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Murphy Oil (MUR) Reports Narrower-than-Expected Q2 Loss
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Murphy Oil Corporation (MUR - Free Report) reported second-quarter 2016 loss of 36 cents per share, narrower than both the Zacks Consensus Estimate of a loss of 41 cents and the year-ago loss of 48 cents.
On a GAAP basis, net earnings came in at 2 cents per share. In the prior-year quarter, the company had recorded a GAAP loss of 42 cents.
The variance between the adjusted and GAAP figures was primarily due to a mark-to-market loss on crude oil derivative contracts, foreign exchange gains, Oil Insurance Limited dividends and income tax benefits associated with the Syncrude and Montney divestitures, and income tax benefits from investment in foreign areas.
In the quarter under review, Murphy Oil’s revenues came in at $437.5 million, missing the Zacks Consensus Estimate of $486 million by nearly 10%. On a year-over-year basis too, reported revenues tanked 40.7%. The dismal top-line performance was primarily due to lower exploration and production revenues from the company’s U.S. and global operations.
Highlights of the Release
Murphy Oil produced approximately 168,600 barrels of oil equivalent per day (BOE/d) in the second quarter and failed to meet management’s guided range of 177,000–180,000 BOE/d. Production fell below expectations due to downtime from a third-party natural gas plant in Malaysia and downstream natural gas pipeline restrictions in Canada.
Total hydrocarbon sales volume was 167,021 BOE/d in the quarter, down 14.2% from 194,700 BOE/d a year ago.
Murphy Oil’s total costs and expenses decreased 33% year over year to $568.7 million.
The company spent $35.1 million as interest expenses, up 15.1% from $30.5 million a year ago.
Murphy Oil had cash and cash equivalents of $267.5 million as of Jun 30, 2016, compared with $283.2 million as of Dec 31, 2015.
Long-term debt was $2,435.5 million as of Jun 30, 2016, compared with $3,040.6 million as of Dec 31, 2015.
Net cash from operating activities in the second quarter was $70.1 million, significantly lower than $181.4 million in the year-ago period.
In the reported quarter, the company’s total capital expenditure was $306.5 million, compared with $516 million in the year-ago quarter.
Guidance
Murphy Oil expects third-quarter 2016 and full-year total production of 167,500–169,500 BOE/d and 173,000–177,000 BOE/d, respectively. Total sales for third-quarter 2016 are expected in the range of 164,500–166, 500BOE/d.
The company estimates total exploration expense of $19 million in the third quarter.
Capital expenditure is projected to be around $620 million for 2016, excluding $206.7 million associated with the acquisitions of the Kaybob Duvernay and Montney oil plays.
Upcoming Peer Releases
Devon Energy Corporation (DVN - Free Report) is scheduled to report on Aug 2, after the market closes. The Zacks Consensus Estimate stands at a loss of 22 cents.
Noble Energy, Inc. is scheduled to report on Aug 3, before the market opens. The Zacks Consensus Estimate stands at a loss of 31 cents.
WPX Energy, Inc. is scheduled to report on Aug 4, before the market opens. The Zacks Consensus Estimate stands at a loss of 21 cents.
Our View
The recent rally in oil prices, which followed a two-year low, may prove to be short lived as it has spurred producers to resume drilling. This could aggravate the oil supply glut in the market. As a result, oil prices have begun falling once again. Amid such an uncertain commodity price environment, Murphy Oil’s management implemented rigorous cost cutting initiatives, through which it has been able to significantly lower costs and expenses.
Moreover, Murphy Oil’s second-quarter loss was narrower than our estimates. The company has been focusing on shedding non-core assets from its portfolio in order to concentrate on the unconventional North American onshore business. The recent divestitures of Syncrude and Montney natural gas processing and sales pipeline assets in the second quarter were part of this strategy.
Murphy Oil currently carries a Zacks Rank #2 (Buy).
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Murphy Oil (MUR) Reports Narrower-than-Expected Q2 Loss
Murphy Oil Corporation (MUR - Free Report) reported second-quarter 2016 loss of 36 cents per share, narrower than both the Zacks Consensus Estimate of a loss of 41 cents and the year-ago loss of 48 cents.
On a GAAP basis, net earnings came in at 2 cents per share. In the prior-year quarter, the company had recorded a GAAP loss of 42 cents.
The variance between the adjusted and GAAP figures was primarily due to a mark-to-market loss on crude oil derivative contracts, foreign exchange gains, Oil Insurance Limited dividends and income tax benefits associated with the Syncrude and Montney divestitures, and income tax benefits from investment in foreign areas.
Revenues
In the quarter under review, Murphy Oil’s revenues came in at $437.5 million, missing the Zacks Consensus Estimate of $486 million by nearly 10%. On a year-over-year basis too, reported revenues tanked 40.7%. The dismal top-line performance was primarily due to lower exploration and production revenues from the company’s U.S. and global operations.
Highlights of the Release
Murphy Oil produced approximately 168,600 barrels of oil equivalent per day (BOE/d) in the second quarter and failed to meet management’s guided range of 177,000–180,000 BOE/d. Production fell below expectations due to downtime from a third-party natural gas plant in Malaysia and downstream natural gas pipeline restrictions in Canada.
Total hydrocarbon sales volume was 167,021 BOE/d in the quarter, down 14.2% from 194,700 BOE/d a year ago.
Murphy Oil’s total costs and expenses decreased 33% year over year to $568.7 million.
The company spent $35.1 million as interest expenses, up 15.1% from $30.5 million a year ago.
MURPHY OIL Price, Consensus and EPS Surprise
MURPHY OIL Price, Consensus and EPS Surprise | MURPHY OIL Quote
Financial Condition
Murphy Oil had cash and cash equivalents of $267.5 million as of Jun 30, 2016, compared with $283.2 million as of Dec 31, 2015.
Long-term debt was $2,435.5 million as of Jun 30, 2016, compared with $3,040.6 million as of Dec 31, 2015.
Net cash from operating activities in the second quarter was $70.1 million, significantly lower than $181.4 million in the year-ago period.
In the reported quarter, the company’s total capital expenditure was $306.5 million, compared with $516 million in the year-ago quarter.
Guidance
Murphy Oil expects third-quarter 2016 and full-year total production of 167,500–169,500 BOE/d and 173,000–177,000 BOE/d, respectively. Total sales for third-quarter 2016 are expected in the range of 164,500–166, 500BOE/d.
The company estimates total exploration expense of $19 million in the third quarter.
Capital expenditure is projected to be around $620 million for 2016, excluding $206.7 million associated with the acquisitions of the Kaybob Duvernay and Montney oil plays.
Upcoming Peer Releases
Devon Energy Corporation (DVN - Free Report) is scheduled to report on Aug 2, after the market closes. The Zacks Consensus Estimate stands at a loss of 22 cents.
Noble Energy, Inc. is scheduled to report on Aug 3, before the market opens. The Zacks Consensus Estimate stands at a loss of 31 cents.
WPX Energy, Inc. is scheduled to report on Aug 4, before the market opens. The Zacks Consensus Estimate stands at a loss of 21 cents.
Our View
The recent rally in oil prices, which followed a two-year low, may prove to be short lived as it has spurred producers to resume drilling. This could aggravate the oil supply glut in the market. As a result, oil prices have begun falling once again. Amid such an uncertain commodity price environment, Murphy Oil’s management implemented rigorous cost cutting initiatives, through which it has been able to significantly lower costs and expenses.
Moreover, Murphy Oil’s second-quarter loss was narrower than our estimates. The company has been focusing on shedding non-core assets from its portfolio in order to concentrate on the unconventional North American onshore business. The recent divestitures of Syncrude and Montney natural gas processing and sales pipeline assets in the second quarter were part of this strategy.
Murphy Oil currently carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>