Murphy in Line, Robust Production

Murphy Oil Corporation (MUR - Snapshot Report) posted earnings from continuing operations of 98 cents per share in the third quarter, almost in line with the Zacks Consensus Estimate of 97 cents. However, results were significantly below earnings of $3.04 reported last year, largely driven by lower commodity prices in the Exploration & Production (E&P) segment accompanied by lower earnings from the Refining & Marketing (R&M) operations. 

Earnings from Murphy’s E&P business declined 65% from a year ago, primarily based on lower oil and gas prices, higher production costs and depreciation. Exploration expenses improved 55% to $37.9 million in the quarter versus $83.4 million last year, primarily attributable to lower dry hole costs in the Gulf of Mexico and offshore Malaysia, and lower undeveloped lease amortization expense for the Tupper properties. R&M earnings also fell by 57% from last year due to weaker U.S. retail marketing margins and U.K. refining margins. 

Revenues in the quarter dropped 37% year over year to $5.2 billion, on account of lower oil and gas prices. 

Total oil and gas liquids production surged 18% averaging 131,637 barrels per day. This was driven by higher production at the Kikeh field, Malaysia, and new production at the Thunder Hawk field and the Azurite field that started up during the quarter. Oil sales improved 15% to 128,187 barrels per day compared to last year. Natural gas sales volumes increased nearly 300% over last year to 182 million cubic feet per day, mainly due to higher production at the Tupper area in Western Canada and at the Kikeh field. Oil and natural gas prices averaged $61.13 per barrel (down 46%) and $3.01 per thousand cubic feet (down 74%), respectively. 

For the fourth quarter, Murphy guided production to average 193,000 barrels of oil equivalent (BOE) per day, with sales volumes of 184,000 BOE per day. It expects earnings in the range of 75−90 cents per share, based on projected losses of $24.0 million from the R&M business and exploration expense range of $40−$75 million.