El Dorado-based Murphy Oil Corp. said Wednesday afternoon (May 6) it will close its home office in south Arkansas and relocate the corporate headquarters to its existing offices in Houston.
The El Dorado office is home to 80 employees, according to a corporate news release. The company is also relocating 110 employees from its Canadian office in Calgary to Houston.
“Over the past several months, we have taken several actions to significantly reduce costs, including cutting this year’s capital expenditures by approximately 50 percent, or $700 million, lowering the company’s dividend by 50 percent, or $76.5 million on an annualized basis, and lowering executive officers’ salaries on average 22 percent, with the chief executive officer’s reduced by 35 percent. We realize, reluctantly, that we need to consolidate our offices to capture additional cost savings to remain competitive in this unprecedented industry environment. We simply do not have a choice and came to this decision only after exhausting all other cost saving measures,” Claiborne Deming, chairman of the Board, said in a statement. “The El Dorado office closure is particularly painful and difficult, because the company was founded here by C.H. Murphy, Jr. and has been an integral and important part of the community for many years.”
President and CEO Roger Jenkins said in a statement the decision was made “with sadness, but with the understanding that our only path forward is to consolidate into one office in Houston.” Jenkins said the actions will not impact the company’s field operations in the U.S. and Canada. The office closures are expected to be completed in the third quarter of 2020.
Murphy Oil will continue funding the El Dorado Promise, according to the release. Founded in 2007, the program pays the college tuition, up to the highest amount charged by an Arkansas public university, of every college-bound graduate of the El Dorado Public School District.
Gov. Asa Hutchinson put a melancholy spin on the news stressing that he expected Murphy Oil to continue to have a presence in El Dorado, while noting that its spinoff company, Murphy USA, has a sizable workforce in the south Arkansas town.
“Both Murphy Oil and Murphy USA have been amazing partners for Arkansas through many decades and I’m confident they will continue to be a key part of our economic future, even though we are saddened by the news today that Murphy Oil will be moving 82 jobs to Houston as a result of this change. We are very pleased with the continued presence of Murphy USA, that has 600 employees and their headquarters in El Dorado, and that they have a continued commitment to the El Dorado Promise. We know that we will continue to work with both companies in the future,” Hutchinson said.
Lt. Gov. Tim Griffin, a nearby Magnolia native, offered his praise for Murphy Oil, too.
“I am so very sad Arkansas is losing an iconic company and the important jobs they provide in South Arkansas where I grew up. Murphy Oil has been a generous corporate citizen and called Arkansas home for decades. They will be sorely missed. They have been a strong supporter of the El Dorado community, and I am thankful they will continue to support the El Dorado Promise Scholarship. The unprecedented economic impact of the COVID-19 pandemic on our business community cannot be overstated, but this news is also a reminder that there is intense competition for jobs and industry, and we must remain committed to improving Arkansas’ business climate,” Griffin said.
LOW PRICES, COVID-19 PRODUCE BIG 1Q LOSS
In addition to the high-profile move to Houston, the company reported a large first-quarter loss due to industry turmoil and the COVID-19 pandemic.
For the period ending March 31, 2020, Murphy Oil posted a $416 million loss, or $2.71 per share. In the previous year’s first quarter, the company posted a $40.18 million first-quarter profit, or 23 cents per share. Revenues were $1.003 billion, up from $630.55 million one year ago.
While the pandemic has slowed operations and curtailed oil demand worldwide, a glut of supply on the world stage has been a major contributor to Murphy and other oil explorers’ woes. Domestic production combined with Middle East and Russian oil production has led to some of the lowest prices for crude oil in decades. At one point last month, oil futures were trading at negative prices meaning producers were paying for future oil storage versus selling it on the market.
During the quarter, Murphy Oil recorded a $968 million non-cash impairment charge due to low commodity prices in the first quarter of 2020 and lowered planned capital expenditures further to a midpoint of $740 million, representing approximately a 50% reduction from its original 2020 capital budget.
Murphy said it will have an average of 48 thousand barrels of oil per day (MBOPD) hedged at an average price of $54.35 per barrel. Since fourth quarter 2019, Murphy has executed additional WTI (West Texas Intermediate) fixed price swaps to hedge an additional 20 MBOPD for May and June 2020 at an average price of $26.45 per barrel, resulting in a total 65 MBOPD of volumes hedged for the months of May and June 2020 at an average price of $47.20 per barrel. For the month of April 2020, as well as July through December 2020, the company has 45 MBOPD of volumes hedged at an average price of $56.42 per barrel.
WTI Crude closed trading on Wednesday at $24.28 per barrel. Oil prices have not been this low since 1998 and previously in 1973.
The company employs derivative commodity instruments to manage certain risks associated with commodity price volatility and underpin capital spending associated with certain assets.
“We remain focused on protecting our balance sheet and liquidity through this unstable market while maintaining future flexibility through our long-dated debt maturity profile, with the first tranche not due until mid-2022,” said CEO Roger Jenkins, who contracted and recovered from COVID-19 during the first quarter.
Shares of Murphy Oil (NYSE: MUR) closed at $10.39 on Wednesday and were trading lower in after-hours markets. The company’s stock has traded over the past 52 weeks in a range between $4.50 and $28.43.