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Murphy Oil (MUR) Likely to Beat Q2 Earnings Estimates

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Murphy Oil Corporation (MUR - Free Report) will release its second-quarter 2014 financial results on Jul 30, 2014. In the prior quarter, earnings for this oil and gas company came in line with the Zacks Consensus Estimate. Murphy Oil currently has a Zacks Rank #3 (Hold). Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Murphy Oil is likely to beat earnings because it has the right combination of key factors.

Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +10.71%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.

Zacks #3 Rank (Hold): The stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Murphy Oil’s Zacks Rank #3 (Hold) and +10.71% ESP makes us confident of an earnings beat on Jul 30.

What is Driving Better-than-Expected Earnings?

A number of favorable factors including disciplined investment in exploration and production activities in the Eagle Ford Shale and Gulf of Mexico, the addition of acreage in Namibia and an effective share repurchase program are expected to collectively boost Murphy Oil’s second-quarter results.

During the first quarter earnings call, Murphy Oil issued its guidance for second-quarter 2014 hydrocarbons production and sales volumes. The company expects average production volume of 217,000 barrels of oil equivalents per day (Boe/d), up 6.1% sequentially. Murphy Oil also anticipates its quarterly sales volume to average 216,000 Boe/d compared with 200,503 Boe/d in the first quarter.

Murphy Oil follows a systematic exploration and production program. The company has a significant presence in the Eagle Ford Shale area, in the deepwater Gulf of Mexico, Malaysia and Canada. Recently, Murphy Oil has started operations in Namibia. These initiatives will enable the company to improve its future production volume.

In addition, Murphy Oil pursues a steady share buyback plan. On May 20, 2014, the company repurchased common stock worth $125 million through an accelerated share repurchase agreement with a financial institution. Murphy Oil’s share buyback initiative will boost the bottom line and increase shareholder value by reducing the total number of outstanding shares.

Other Stocks to Consider

Here are some other oil and gas companies worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

ConocoPhillips (COP - Free Report) has an earnings ESP of +1.90% and carries a Zacks Rank #2 (Buy).

Hess Corporation (HES - Free Report) has an earnings ESP of +1.65% and carries a Zacks Rank #3 (Hold).

Marathon Oil Corporation (MRO - Free Report) has an earnings ESP of +1.35% and carries a Zacks Rank #3 (Hold).

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