Low energy prices reduce Murphy Oil quarterly revenue more than 70%

Murphy Oil posted an adjusted second quarter loss of $109.8 million as low energy prices resulting from COVID-19 economic disruptions reduced revenue and created the need to shut-in some wells. Second quarter revenue was down 71.5%.

Murphy Oil, the Houston-based company previously headquartered in El Dorado, posted quarterly earnings Thursday (Aug. 6) morning. The adjusted earnings earnings reflect a loss of 71 cents per share, which was better than the consensus estimate of a 94 cents per share loss. One-time charges in the quarter included a $146 million loss on crude oil derivative contracts and a $32 million charge for restructuring expenses.

The quarterly loss of $109.8 million compares with $35.6 million adjusted net income in the second quarter of 2019. Revenue in the quarter was $211.542 million, down 71.5% from the $743.95 million in the same quarter of 2019. The revenue was also well below the consensus estimate of $395.43 million.

For the first six months of 2020, Murphy Oil posted an adjusted loss of $155.5 million compared with $62.1 million in net income during the same period of 2019. Revenue in the first six months of the year totaled $1.215 billion, down from the $1.374 billion in the same period of 2019.

“The second quarter was difficult not only for our industry, but also our company. As we endured the economic fallout from the global pandemic and the unprecedented oil price collapse, we made the decision to shut in wells, primarily at a single offshore facility. Absent these shut-ins, our assets performed very well and production volumes would have been essentially flat with first quarter 2020,” Roger Jenkins, president and CEO, said in the earnings report. “I am proud of our team’s ability to manage uptime and performance despite the unique challenges presented by recent events. Our field employees continue to follow strict safety protocols, and have kept COVID-19 absent from our operations.”

The company has also burned through some of its cash and cash equivalent holdings. Murphy Oil reported $145.505 million in cash and equivalents at the end of the second quarter, down 55.4% from the $326.044 million in the same period of 2019.

Company officials also cut $40 million from the capital expenditure budget for the remainder of the year, leaving it in a range of $680 million to $720 million. That range is 50% less than original guidance.

Murphy Oil execs announced May 6 plans to close its home office in south Arkansas and relocate the corporate headquarters to existing offices in Houston. The El Dorado office was home to 80 employees, according to the company. Murphy is also relocating 110 employees from its Canadian office in Calgary to Houston.

“This quarter, we made meaningful reductions to right-size our cost structure, capital spending and quarterly dividend. With our capital program significantly weighted towards the first half of 2020, this sets the company up to generate free cash flow, after the dividend, for the remainder of the year based on current strip prices. As I look ahead, we are in the early stages of benefiting from our new low-cost structure with the reduction in force and office closures finalized just last month, and we look forward to executing our business plans in a streamlined setting going forward,” Jenkins said.

Second quarter production averaged 168,000 barrels of oil equivalent per day (MBOEPD) with 58% oil and 65% liquids. The quarter included a loss of 17.5 MBOEPD primarily as a result of shut-ins due to market prices. Production volumes from the shut-in wells came back online in June, the company said.

Murphy Oil shares (NASDAQ: MUR) opened Thursday at $14.06. During the past 52 weeks the share price has ranged between $28.12 and $4.50.