Murphy Oil Announces Preliminary Second Quarter Earnings

01.08.2012  |  Business Wire

Murphy Oil Corporation (NYSE: MUR) announced today that income from
continuing operations was $295.4 ?million ($1.52 ?per diluted share) in
the 2012 second quarter, up from $280.0 ?million ($1.44 ?per diluted
share) in the second quarter 2011. The increase in 2012 earnings from
continuing operations was mostly attributable to improved downstream
results compared to the prior year′s quarter. Net income in the second
quarter of 2012 was also $295.4 million ($1.52 ?per diluted share)
compared to net income of $311.6 million ($1.60 per diluted share) in
the second quarter of 2011. Net income in the 2011 second quarter
included income from discontinued operations of $31.6 ?million ($0.16 per
diluted share), which related to operating results of two U.S.
refineries that were sold in the second half of 2011.

For the first six months of 2012, income from continuing operations was
$585.5 ?million ($3.01 ?per diluted share), an improvement from
$518.5 ?million ($2.66 per diluted share) in 2011. For the six-month
period of 2012, net income totaled the same $585.5 ?million ($3.01 ?per
diluted share), but net income of $580.5 ?million ($2.98 per diluted
share) for the first six months in ?2011 included income from
discontinued operations of $62.0 ?million ($0.32 per diluted share).

Second Quarter 2012 vs. Second Quarter 2011

Exploration and Production (E&P)

The Company′s income from E&P operations was $230.1 ?million in the
second quarter of 2012 compared to $243.3 million in the same quarter of
2011. The 2011 quarter included an after-tax gain of $13.1 ?million
associated with the sale of natural gas storage assets in Spain. Income
in the 2012 quarter was unfavorably affected by lower average realized
sales prices in the current period for the Company′s worldwide oil and
North American natural gas production. The just completed quarter also
had higher extraction costs, primarily due to the higher oil and gas
sales volumes, but also due to higher facility and well maintenance
costs and increased production in the Eagle Ford Shale area of South
Texas, which has higher capital amortization unit costs compared to the
Company′s average. The second quarter of 2012 had higher sales volumes
for crude oil and natural gas compared to 2011. Exploration expenses
were $96.6 ?million in the second quarter of 2012 compared to
$122.5 ?million in the same period of 2011, with the reduction in 2012
mainly attributable to a prior year dry hole at the Lengkuas prospect in
Indonesia. Dry hole expense was higher in the U.S. in the just completed
quarter due to write-off of the unsuccessful Deep Blue prospect in the
Gulf of Mexico.

Worldwide production averaged 188,575 barrels of oil equivalent per day
in the second quarter 2012, compared to 170,457 barrels of oil
equivalent per day in the same quarter in 2011. Total crude oil and gas
liquids production was 104,012 barrels per day in the second quarter of
2012 compared to 94,242 ?barrels per day in the 2011 quarter. The
increase in oil production in 2012 was primarily attributable to higher
gross production at the Kikeh field, offshore Sabah, as wells have been
brought on stream in association with the ongoing field development and
well work program. In addition, 2012 crude oil production in the United
States was higher than 2011 levels primarily due to an ongoing
development program in the Eagle Ford Shale area. Increases in Eagle
Ford production more than offset lower volumes produced at fields in the
Gulf of Mexico. Oil production at Syncrude in Western Canada was
adversely affected in the 2012 quarter by equipment maintenance. Crude
oil production at Terra Nova, offshore Eastern Canada, was also lower in
the 2012 quarter primarily due to the start of a 150 day shut-in for
equipment maintenance in June 2012. The Azurite field, offshore Republic
of the Congo, had lower crude oil production in 2012 due to well decline
and one well being offline during the quarter pending a mechanical
workover. Crude oil and gas liquids sales volumes averaged
104,768 ?barrels per day in the second quarter of 2012 compared to
90,004 ?barrels per day in the 2011 quarter. Natural gas sales volumes
averaged 507 ?million cubic feet per day in the second quarter of 2012
compared to 457 ?million cubic feet per day in the 2011 quarter. The
increase in natural gas sales volumes in 2012 was attributable to higher
gas production at the Tupper West area in British Columbia, Canada. The
Company′s worldwide crude oil and condensate sales prices averaged
$94.33 ?per barrel for the second quarter of 2012 compared to $99.37 per
barrel in the second quarter 2011. North American natural gas sales
prices averaged $2.15 ?per thousand cubic feet (MCF) in the 2012 quarter
compared to $4.26 ?per MCF in the same quarter of 2011. Natural gas
produced offshore Sarawak, Malaysia was sold at an average price of
$7.88 ?per MCF during the second quarter 2012 compared to an average
price of $6.40 per MCF in the second quarter 2011.

Refining and Marketing (R&M)

The Company previously announced its intent to sell its U.K. R&M assets.
Ongoing sale activities related to these assets continue.

The Company′s refining and marketing operations generated income from
continuing operations of $80.5 ?million in the second quarter 2012
compared to $60.1 ?million in the same quarter of 2011. The R&M earnings
improvement in the 2012 second quarter occurred primarily in the United
Kingdom, where the quarterly profit was $7.2 ?million in 2012 compared to
a quarterly loss of $15.8 ?million in 2011.

U.S. income of $73.3 ?million in the 2012 quarter was slightly below the
2011 quarterly income of $75.9 ?million, primarily due to weaker results
for ethanol production facilities in the current period. The ethanol
production facilities incurred losses in the 2012 quarter resulting from
lower margins as the average sales prices for ethanol fell more than the
average decline in the price of corn compared to the second quarter of
2011. U.S. retail marketing margins averaged $0.197 per gallon in the
2012 quarter compared to $0.199 per gallon in 2011. Fuel sales volume
per store in the 2012 quarter was 2.6% below 2011 levels, while
merchandise sales per store were down 1.9% in the 2012 quarter compared
to the prior year.

The favorable result in the U.K. in 2012 compared to 2011 was primarily
due to improved refining margins at the Milford ?Haven, Wales refinery.
In addition, marketing operations had better average product margins in
the 2012 quarter. Total U.K. unit margins averaged a positive $1.26 per
barrel in the 2012 quarter, compared to a negative margin of $1.76 ?per
barrel a year ago. Milford Haven processed 130,059 ?barrels of crude oil
per day in the 2012 quarter, down from a record quarterly crude oil
throughput volume of 136,428 barrels per day during the 2011 quarter.

*Includes 166,249 ?bbls. per day in the 2011 three-month period and
160,032 ?bbls. per day in the 2011 six-month period related to
discontinued operations.

Corporate

Corporate functions incurred net costs of $15.2 ?million in the 2012
second quarter compared to net costs of $23.4 million in the 2011 second
quarter, with the improved result in 2012 attributable to both lower net
interest expense and favorable impacts on transactions denominated in
foreign currencies. Net interest expense was favorable in 2012 primarily
due to a higher proportion of financing costs being capitalized to
ongoing oil development projects offshore Malaysia. Foreign currency
effects were an after-tax gain of $10.7 ?million in the 2012 quarter
compared to an after-tax gain of $4.9 ?million in the 2011 quarter.

First Six Months 2012 vs. First Six Months 2011

Exploration and Production (E&P)

The Company′s E&P business earned $551.7 ?million in the first six months
of 2012 compared to earnings of $503.7 ?million in the same period of
2011. Earnings in 2012 were favorably affected by higher average sales
prices for crude oil and Sarawak natural gas compared to a year ago. The
Company also benefited from higher crude oil and natural gas sales
volumes in 2012 compared to 2011. North American natural gas prices were
much weaker in 2012 than the previous year, but sales prices were higher
for natural gas production in Malaysia in the current period.
Exploration expenses were $149.6 ?million in 2012, down from
$218.8 ?million in 2011, with the lower costs in the 2012 period
primarily related to unsuccessful 2011 wildcat drilling offshore
Indonesia and Suriname. The 2011 period included a $13.1 ?million
after-tax gain on sale of gas storage assets in Spain.

Worldwide production averaged 191,836 ?barrels of oil equivalents per day
during the first six months of 2012 compared to 176,272 ?barrel
equivalents per day in the same period a year ago. Crude oil and gas
liquids production for the first six months of 2012 averaged
105,751 ?barrels per day compared to 103,725 ?barrels per day in 2011. The
oil production increase in 2012 was mostly caused by higher crude oil
volumes produced in the Eagle Ford Shale. Additionally, crude oil
production in 2012 was higher in all areas of Malaysia. However,
production in the Gulf of Mexico was lower in the current year due to
continued field decline for mature properties. Also, crude oil
production at the Azurite field in Republic of the Congo was lower in
the current year due to decline and one well being offline since March
2012 pending a mechanical workover. Natural gas sales volumes were
516 ?million cubic feet per day in 2012 compared to 435 million cubic
feet per day in 2011, with the increase primarily resulting from
additional gas volumes produced at Tupper West in British ?Columbia.
Tupper West came on production in February 2011. Crude oil and
condensate sales prices averaged $97.21 ?per barrel in the 2012 period
compared to $93.04 per barrel in 2011. North ?American natural gas was
sold at an average price of $2.36 ?per MCF in 2012, significantly lower
than the $4.30 ?per MCF in 2011. Sales prices for Sarawak natural gas
production averaged $7.80 per MCF during the first six months of 2012
compared to $6.15 per MCF during 2011.

Refining and Marketing (R&M)

The Company′s refining and marketing earnings from continuing operations
were $76.3 ?million in the first six months of 2012, compared to earnings
of $60.4 ?million in the same 2011 period. R&M profit in the U.S. was
$66.1 ?million in the first six months of 2012, down from $84.9 ?million
in the 2011 period. The 2012 earnings reduction was primarily
attributable to weaker U.S. retail marketing margins, which averaged
$0.137 per gallon in the 2012 six-month period compared to $0.146 per
gallon in the 2011 six months. Fuel sales per store month in 2012 were
4.5% lower than in 2011, while merchandise sales per store and
merchandise margin as a percent of sales were about flat in 2012
compared to 2011. Ethanol margins were lower in 2012 than in 2011 as
average ethanol prices declined more than corn prices in the current
year.

R&M operations in the U.K. in the six-month 2012 period generated a
profit of $10.2 ?million compared to a loss of $24.5 ?million in the prior
year, as the business experienced improved margins for both the Milford
Haven, Wales, refinery and marketing operations in the current period.
U.K. unit margins averaged a positive $1.03 per barrel in the first six
months of 2012 compared to a negative margin of $1.22 per barrel in the
2011 period.

Corporate

Corporate after-tax costs were $42.5 ?million in the first six months of
2012 compared to after-tax costs of $45.6 ?million in the 2011 period.
The reduction in net costs was primarily attributable to lower net
interest expense in 2012 compared to 2011 caused by a higher proportion
of financing costs being capitalized to ongoing oil and natural gas
development projects in the current period. The 2012 results included a
$9.1 ?million after-tax gain on transactions denominated in foreign
currencies compared to an after-tax gain of $3.9 ?million in 2011.
Administrative expenses associated with corporate activities were higher
in the 2012 period compared to the prior year due to additional costs
for employee compensation and professional fees.

Steven A. Coss?, President and Chief Executive Officer, commented, 'The
second quarter of 2012 saw meaningful contributions from both the
upstream and downstream business segments. Our Eagle Ford oil
development activities have continued the growth momentum, with daily
production volumes exceeding 14,000 net barrels of oil equivalent in
recent days. Field development work at our important Kikeh oil field
continues to go well. In the Gulf of Mexico, we were successful in
acquiring 14 new exploration blocks in the recent lease sale and our
Board recently sanctioned the development of the Dalmatian property in
the DeSoto ?Canyon area. We continue to be encouraged about the Company's
exploration program, where in the Central Dohuk block in the Kurdistan
region of Iraq our first well has reached target depth and is now being
tested and our remaining 2012 drilling program calls for offshore wells
in Malaysia, Congo, the Gulf of Mexico and Australia. Downstream
operations remain steady in both the U.S. and U.K. as we continue to
offer value priced fuel products to the driving public in both markets.

'We anticipate total worldwide production volumes of about 183,000
barrels of oil equivalent per day in the third quarter of 2012. Sales
volumes of oil and natural gas are projected to average 179,000 barrels
of oil equivalent per day during this period. We anticipate full year
2012 production volumes of 193,000 barrels of oil equivalent per day. At
the current time, we expect net income in the third quarter to range
between $0.90 and $1.15 ?per diluted share. Exploration expense should
total between $50 ?million and $120 ?million during the quarter. The third
quarter estimate includes projected earnings from our downstream
businesses of approximately $45 ?million. Results could vary based on
commodity prices, drilling results, timing of crude oil and natural gas
sales, retail marketing and U.K. refining margins, and foreign exchange
movements.?

The public is invited to access the Company′s conference call to discuss
second quarter 2012 results on Thursday, August 2, at 12:00 p.m. CDT
either via the Internet through the Investor ?Relations section of Murphy
Oil′s Web site at http://www.murphyoilcorp.com/ir
or via ?telephone by dialing 1-800-946-0706. The telephone reservation
number for the call is 2949778. Replays of the call will be available
through the same address on Murphy Oil′s Web ?site, and a recording of
the call will be available through August 6 by calling 1-888-203-1112
and using the same reservation number shown above. Audio downloads of
the conference will be available on Murphy′s Web site through September
4 and via Thomson StreetEvents for their service subscribers.

This press release contains forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995.These
statements, which express management′s current views concerning future
events or results, are subject to inherent risks and uncertainties.Factors
that could cause actual results to differ materially from those
expressed or implied in our forward-looking statements include, but are
not limited to, the volatility and level of crude oil and natural gas
prices, the level and success rate of our exploration programs, our
ability to maintain production rates and replace reserves, customer
demand for our products, political and regulatory instability, and
uncontrollable natural hazards.For further discussion of risk
factors, see Murphy′s 2011 Annual Report on Form 10-K on file with the
U.S. Securities and Exchange Commission.Murphy undertakes no
duty to publicly update or revise any forward-looking statements.