Murphy Oil post profits of $103 million in 4Q turnaround, tops Wall Street views

Arkansas energy giant Murphy Oil Corp. ended 2018 on a strong note as the international oil explorer continues to turnaround its fortunes with key global oil and gas prospects.

For the period ended Dec. 31, the El Dorado-based oil and gas concern reported net earnings of $103 million or 59 cents per share, compared to a net loss of $286 million, or $1.66 cents per share, in the same period of 2017. Total revenues jumped 27.7% to $692 million, compared to $541.5 million, a year ago.

Adjusted earnings, which exclude a gain of $30 million associated with the 2017 corporate tax cut, an unrealized mark-to-market credit on crude oil derivative contracts of $28 million and a $16 million impairment on select East Texas shale assets, were $54 million or 31 cents per share. Wall Street analysts expected the company to report fourth quarter earnings of 27 cents per share on revenue of nearly $655 million, according to Thomson Reuters.

On a yearly basis, Murphy reported net income of $411 million, or $2.36 per share, compared to a net loss of $311.8 million, or $1.81 per share, in 2017. Total revenues in 2018 rose to $2.57 billion, up 15.7% from $2.22 billion for the 12-month period in 2017.

“2018 was a really good year for Murphy with our net income at the highest level in four years. We continued to benefit from our diverse, growing, oil-weighted portfolio that was able to continuously generate high cash flow per barrel metrics,” Murphy Oil President and CEO Roger Jenkins noted in the report. “We demonstrated again that we are proven deal-makers by successfully closing on an accretive oil-weighted transaction that will further enhance our ability to generate cash flow. Also, we remain committed to rewarding shareholders with cash returns through our long-standing competitive dividend, while we keep investment in our assets in line with our cash flows.”

In the fourth quarter, Murphy completed a $795 million deal with Brazil’s multinational oil conglomerate to develop a deepwater Gulf of Mexico project that is expected to bolster the Arkansas oil company’s daily crude oil production by 60,000 barrels.

Murphy Exploration & Production Company – USA, the Houston-based subsidiary of the company, entered into the joint venture agreement with Petrobras America Inc. (PAI) on Oct. 11. Under the terms of the deal that closed Dec. 3, both companies contributed all their producing Gulf of Mexico assets to the joint venture company, MP Gulf of Mexico LLC (MPCOM). The joint venture will be owned 80% by Murphy, which will oversee the project, and a 20% non-controlling stake held by Petrobras. Murphy will fund a portion of the deal, about $470 million with cash on hand. The remaining $325 million will be drawn on the company’s new senior credit facility, officials said.

At the close of 2018, Murphy’s preliminary year-end proved reserves were 816 million barrels of oil equivalent (MMBOE), a 17% spike from 698 mmboe at year-end 2017. The change in year-over-year reserves is mainly attributed to the acquisition of Gulf of Mexico reserves through the Petrobras transaction as well as organic additions in the Eagle Ford Shale and Tupper Montney assets.

Operationally, Murphy’s oil and gas production in the fourth quarter averaged 176 thousand barrels of oil equivalent per day (mboepd), which was in line with the company’s guidance. Production for the full year averaged 171 mboepd. The North American onshore business produced over 93 Mboepd in the fourth quarter. Murphy’s onshore North American operations include the Eagle Ford Shale and Midland Basin in Texas, and the Tupper Montnay and Kaybob Duvernay oil and gas plays in Canada.

The global offshore business produced nearly 83 Mboepd for the fourth quarter. Murphy Oil’s offshore drilling operations are primarily located in Malaysia, the Gulf of Mexico and East Coast of Canada. The Arkansas oil and gas giant is also exploring for new oil and gas finds in offshore Gulf of Mexico and Vietnam.

“Our team did an excellent job adding low-cost, high-value reserves in 2018,” said Jenkins. “We continue to replace reserves with finding and development costs tracking below $11 per BOE. We are especially pleased with the additional oil reserves from our new Gulf of Mexico assets where the initial booking at year-end was above our original estimated volumes.”

Murphy is planning 2019 capital expenditures to be in the range of $1.25 to $1.45 billion with full year 2019 production to be in the range of 202 to 210 MBOEPD. Production for the first quarter 2019 is estimated to be in the range of 198 to 202 MBOEPD. In 2018, Murphy’s capital budget was just over $1 billion annually.