32.51 on the New York Stock Exchange. The El Dorado-based oil company’s shares have traded in the range of $22.21 and $35.98 over the past 52 weeks.

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