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Murphy EPS Takes a Beating, Revs Up - Analyst Blog
Murphy Oil Corporation ( MUR ) engaging in the exploration, production, refining and marketing of oil and gas in the U.S. and the U.K announced fourth quarter and fiscal 2011 results. Loss from continuing operations was 59 cents, far below the Zacks Consensus Estimate of earnings of $1.41 and the year-ago earnings of 77 cents per share. The significant year-over-year decline reflects an impairment charge of $368.6 million for the Azurite field in the Republic of the Congo. However, this was partially offset by higher year-over-year sales prices for crude oil production.
In the reported quarter, loss from discontinued operations related to the final adjustments associated with the sale of the Superior, Wisconsin refinery and the Meraux, Louisiana refinery was $0.6 million, which comes to a nil figure in per share terms. Therefore, the company reported a loss per share of 59 cents versus earnings of 90 cents per share a year ago.
Excluding income from discontinued operations of 68 cents per share in fiscal 2011, income from continuing operations was $3.81, below the Zacks Consensus Estimate of $5.24 and the fiscal 2010 figure of $4.03. Including income from discontinued operations, the company reported net income of $4.49 per share compared with $4.13 per share in fiscal 2010.
Murphy's total revenue for fourth-quarter 2011 grew 22.5% to $6.82 billion from $5.6 billion reported in the year-ago period. The company experienced significant growth in both the Exploration and Production and Refining and Marketing segments. Reported quarter revenue was also higher than the Zacks Consensus Estimate by $399.5 million.
Top-line in the fiscal year was $27.74 billion, up 37.6% from the year-ago figure of $20.17 billion. However, it failed to meet the Zacks Consensus Estimate of $28.34 billion.
Exploration and Production: The fourth quarter 2011 revenue from this division was $1.19 billion, up 28.2% year over year.
Refining and Marketing: Reported quarter revenue from this division grew by 20.6% to $5.6 billion from $4.7 billion in the year-ago quarter.
Corporate : In the fourth quarter 2011, revenues from Corporate activities were ($10.2) million versus $1.7million in the year-earlier period.
Murphy's total worldwide production in the most recent quarter was 190,103 barrels of oil equivalents per day (boe/d), up 6.8% year over year.
The increase in total output was primarily due to higher natural gas volume production, whereas oil production volume declined over the prior-year period.
Natural gas sales volumes spurred 33.6% year over year to 488 million cubic feet per day driven by higher natural gas production offshore Sarawak, Malaysia and in the Tupper area in British Columbia.
Murphy's worldwide crude oil and condensate sales price averaged $96.90 per barrel for the fourth quarter of 2011 compared with $73.60 per barrel in the fourth quarter of 2010, reflecting an increase of 31.7%.
North American natural gas sales prices decreased 28 cents per thousand cubic feet ( MCF ) in the quarter to $3.67 per MCF. However, natural gasproduced offshore Sarawak Malaysia was sold at an average of $7.85 per MCF in the fourth quarter 2011, up from $5.57 per MCF in the fourth quarter 2010.
Exploration expenses during the quarter rose 67.3% to $185.4 million from $110.8 million recorded in the fourth quarter 2010. The increase in expenses was due to higher dry hole costs in Brunei and southern Alberta, which were partially offset by lower dry hole costs in Republic of the Congo.
Interest expenses of the company at the end of the quarter were $14.2 million versus $11.7 million a year ago. The increase was attributable to higher interest for tax and other settlements and lower amounts of interest capitalized to oil and natural gas development projects.
Net cash provided by operating activities during the fourth quarter 2011 was $259.3 million, down 72% from $927.7 million in the fourth quarter 2010. Total capital expenditure was $769.4 million versus $706.6 million in the year-ago period.
Murphy estimates total production in the first quarter 2012 to average 195,000 boe/d and sales volumes to clock 193,000 boe/d as it expects to work on the initiatives taken in 2011. The company expects the full-year 2012 average production to be 200,000 boe/d.
Murphy expects first quarter 2012 earnings in the range of $1.30 to $1.40 per share. This earnings projection takes into account the downstream contribution of approximately $22 million, and total exploration expense within a range of $60 million to $80 million.
Murphy possesses one of the best upstream affluence themes among the domestic oil and natural gas integrated companies and independent E&P group. Murphy Oil continues to augment shareholder value by maintaining a superior E&P production profile. The exploration line-up provides a strong production profile, translating into a robust EPS-growth opportunity.
However, we remain on the sidelines given the volatile commodity environment and investor unrest due to the failures at the company's exploration wells.We have a long-term Neutral recommendation on the stock. The company presently retains a short-term Zacks #2 Rank (Buy).
Based in El Dorado, Arkansas, Murphy Oil Corporation is a global oil and gas exploration and production company with refining and marketing operations in the U.S. and the U.K. The company conducts its upstream operations in the U.S., Canada, Congo, the U.K., and Malaysia. The company mainly competes with BP plc ( BP ) and Exxon Mobil Corporation ( XOM ).
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