Murphy Oil profits down 76% amid change in strategic focus toward North America operations

by Wesley Brown (wesbrocomm@gmail.com) 313 views 

El Dorado-based Murphy Oil Corp. on Thursday (May 2) closed out an eventful first quarter with lukewarm results as the oil and gas producer efforts to change the strategic focus of the company’s global operations.

For the period ended March 31, the company reported net income of $40 million or 23 cents per share, down 76.2% compared to net income of $168.2 million, or 96 cents per share, in the same period of 2018. Total revenue, however, jumped 41.2% to $591 million, compared to only $347.7 million in the previous year.

Adjusted earnings, which exclude discontinued operations and other one-time items, resulted in a net gain of $27 million, or 15 cents per shares. Those adjusted items include a $13 million write-off of past suspended exploration well costs, and $21 million in expenses and fees related to the company’s $795 million deal with Brazil’s Petrobras America in late December to develop a deepwater Gulf of Mexico project.

Wall Street analysts expected the oil company to report first quarter earnings of 12 cents per share on revenue of $624 million, according to Thomson Reuters.

The first quarter earnings report comes just over a week after the Arkansas oil company announced plans to broaden its North American energy portfolio with a key $1.7 billion acquisition in the deepwater Gulf of Mexico. On April 23, Murphy Exploration & Production Company USA entered into a definitive agreement to acquire offshore Gulf of Mexico assets from LLOG Exploration Offshore LLC and LLOG Bluewater Holdings LLC. Those two privately-held partnerships are part of Covington, La.-based LLOG Exploration Company LLC, one of the nation’s largest exploration and production companies with a long history in the Gulf of Mexico.

That deal occurred only a month after Murphy’s two primary Malaysian subsidiaries, Murphy Sabah Oil Company Ltd. and Murphy Sarawak Oil Company Ltd., announced a deal to divest the company’s deepwater play in the Southeast Asian country to a subsidiary of Bangkok, Thailand-based PTT Exploration and Production Public Company Limited.

Murphy Oil President and CEO Roger Jenkins said exiting Malaysia and focusing on the company’s Gulf of Mexico and other North America shale and natural gas assets in the Eagle Ford Shale and Canada is already paying off.

“The first quarter was an extremely busy quarter at Murphy,” said Jenkins. “We demonstrated again that we are proven deal-makers by successfully executing agreements to divest our Malaysia assets, which are becoming gassier, followed shortly thereafter by an agreement to re-deploy the expected proceeds by acquiring oil-weighted, tax-advantaged Gulf of Mexico assets further enhancing our ability to generate cash flow.”

He added that while lower planned production across our North American business is disappointing, many of the causes were “one-off” events that are behind as production stabilizes in the second quarter.

Companywide, Murphy’s production from continuing operations in the first quarter averaged 148 thousand barrels of oil equivalent per day (Mboepd) with production from discontinued operations averaging 44 Mboepd.

After exiting offshore Malaysia, Murphy is adjusting its capital investment in 2019 from a range of $1.25 to $1.45 billion to $1.15 to $1.35 billion. This budget, however, does not include new capital that will be allocated to the recently closed deal with LLOG to acquire Gulf of Mexico assets. The company also said it will provide a yearly production guidance after that deal closes.

As of March 31, Murphy had $2.8 billion of outstanding long-term, fixed-rate notes, $325 million of borrowings its $1.6 billion unsecured senior credit facility, and nearly $286 million in cash on hand, officials said.

In early trading Thursday, Murphy’s shares (NYSE: MUR) were down 5.7%, or $1.48 at $24.38. The company’s shares have traded in the range of $21.51 and $36.53 over the past 52 weeks.

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