Murphy Oil Misses Q4 Earnings & Revs - Analyst Blog


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Murphy Oil Corporation ( MUR ) announced fourth-quarter and full-year 2013 results. The company's fourth-quarter adjusted earnings from continuing operations were 67 cents per share, missing the Zacks Consensus Estimate by 40.2%. Quarterly results were 38.5% lower than the prior-year figure, primarily due to an increase in expenses for abandonment of operations at the Azurite field in Republic of Congo, decreased oil sales prices, and higher expenses for debt financing and administration.

On a GAAP basis, the company's earnings per share were 40 cents compared with 82 cents a year ago. The variance between GAAP and adjusted earnings from continuing operations was due to the combined impact of discontinued operations in U.K. downstream business, abandonment and other exit costs at Azurite field, tax benefits on investments in foreign territories, foreign exchange gains, synthetic crude oil royalty adjustments and expenses related to the spin-off of Murphy USA Inc. ( MUSA ).

Murphy Oil's yearly adjusted earnings from continuing operations of $4.25 per share lagged the Zacks Consensus Estimate by 20.3%. On a year-over-year basis, earnings decreased 8% owing to a rise in exploration expenses, lower oil sales prices and increased expenses for compensation.

Reported annual GAAP earnings was $5.94 per share, higher than the year-ago figure of $4.99 per share.

Total Revenue

In fourth-quarter 2013, Murphy Oil's top line came in at $1.3 billion, lagging the Zacks Consensus Estimate by 51.4%. However, the reported earnings improved 3.5% from the year-ago level primarily on the back of strong contribution from the U.S exploration and production ("E&P") operations.

The company's total revenues of $5.4 billion fell short of the Zacks Consensus Estimate by a substantial 72.4%. Reported revenues however surged 16.7% year over year, mainly due to improved performance from operations at the U.S, Canada and the Republic of Congo.

Quarterly Highlights

In the quarter under review, Murphy Oil's total worldwide production was 206,255 barrels of oil equivalents per day ("Boe/d"), down 2.6% year over year.

The company produced 139,660 barrels per day of crude oil, condensate and gas liquids, up 5.1% from the year-ago level of $132,918 barrels per day, on the back of increased volumes from the Eagle Ford Shale area. This was accompanied by higher oil production in Western Canada.

Average natural gas sales volumes decreased 16% year over year to 399,570 thousand cubic feet ("Mcf") per day. This was primarily due to a drop in gas production volumes at both the Tupper area in Western Canada as a result of voluntary drilling-curtailment measures caused by lower sales prices. In addition, a decline in production volume at the Kikeh field in Malaysia also impacted the quarterly figure.

The company sold crude oil, condensate and gas liquids at an average price of $90.77 per barrel, down 2.2% year over year. North American natural gas sales prices edged up 0.6% year over year to $3.36 per Mcf. Natural gas produced at offshore Sarawak, Malaysia was sold at $6.24 per Mcf on average, down from $6.78 per Mcf in the prior-year quarter.

Murphy Oil's exploration expenses were $157.1 million, up 14.5% year over year mainly due to an increase in dry hole costs as a result of unsuccessful exploratory drilling at the prospects named Madagascar in the Gulf of Mexico and Dufresne in Australia. In addition, higher seismic acquisition costs in Africa and Asia also added to the cost.

Financial Update

Murphy Oil's cash balance as of Dec 31, 2013 was $0.8 billion versus $0.9 billion a year ago.

As of Dec 31, 2013, long-term debt was $2.9 billion versus $2.2 billion as of Dec 31, 2012.

Net cash provided by operating activities during fourth-quarter 2013 was $960 million, higher than $955.1 million in the year-ago comparable period.

In fourth-quarter 2013, the company's total capital expenditure from continuing operations was $1.0 billion versus $1.4 billion in the third quarter of 2012.


For first-quarter 2014, Murphy Oil anticipates total worldwide production to average 205,000 Boe/d and sales volumes to likely average 196,000 Boe/d. The company also estimates total exploration expense to range between $60 million and $150 million for the first quarter of 2014.

Upcoming Release

Occidental Petroleum Corporation ( OXY ) is slated to release its fourth-quarter 2013 earnings on Jan 30. The Zacks Consensus Estimate is pegged at $1.69.

ConocoPhillips ( COP ) is slated to release its fourth-quarter 2013 earnings on Jan 30. The Zacks Consensus Estimate is pegged at $1.33.

Our Take

Murphy Oil continues with its drilling activities in the onshore Eagle Ford Shale area. In addition, the company is strengthening its presence in Asia, Africa and Australia. During 2013, Murphy Oil made three natural gas discoveries in Brunei Block CA-2 and started production at four new oil fields in Malaysia. These initiatives will enable the company to improve its reserves.

Murphy Oil expects to complete the divestiture of its U.K. downstream business in 2014. The divestiture will allow the company to concentrate more on E&P programs and focus on adding new assets to drive further value.

We note that Murphy Oil continues with its steady share repurchase program. Like 2012, the company repurchased common shares worth $500 million in 2013. This initiative may help the company to improve shareholders' value.

Murphy Oil currently has a Zacks Rank #3 (Hold).

CONOCOPHILLIPS (COP): Free Stock Analysis Report

MURPHY OIL (MUR): Free Stock Analysis Report

MURPHY USA INC (MUSA): Get Free Report

OCCIDENTAL PET (OXY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: COP , MUR , MUSA , OXY

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