Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MUR > SEC Filings for MUR > Form 10-Q on 7-May-2014All Recent SEC Filings

Show all filings for MURPHY OIL CORP /DE

Form 10-Q for MURPHY OIL CORP /DE


7-May-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Murphy's net income in the first quarter of 2014 was $155.3 million ($0.85 per diluted share) compared to net income of $360.6 million ($1.88 per diluted share) in the first quarter of 2013. The 2014 results included a loss from discontinued operations of $14.0 million ($0.08 per diluted share) and the 2013 results included income from discontinued operations of $177.9 million ($0.93 per diluted share). Excluding discontinued operations, income from continuing operations was $169.3 million ($0.93 per diluted share) in the first quarter of 2014 compared to $182.7 million ($0.95 per diluted share) in the same quarter of 2013. The 2014 continuing operating results were below 2013 results primarily due to higher exploration costs of $30.0 million in the most recent quarter.

Murphy's income by type of business is presented below.

                                                      Income (Loss)
                                                   Three Months Ended
                                                        March 31,
             (Millions of dollars)                 2014           2013
             Exploration and production          $   210.6         231.9
             Corporate and other                     (41.3 )       (49.2 )

             Income from continuing operations   $   169.3         182.7

In the 2014 first quarter, the Company's exploration and production operations earned $210.6 million compared to $231.9 million in the 2013 quarter. Income in the 2014 quarter was favorably impacted by higher oil sales volumes, but this was more than offset by higher exploration costs in the current quarter. The corporate function had after-tax costs of $41.3 million in the 2014 first quarter compared to after-tax costs of $49.2 million in the 2013 period with the improvement in 2014 primarily due to more favorable effects from transactions dominated in foreign currencies.

Exploration and Production

Results of exploration and production operations are presented by geographic
segment below.



                                                              Income (Loss)
                                                           Three Months Ended
                                                                March 31,
    (Millions of dollars)                                   2014          2013
    Exploration and production - continuing operations
    United States                                        $    103.1         93.8
    Canada                                                     67.6         13.3
    Malaysia                                                  162.3        205.2
    Other International                                      (122.4 )      (80.4 )

    Total                                                $    210.6        231.9

United States exploration and production operations generated earnings of $103.1 million in the first quarter of 2014 compared to earnings of $93.8 million in the 2013 quarter. Earnings improved in 2014 primarily due to higher crude oil production and sales volumes compared to the prior year. The increase in production was achieved in the Eagle Ford Shale area of South Texas, where an ongoing development project is proceeding. At March 31, 2014, the Company employed eight drilling rigs in the Eagle Ford Shale. U.S. results also benefited in 2014 from higher natural gas sales prices, but results were unfavorably affected by lower oil sales prices, an unfavorable mark-to-market adjustment on open crude oil swap contracts related to the Eagle Ford Shale, and higher expenses for exploration and production-related activities. The Company recorded a non-cash, unrealized pretax charge of $18.4 million during the first quarter of 2014 associated with marking-to-market open West Texas Intermediate crude oil swaps contracts. While lease operating expenses were relatively flat with the prior year, production taxes and depreciation expense in the U.S. increased $11.0 million and $37.7 million, respectively, in 2014 compared to 2013 mostly due to higher production in the Eagle Ford Shale area. Exploration expenses in the 2014 quarter were $8.7 million above 2013 levels due to both carryover dry hole expense associated with a well drilled in 2013 and higher costs for seismic in the Gulf of Mexico. Selling and general expenses in the 2014 period increased $6.9 million from the prior year primarily due to higher costs for employee compensation, professional services and home office support.


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)

Results of Operations (Contd.)

Exploration and Production (Contd.)

Operations in Canada had earnings of $67.6 million in the first quarter 2014 compared to earnings of $13.3 million in the 2013 quarter. Canadian earnings increased in the 2014 quarter due to a combination of higher oil sales volumes at Terra Nova and Syncrude, higher sales prices for heavy oil and natural gas production and lower exploration expenses in the current period. Oil sales volume increased in the 2014 quarter compared to 2013 primarily due to higher production at Syncrude and the timing of sales transactions at Terra Nova. Natural gas sales volumes decreased in 2014 due to the Company voluntarily restricting development drilling in recent years in the Tupper and Tupper West areas due to historically weak gas sales prices in this region during recent years. Oil sales prices in 2014 were above the prior year in most areas of Canada, especially in the heavy oil area where sales prices were extremely weak during the 2013 quarter. Exploration expense in 2014 was $30.9 million below the prior year primarily due to dry hole costs recorded in 2013 associated with drilling in the Muskwa Shale area of Alberta. Operating expense for the synthetic oil business increased $9.0 million in 2014 due to higher costs for fuel and maintenance at Syncrude. Depreciation expense for Canadian conventional operations declined $13.7 million in 2014 primarily due to lower levels of natural gas production compared to the prior year.

Operations in Malaysia reported earnings of $162.3 million in the 2014 quarter compared to earnings of $205.2 million during the same period in 2013. Earnings in 2014 were below 2013 levels in Malaysia primarily due to lower oil sales volumes at the Kikeh field, where production was shut-in for 18 days of the 2014 quarter to tie-in the new Siakap North-Petai (SNP) field to the Kikeh production facilities. The 2014 quarter benefited from higher average crude oil sales prices, but average prices for Sarawak gas production declined predominantly due to contractually required revenue sharing with the local government on a higher percentage of gas volumes produced. Lease operating expense in 2014 was $5.3 million below 2013 primarily due to lower oil sales volumes in the current quarter. Depreciation expense was $9.1 million more in the 2014 quarter due to higher capital amortization unit rates for the newer oil production areas, including offshore Sarawak oil fields and the Kakap field.

Other international operations reported a loss of $122.4 million in the first quarter of 2014 compared to a loss of $80.4 million in the 2013 period. The unfavorable variance in the current quarter was primarily associated with higher costs for unsuccessful exploratory drilling operations compared to 2013. Dry hole expense of $81.1 million in the 2014 quarter included an unsuccessful deepwater well drilled at the Bamboo prospect in the Ntem block, offshore Cameroon. Other exploration expenses in 2014 were lower by $18.8 million compared to 2013, primarily due to more geophysical costs in 2013 associated with seismic data and other studies in Australia, Cameroon and Indonesia. The 2013 first quarter included oil revenue and associated production expense at the Azurite field, offshore Republic of the Congo. This field ceased production in late 2013.

On a worldwide basis, the Company's crude oil and condensate sales prices averaged $96.43 per barrel in the first quarter 2014 compared to $96.00 per barrel in the 2013 period. U.S. natural gas liquids (NGL) associated with Eagle Ford Shale production were sold at an average of $33.63 per barrel in the 2014 quarter. During the early part of 2013, these gas liquids were sold as part of the Eagle Ford Shale wet gas stream. Total hydrocarbon production averaged 204,436 barrels of oil equivalent per day in the 2014 first quarter, up from 201,876 barrels equivalent per day produced in the 2013 quarter. Average crude oil and gas liquids production was 137,755 barrels per day in the first quarter of 2014 compared to 126,888 barrels per day in the first quarter of 2013, with the more than 8% increase primarily attributable to higher crude oil and NGL production in the Eagle Ford Shale area in South Texas, where an ongoing development program continues. Crude oil production in Malaysia was lower in the 2014 quarter due to Kikeh wells shut-in for 18 days to tie-in the SNP field into the Kikeh production facility. North American natural gas sales prices averaged $4.15 per thousand cubic feet (MCF) in the 2014 quarter compared to $3.11 per MCF in the same quarter of 2013. Prices were stronger in the current year due to more severe winter weather across most of North America in 2014. Natural gas produced in 2014 at fields offshore Sarawak was sold at $5.59 per MCF, compared to a sale price of $6.82 per MCF in the 2013 quarter. The Sarawak gas price declined in 2014 due to contractually required revenue sharing with the local government for a larger portion of these gas volumes sold. Natural gas sales volumes averaged 400 million cubic feet per day in the first quarter 2014, down from 450 million cubic feet per day in the 2013 quarter. The 11% reduction in natural gas sales volumes in 2014 was primarily due to declining natural gas production at the Tupper and Tupper West areas in British Columbia. Development drilling activities in the Tupper area have been voluntarily curtailed in the last few years due to historically weak North American gas sales prices during recent years. Additionally, 2014 natural gas sales volumes from fields offshore Sabah were below 2013 levels primarily due to wells shut-in for tie-in of the SNP field into the Kikeh production facility during the 2014 quarter. Natural gas sales volumes from fields offshore Sarawak in Malaysia increased during the 2014 quarter due to higher product demand from the local purchaser.

Additional details about results of oil and gas operations are presented in the tables on page 21.


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)



Results of Operations (Contd.)

Exploration and Production (Contd.)



Selected operating statistics for the three-month periods ended March 31, 2014
and 2013 follow.



                                                                    Three Months Ended
                                                                        March 31,
Exploration and Production                                         2014           2013
Net crude oil and condensate produced - barrels per day            131,573        126,822
Continuing operations                                              131,573        125,173
United States - Eagle Ford Shale                                    40,755         25,345
  - Gulf of Mexico and other                                        11,649         14,717
Canada - light                                                          28            228
  - heavy                                                            7,996          8,519
  - offshore                                                         8,846          9,243
  - synthetic                                                       13,695         12,417
Malaysia                                                            48,604         53,289
Republic of the Congo                                                   -           1,415
Discontinued operations - United Kingdom                                -           1,649
Net crude oil and condensate sold - barrels per day                127,368        131,410
Continuing operations                                              127,368        129,856
United States - Eagle Ford Shale                                    40,755         25,345
  - Gulf of Mexico and other                                        11,649         14,717
Canada - light                                                          28            228
  - heavy                                                            7,996          8,519
  - offshore                                                         9,866          7,943
  - synthetic                                                       13,695         12,417
Malaysia                                                            43,379         53,845
Republic of the Congo                                                   -           6,842
Discontinued operations - United Kingdom                                -           1,554
Net natural gas liquids produced - barrels per day                   6,182             66
United States - Eagle Ford Shale                                     4,299             -
  - Gulf of Mexico and other                                         1,088             -
Canada                                                                  22             -
Malaysia                                                               773             66
Net natural gas liquids sold - barrels per day                       6,454             69
United States - Eagle Ford Shale                                     4,299             -
  - Gulf of Mexico and other                                         1,088             -
Canada                                                                  22             -
Malaysia                                                             1,045             69
Net natural gas sold - thousands of cubic feet per day             400,086        449,925
Continuing operations                                              400,086        447,014
United States - Eagle Ford Shale                                    27,479         21,171
  - Gulf of Mexico and other                                        33,678         38,313
Canada                                                             147,965        191,799
Malaysia - Sarawak                                                 161,661        149,083
   - Block K                                                        29,303         46,648
Discontinued operations - United Kingdom                                -           2,911
Total net hydrocarbons produced - equivalent barrels per day*      204,436        201,876
Total net hydrocarbons sold - equivalent barrels per day*          200,503        206,467

These operating statistics continue on the following page.

* Natural gas converted on an energy equivalent basis of 6:1


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)



Results of Operations (Contd.)



                                                         Three Months Ended
                                                              March 31,
       Exploration and Production (Continued)             2014          2013
       Weighted average sales prices
       Crude oil and condensate - dollars per barrel
       United States - Eagle Ford Shale                $    97.47       105.41
              - Gulf of Mexico and other                   100.25       108.43
       Canada (1) - light                                   95.09        81.91
            - heavy                                         51.13        28.04
            - offshore                                     107.51       111.44
            - synthetic                                     95.34        94.30
       Malaysia (2)                                        100.60        94.44
       Republic of the Congo (2)                               -        112.89
       United Kingdom - discontinued operations                -        113.19
       Natural gas liquids - dollars per barrel
       United States - Eagle Ford Shale                     33.63           -
              - Gulf of Mexico and other                    38.61           -
       Canada                                               72.14           -
       Malaysia                                             92.78       101.59
       Natural gas - dollars per thousand cubic feet
       United States - Eagle Ford Shale                $     4.58         3.69
              - Gulf of Mexico and other                     5.03         3.42
       Canada (1)                                            3.87         2.99
       Malaysia - Sarawak (2)                                5.59         6.82
          - Block K                                          0.24         0.24
       United Kingdom - discontinued operations (1)            -         12.30

(1) U.S. dollar equivalent.

(2) Prices are net of payments under terms of the respective production sharing contracts.


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)



Results of Operations (Contd.)

Exploration and Production (Contd.)



OIL AND GAS OPERATING RESULTS (unaudited)



                                                             Canada
                                          United      Conven-        Syn-
(Millions of dollars)                     States       tional       thetic       Malaysia       Other          Total
Three Months Ended March 31, 2014
Oil and gas sales and other revenues      $ 485.5        180.2        117.5          492.8           -         1,276.0
Lease operating expenses                     76.5         40.8         63.7           81.3           -           262.3
Severance and ad valorem taxes               23.9          1.3          1.1             -            -            26.3
Depreciation, depletion and
amortization                                168.1         67.8         14.1          143.0          1.1          394.1
Accretion of asset retirement
obligations                                   4.1          1.5          2.3            4.1           -            12.0
Exploration expenses
Dry holes                                     6.8           -            -              -          81.1           87.9
Geological and geophysical                   14.5          0.1           -              -          15.5           30.1
Other                                         1.7          0.3           -              -           5.6            7.6

                                             23.0          0.4           -              -         102.2          125.6
Undeveloped lease amortization                6.7          4.9           -              -           1.3           12.9

Total exploration expenses                   29.7          5.3           -              -         103.5          138.5

Selling and general expenses                 23.0          7.9          0.3            3.4         17.1           51.7
Other expenses                                 -           0.1           -              -           0.7            0.8

Results of operations before taxes          160.2         55.5         36.0          261.0       (122.4 )        390.3
Income tax provisions                        57.1         14.5          9.4           98.7           -           179.7

Results of operations (excluding
corporate overhead and interest)            103.1         41.0         26.6          162.3       (122.4 )        210.6

Three Months Ended March 31, 2013
Oil and gas sales and other revenues      $ 408.9        155.4        105.4          560.0         69.3        1,299.0
Lease operating expenses                     77.5         42.5         54.7           86.6         75.9          337.2
Severance and ad valorem taxes               12.9          0.9          1.3             -            -            15.1
Depreciation, depletion and
amortization                                130.4         81.5         13.7          133.9          1.2          360.7
Accretion of asset retirement
obligations                                   3.3          1.5          2.7            3.3          1.1           11.9
Exploration expenses
Dry holes                                     0.7         30.5           -             0.4          9.4           41.0
Geological and geophysical                   12.7          0.1           -             0.3         26.4           39.5
Other                                         1.5          0.3           -              -          10.8           12.6

                                             14.9         30.9           -             0.7         46.6           93.1
Undeveloped lease amortization                6.1          5.3           -              -           4.0           15.4

Total exploration expenses                   21.0         36.2           -             0.7         50.6          108.5

Selling and general expenses                 16.1          6.4          0.2            0.5         14.2           37.4

Results of operations before taxes          147.7        (13.6 )       32.8          335.0        (73.7 )        428.2
Income tax provisions (benefits)             53.9         (2.8 )        8.7          129.8          6.7          196.3

Results of operations (excluding
corporate overhead and interest)             93.8        (10.8 )       24.1          205.2        (80.4 )        231.9

Due to the shutdown of production operations in Republic of the Congo in late 2013, the Company now includes the results of these operations in the Other exploration and production segment in the above table.


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)

Results of Operations (Contd.)

Corporate

Corporate activities, which include interest income and expense, foreign exchange effects, and corporate overhead not allocated to operating functions, had net costs of $41.3 million in the 2014 first quarter compared to net costs of $49.2 million in the first quarter of 2013. The net costs for corporate activities in 2014 were less than 2013 primarily due to more favorable impacts from transactions denominated in foreign currencies and lower corporate administrative costs, but these were somewhat offset by higher net interest expense in the just completed quarter. The Company had after-tax gains of $3.1 million in the 2014 quarter on transactions denominated in foreign currencies compared to an after-tax loss of $4.1 million in the 2013 quarter. Additionally, corporate activities in 2014 benefited from lower levels of administrative costs after allocation to exploration and production or discontinued operations. The Company's net interest expense increased $10.4 million in 2014 due to higher average borrowing levels coupled with lower levels of interest capitalized to oil field development projects.

Discontinued Operations

The Company has presented a number of businesses as discontinued operations in its consolidated financial statements. These businesses principally included:

U.K. refining and marketing company held for sale at March 31, 2014. Weaker operating results in the 2014 quarter compared to the prior year were primarily attributable to lower refining margins in the current period.

U.S. retail marketing company spun-off to shareholders on August 30, 2013. Results of operations were included in the Company's 2013 financial statements through the date of spin-off.

U.K. oil and gas assets sold through a series of transactions in the first half of 2013. The Company's 2013 financial statements included the results of operations through the respective dates the assets were sold, plus the cumulative gain realized upon sale. The three months ended March 31, 2013 included an after-tax gain of $147.4 million on sale of two properties.

The results of these operations for the 2013 and 2014 first quarters are reflected in the following table.

                                                       Three Months Ended
                                                            March 31,
        (Millions of dollars)                          2014           2013
        U.K. refining and marketing                  $   (13.8 )        (4.1 )
        U.S. refining and marketing                         -           29.4
        U.K. exploration and production                   (0.2 )       152.6

        Income (loss) from discontinued operations   $   (14.0 )       177.9


Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.)



Results of Operations (Contd.)

Discontinued Operations (Contd.)



Selected operating statistics for the U.K. refining and marketing operations for
the three-month periods ended March 31, 2014 and 2013 follow.



                                                                 Three Months Ended
                                                                      March 31,
                                                               2014              2013
United Kingdom refining and marketing - unit margins
per barrel                                                   $   (0.82 )           (0.03 )
Petroleum and other products sold in the U.K. - barrels
per day                                                        127,655           118,278
Gasoline                                                        45,923            44,510
Kerosine                                                        18,149            15,105
Diesel and home heating oils                                    42,102            42,031
Residuals                                                       10,236            12,698
LPG and other                                                   11,245             3,934
U.K. refinery inputs - barrels per day                         119,555           115,768
Milford Haven, Wales - crude oil                               115,564           112,411
    - other feedstocks                                           3,991             3,357
U.K. refinery yields - barrels per day                         119,555           115,768
Gasoline                                                        41,587            40,420
Kerosine                                                        16,822            15,465
Diesel and home heating oils                                    38,160            40,604
Residuals                                                       11,279            12,135
LPG and other                                                    9,101             4,160
Fuel and loss                                                    2,606             2,984

The Company has announced that it plans to exit the U.K. refining and marketing business. On April 3, 2014, the Company announced that its U.K. downstream subsidiary had entered into a period of consultation with its employees concerning the future of the subsidiary and the Milford Haven refinery. The Company continues to explore its options regarding the U.K. downstream business. Should the Company be unable to sell its U.K. refining and marketing assets on acceptable terms, borrowings under credit facilities at the end of 2014 would be . . .

  Add MUR to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MUR - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.