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Murphy (MUR) Q1 Loss Lower than Expected, Keeps '16 View

Murphy Oil Corporation MUR reported a first-quarter 2016 loss of 66 cents per share, narrower than the Zacks Consensus Estimate of a loss of 87 cents. This amounted to a positive surprise of 24.1%. In the year-ago quarter, the company reported a loss of $1.11 per share.

 

On a GAAP basis, net loss per share was $1.16 compared with a loss of 8 cents per share a year ago. The variance between the adjusted and GAAP figures was primarily due to impairment of assets, mark-to-market loss on crude oil derivative contracts, restructuring charges and foreign exchange gains.

Revenues

In the quarter under review, Murphy Oil’s revenues came in at $430.3 million, beating the Zacks Consensus Estimate of $428 million marginally by 0.5%. However, on a year-over-year basis, reported revenues tanked 53.3% mainly due to lower exploration and production revenues from the U.S. and global operations.

Highlights of the Release

Murphy Oil produced 196,600 barrels of oil equivalent per day (BOE/d) in the first quarter, above the guidance range of 190,000–194,000 BOE/d. Production exceeded the guidance due to higher oil production from the Eagle Ford area in Texas, increased uptime at Syncrude, higher natural gas production from the Montney area in Western Canada, and higher oil production in both offshore Sabah, Malaysia and offshore Canada.

Total net hydrocarbon sales volume was 192,815 BOE/d in the quarter, down 16.2% from 230,149 BOE/d a year ago.

Murphy Oil’s total costs and expenses decreased 33.1% year over year to $695.3 million.

Lease operating expenses in the first quarter decreased 31.5% to $159.1 million.

The company spent $32.1 million as interest expenses, up 8.8% from $29.5 million a year ago.

Financial Condition

Murphy Oil had cash and cash equivalents of $423.1 million as of Mar 31, 2016, compared with $283.2 million as of Dec 31, 2015.

Long-term debt was $3,409.5 million as of Mar 31, 2016, compared with $3,040.6 million as of Dec 31, 2015.

Net cash from operating activities in the first quarter was $43.3 million, way lower than $533.9 million in the year-ago period.

In the reported quarter, the company’s total capital expenditure was $144.9 million compared with $612.9 million in the year-ago quarter.

Guidance

Murphy Oil expects second-quarter 2016 and full year total net production of 177,000–180,000 BOE/d and 180,000–185,000 BOE/d, respectively. Total net sales for second-quarter 2016 are expected to be 177,000 BOE/d.

The company estimates total exploration expense of $45 million in the second quarter of 2016.

Murphy Oil reiterated its revised capital expenditure guidance of $580 million for 2016. The new guidance, provided on Feb 24, 2016, was down 29.7% from the prior capital expenditure budget of $825 million.

Peer Releases

Noble Energy, Inc. NBL reported adjusted loss of 53 cents per share for the first quarter of 2016, which came in line with the Zacks Consensus Estimate.

Devon Energy Corporation DVN reported first-quarter 2016 adjusted loss per share of 53 cents, narrower than the Zacks Consensus Estimate of a loss of 60 cents.

Anadarko Petroleum Corp. APC reported a first-quarter 2016 adjusted loss of $1.12 per share, narrower than the Zacks Consensus Estimate of a loss of $1.19.

Our View

Murphy Oil’s loss in the first quarter was narrower than our expectation. Murphy Oil has also undertaken initiatives to divest some non-core assets and concentrate more on its unconventional North American onshore business.

Amid a difficult commodity price environment, it is good to see that efficient cost management has allowed the company to lower its lease operating expense per barrel by over 22% quarter over quarter and G&A expense by nearly 26 % quarter over quarter.

Steady production from its assets is enabling the company to maintain its 2016 production levels despite a substantial reduction in capital expenditure for the year.  

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

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DEVON ENERGY (DVN): Free Stock Analysis Report
 
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