Murphy Oil Earnings Erode On Unusual Items

Murphy Oil Corp.’s fourth quarter profits fell short of Wall Street expectations, but rising oil prices and increased oil production lifted the company’s quarterly and yearly sales into double digits.

For the period ended Dec. 31, the El Dorado oil firm reported net income of $174.1 million, or 90 cents per share, compared to net income of $318.8 million, or $1.65 per share a year ago. However, fourth quarter revenues rose to $6.5 billion, up 11.7% from $5.82 billion in the same period of 2009.

Analysts, on average, expected the Arkansas oil company to report fourth quarter profits of $1.00 on revenue of $5.62 billion, according to Thomson Reuters.

For the full year, Murphy reported net income totaled $798.1 million, or $4.13 per diluted share, compared to net income of $837.6 million, or $4.35 per diluted share in 2009. Yearly revenue rose a whopping 22.6% to $23.3 billion versus $19 billion a year ago.

“We will look back on 2010 as a productive year for the company,” said David Wood, Murphy CEO and president. “Our oil-weighted production portfolio benefited from higher than anticipated oil prices during the year.”

Overall, Murphy’s fourth quarter income from exploration and production operations was $154.1 million, well short of $339.1 million in the same quarter of 2009. Lower earnings in 2010 were primarily attributable to a recovery of federal royalties in 2009, plus higher exploration expenses in the 2010 fourth quarter.

The company’s refining and marketing operations had income of $44.4 million in the fourth quarter, compared to a loss of $4.1 million in 2009. The favorable variance in results was primarily attributable to stronger U.S. refining margins and higher profits on the resale of merchandise in its retail marketing operations.

Worldwide crude oil, condensate and gas liquids sales prices averaged $73.60 per barrel for the 2010 fourth quarter compared to $67.59 per barrel in the 2009 quarter. North American natural gas sales prices averaged $3.95 per thousand cubic feet (MCF) in the 2010 fourth quarter compared to $4.17 per MCF in the 2009 quarter.

The company’s crude oil, condensate and gas liquids production averaged 117,084 barrels per day in the fourth quarter of 2010 compared to 138,269 barrels per day in 2009. The decline in crude oil production in 2010 was primarily attributable to lower volumes produced at Murphy’s deepwater drilling program in Malaysia, where downtime occurred for well maintenance and weather delays.

At the close of business Wednesday, Murphy’s shares were up 3.08%, or $2.19, at $73.23. However, in after hours trading, Murphy’s shares were headed downward following the company’s earnings release after the close of market.

In 2011, Murphy shares have hit a headwind after reaching a 52-week high of $76.74 on Jan. 4. The company’s stock began losing ground on Jan. 6, following a company announcement that the oil giant’s ambitious drilling campaign in the Republic of Congo has come up dry.

All three wells were operated by Murphy West Africa, Ltd. at a 58.82% working interest and were plugged and abandoned. The total net cost of the program was estimated at $36 million, and Murphy officials said then that the charge would be expensed in the fourth quarter.