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Murphy Oil Corporation Announces Second Quarter 2018 Results

Successful Exploration Well at Samurai-2

EL DORADO, Ark.--(BUSINESS WIRE)--Aug. 8, 2018-- Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the second quarter ended June 30, 2018, including net income of $46 million, or $0.26 per diluted share.

Financial highlights for the second quarter include:

  • Generated adjusted income of $63 million, or $0.36 per diluted share
  • Achieved annualized year-to-date EBITDA to average capital employed of 20 percent
  • Returned 13 percent of operating cash flow to shareholders through dividend
  • Preserved balance sheet strength with 30 percent net debt to total capital employed ratio
  • Maintained approximately $2.0 billion of liquidity

Operating highlights for the second quarter include:

  • Produced 171,000 BOEPD, exceeding the high end of production guidance, with 59 percent liquids
  • Increased mid-point of annual production guidance by 1,000 BOEPD to 169,500 BOEPD
  • Successfully delineated existing pay zones in the Samurai Field with the Samurai-2 well and drilled additional successful zones in the exploration portion of the well
  • Increased Kaybob Duvernay production by 108 percent, year-over-year
  • Achieved average IP30 rates of 1,750 BOEPD at a Karnes 10-well pad in the Eagle Ford Shale, with seven of the wells producing at company-record peak rates
  • Negotiated operatorship and increased working interest to 40 percent in Vietnam Block 15-1/05, which includes the previously discovered LDV Field

SECOND QUARTER 2018 RESULTS

Murphy recorded net income of $46 million, or $0.26 per diluted share, for the second quarter 2018. The company reported adjusted income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, of $63 million, or $0.36 per diluted share. The adjusted income excludes an unrealized mark-to-market after-tax loss on crude oil derivative contracts of $10 million and an after-tax loss on foreign exchange of $7 million. Details for second quarter results can be found in the attached schedules.

Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $365 million, or $23.50 per barrel of oil equivalent (BOE) sold. Earnings before interest, taxes, depreciation, amortization and exploration expenses (EBITDAX) totaled $384 million, or $24.74 per BOE sold. Details for second quarter EBITDA and EBITDAX reconciliation can be found in the attached schedules.

In the second quarter 2018, the company produced 171,000 barrels of oil equivalent per day (BOEPD). Production exceeded the high end of guidance primarily driven by the outperformance of the high-margin Front Runner, Clipper, Thunder Hawk and Kodiak Fields in the Gulf of Mexico. In onshore Canada, new wells in the Kaybob Duvernay Field and less planned downtime at Tupper Montney also contributed to production exceeding guidance.

“We continue to implement our 2018 plan, with annual production guidance being increased for the second consecutive quarter. Our high-margin offshore fields continue to lead the way in production performance. By successfully executing our operating and financial goals, we are able to deliver cash to our shareholders through our competitive dividend yield and generate significant cash returns on our invested capital,” stated Roger W. Jenkins, President and Chief Executive Officer.

FINANCIAL POSITION

As of June 30, 2018, the company had $2.8 billion of outstanding long-term, fixed-rate notes while maintaining approximately $2.0 billion of liquidity. The fixed-rate notes have a weighted average maturity of 8.3 years and a weighted average coupon of 5.5 percent. The next senior note maturity for the company is in 2022. There were no borrowings on the $1.1 billion unsecured senior credit facility at quarter end.

REGIONAL OPERATIONS SUMMARY

North American Onshore

The North American onshore business produced 95 thousand barrels of oil equivalent per day (MBOEPD) in the second quarter, a ten percent increase year-over-year.

Eagle Ford Shale – Production in the quarter averaged 44 MBOEPD, with 88 percent liquids. The company brought 26 operated wells online during the quarter, including ten wells in Karnes, ten in Catarina and six in Tilden. The 10-well pad in Karnes had an average initial gross production rate over 30 days (IP30 rate) of 1,750 BOEPD, with seven of the wells producing at the highest rates Murphy has achieved in this area. Murphy brought four more wells online in the second quarter than guided. The company expects to bring a total of 45 operated Eagle Ford Shale wells online during full year 2018, with nine in the third quarter.

Tupper Montney – Natural gas production in the quarter averaged 236 million cubic feet per day (MMCFD). During the quarter, the company brought five wells online with an average expected ultimate recovery of 18 billion cubic feet (BCF) per well.

The company entered into a long-term expansion agreement to increase the processing capabilities at third party plants in the Tupper Montney. The expansion project will enable Murphy to produce an additional 200 MMCFD by late 2020 and has additional reserve potential of over 400 BCF. Murphy has firm natural gas transportation service to match the increase in processing capacity. The project has an AECO break-even price1 of approximately C$1.75 per thousand cubic feet. The long-term expansion should allow flexible capital allocation that will ultimately lead to additional free cash generation from the project for many decades.

Kaybob Duvernay – During the quarter, the company achieved record production averaging over 7,300 BOEPD with 63 percent liquids. Late in the second quarter, the company brought a four-well pad online in the Kaybob West development area, with an initial average rate approaching 800 BOEPD and 80 percent liquids. In the second half of 2018, the company plans to allocate an additional $50 million in the Kaybob Duvernay to drill, complete additional wells, and build infrastructure. The increase in capital will reduce the remaining drilling carry, which is expected to be completed by year end 2019.

“Since taking over operatorship of this asset two years ago, our Kaybob Duvernay team has done an outstanding job reducing costs while steadily increasing production. Over the past 24 months, production grew almost six-fold to over 7,300 BOEPD, and we are well on our way to a fourth quarter exit rate that exceeds 11,000 BOEPD. Simultaneously, our drilling and completion costs in the Kaybob Duvernay have been reduced by 30 percent to a second quarter average of $6.5 million per well. This includes a Murphy pacesetter well of $5.9 million, which is industry-leading for the play,” stated Jenkins.

Global Offshore

The offshore business produced over 76 MBOEPD for the second quarter, with 72 percent liquids.

Malaysia & Brunei – Production in the quarter averaged 49 MBOEPD, with 62 percent liquids. Block K and Sarawak averaged nearly 30 thousand barrels of liquids per day, while Sarawak natural gas production averaged 105 MMCFD. Work continues at the Kikeh gas lift and the Block H FLNG projects, which are both being executed on time and on budget.

North America Production in the quarter for the Gulf of Mexico and offshore Canada averaged 27 MBOEPD, with 91 percent liquids.

EXPLORATION

Gulf of Mexico Exploration – During the second quarter, Murphy spud the Samurai-2 appraisal well (Green Canyon 432-2), which was drilled to a depth of just over 32,000 feet. The well encountered more than 150 feet of total pay, primarily from two zones that were originally found in the Samurai-1 exploration well. To date, the company has discovered resources exceeding its mean pre-drill expectation of 75 million barrels of oil equivalent. Murphy also discovered oil pay in additional zones that were not tested in Samurai-1. Murphy and its partner are evaluating options to sidetrack the well into the adjacent block that Murphy also operates with a 50 percent working interest. The potential sidetrack is expected to further delineate the discovery.

“I am thrilled to report the commercial pay success in the Samurai-2 well, which is the first well drilled under our new, focused exploration strategy. We have encountered multiple high-quality, oil-bearing reservoirs, which will generate meaningful value as we move into development. I look forward to continued evaluation of the successful Samurai-2 well during the third quarter,” stated Jenkins.

Mexico Exploration – During the second quarter, Murphy received approval from the Comisión Nacional de Hidrocarburos (CNH) for the Deepwater Block 5 Exploration Plan. The approval is a key step in the process towards spudding the first exploration well on the block late in 2018.

Vietnam Exploration – Murphy secured all approvals of the farm-in terms for the Block 15-01/05 in the Cuu Long Basin, including assuming operatorship of the block at a 40 percent working interest. Murphy also progressed planning for the LDT-1X exploration well that is expected to spud in the fourth quarter.

PRODUCTION AND CAPITAL EXPENDITURE GUIDANCE

Production for the third quarter 2018 is estimated to be in the range of 166,500 to 168,500 BOEPD. Third quarter guidance is below second quarter production primarily due to the annual turn-arounds at the non-operated offshore Canada fields and execution of capital projects in Malaysia. The temporary production loss of approximately 7,400 BOEPD in these areas is partially offset by increased production of approximately 3,900 BOEPD in North American onshore assets.

The company is increasing estimated full year 2018 production guidance to be in the range of 168,500 to 170,500 BOEPD. The mid-point for full year production guidance represents a 1,000 BOEPD increase from the previous annual guidance range. The increase is supported by year-over-year production growth of eight percent in Murphy’s North American onshore assets.

Full year capital expenditure guidance is being increased by six percent from $1.114 billion to $1.179 billion. Approximately $55 million of the additional capital is being allocated to Onshore Canada, primarily in the Kaybob Duvernay to drill eight and bring four additional wells online and build the required facilities and road work for future wells. The remainder is being allocated to further evaluate the successful Samurai-2 appraisal well. Details for production can be found in the attached schedules.

CONFERENCE CALL AND WEBCAST SCHEDULED FOR AUGUST 9, 2018

Murphy will host a conference call to discuss second quarter 2018 financial and operating results on Thursday, August 9, 2018, at 11:00 a.m. ET. The call can be accessed either via the Internet through the Investor Relations section of Murphy Oil’s website at http://ir.murphyoilcorp.com or via the telephone by dialing toll free 1-888-886-7786, reservation number 37250021.

FINANCIAL DATA

Summary financial data and operating statistics for second quarter 2018, with comparisons to the same period from the previous year, are contained in the following schedules. Additionally, a schedule indicating the impacts of items affecting comparability of results between periods and schedules comparing EBITDA and EBITDAX between periods are included with these schedules as well as guidance for the third quarter and full year 2018.

1Break-even natural gas price to achieve a 10 percent rate of return.

ABOUT MURPHY OIL CORPORATION

Murphy Oil Corporation is a global independent oil and natural gas exploration and production company. The company’s diverse resource base includes offshore production in Southeast Asia, Canada and Gulf of Mexico, as well as North America onshore plays in the Eagle Ford Shale, Kaybob Duvernay and Montney. Additional information can be found on the company’s website at http://www.murphyoilcorp.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified through the inclusion of words such as “aim”, “anticipate”, “believe”, “drive”, “estimate”, “expect”, “expressed confidence”, “forecast”, “future”, “goal”, “guidance”, “intend”, “may”, “objective”, “outlook”, “plan”, “position”, “potential”, “project”, “seek”, “should”, “strategy”, “target”, “will” or variations of such words and other similar expressions. These statements, which express management’s current views concerning future events or results, are subject to inherent risks and uncertainties. Factors that could cause one or more of these future events or results not to occur as implied by any forward-looking statement include, but are not limited to, increased volatility or deterioration in the level of crude oil and natural gas prices, deterioration in the success rate of our exploration programs or in our ability to maintain production rates and replace reserves, reduced customer demand for our products due to environmental, regulatory, technological or other reasons, adverse foreign exchange movements, political and regulatory instability in the markets where we do business, natural hazards impacting our operations, any other deterioration in our business, markets or prospects, any failure to obtain necessary regulatory approvals, any inability to service or refinance our outstanding debt or to access debt markets at acceptable prices, and adverse developments in the U.S. or global capital markets, credit markets or economies in general. For further discussion of factors that could cause one or more of these future events or results not to occur as implied by any forward-looking statement, see “Risk Factors” in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K that we file, available from the SEC’s website and from Murphy Oil Corporation’s website at http://ir.murphyoilcorp.com. Murphy Oil Corporation undertakes no duty to publicly update or revise any forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP financial measures that management believes are good tools for internal use and the investment community in evaluating Murphy Oil Corporation’s overall financial performance. These non-GAAP financial measures are broadly used to value and compare companies in the crude oil and natural gas industry, although not all companies define these measures in the same way. In addition, these non-GAAP financial measures are not a substitute for financial measures prepared in accordance with GAAP, and should therefore be considered only as supplemental to such GAAP financial measures. Please see the attached schedules for reconciliations of the differences between the non-GAAP financial measures used in this news release and the most directly comparable GAAP financial measures.

 

MURPHY OIL CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(Thousands of dollars, except per share amounts)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018

20171

2018

20171

 
Revenues
Revenue from sales to customers

$

655,150

477,560 1,262,104 986,595
(Loss) gain on crude contracts (37,624 ) 26,861 (67,126 ) 63,938
Gain on sale of assets and other income   668   3,858   8,821   134,386  
Total revenues   618,194   508,279   1,203,799   1,184,919  
 
Costs and expenses
Lease operating expenses 136,589 111,179 273,085 233,321
Severance and ad valorem taxes 12,876 10,742 25,033 21,955
Exploration expenses, including undeveloped

lease amortization

19,145 20,201 48,073 48,864
Selling and general expenses 57,800 52,809 109,217 102,774
Depreciation, depletion and amortization 237,997 234,992 468,730 471,146
Accretion of asset retirement obligations 11,028 10,428 20,942 20,984
Other expense (benefit)   659   6,377   (10,389 ) 8,534  
Total costs and expenses   476,094   446,728   934,691   907,578  
Operating income from continuing operations   142,100   61,551   269,108   277,341  
 
Other income (loss)
Interest and other income (loss) (15,051 ) (38,305 ) 33 (54,616 )
Interest expense, net   (44,723 ) (45,145 ) (89,772 ) (89,742 )
Total other loss   (59,774 ) (83,450 ) (89,739 ) (144,358 )
 
Income (loss) from continuing operations before income taxes 82,326 (21,899 ) 179,369 132,983
Income tax expense (benefit)   36,410   (4,545 ) (35,237 ) 92,842  
Income (loss) from continuing operations 45,916 (17,354 ) 214,606 40,141
Income (loss) from discontinued operations,
net of income taxes
  (398 ) (217 ) (835 ) 752  
 
NET INCOME (LOSS)

$

45,518

  (17,571 ) 213,771   40,893  
 
INCOME (LOSS) PER COMMON SHARE – BASIC
Continuing operations $ 0.26 (0.10 ) 1.25 0.23
Discontinued operations   -   -   (0.01 ) 0.01  
Net Income (Loss) $ 0.26   (0.10 ) 1.24   0.24  
 
INCOME (LOSS) PER COMMON SHARE – DILUTED
Continuing operations $ 0.26 (0.10 ) 1.23 0.23
Discontinued operations   -   -   (0.01 ) 0.01  
Net Income (Loss) $ 0.26   (0.10 ) 1.22   0.24  
 
Cash dividends per Common share 0.25 0.25 0.50 0.50
 
Average Common shares outstanding (thousands)
Basic 173,043 172,558 172,907 172,482
Diluted 173,983 172,558 174,927 173,017

1

 

Reclassified to conform to current presentation.

 
 

MURPHY OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Thousands of dollars)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Operating Activities
Net income (loss) $ 45,518 (17,571 ) 213,771 40,893

Adjustments to reconcile net income (loss) to net cash provided by continuing operations activities:

 

Loss (Income) from discontinued operations 398 217 835 (752 )
Depreciation, depletion and amortization 237,997 234,992 468,730 471,146
Dry hole costs (credits) (2 ) (1,000 ) (11 ) 1,904
Amortization of undeveloped leases 9,606 10,349 22,774 20,306
Accretion of asset retirement obligations 11,028 10,428 20,942 20,984
Deferred income tax (benefit) charge (10,569 ) (25,403 ) (156,489 ) 33,130
Pretax (gain) loss from disposition of assets (221 ) 1,334 118 (130,648 )
Net decrease in noncash operating working capital 43,886 (837 ) 85,440 42,581
Other operating activities, net   8,384   73,440   (31,564 ) 91,918  
Net cash provided by continuing operations activities   346,025   285,949   624,546   591,462  
 
Investing Activities
Property additions and dry hole costs (341,243 ) (220,023 ) (615,144 ) (431,654 )
Proceeds from sales of property, plant and equipment 363 206 623 64,303
Purchases of investment securities 1 (212,661 )
Proceeds from maturity of investment securities 1     170,983     284,193  
Net cash required by investing activities   (340,880 ) (48,834 ) (614,521 ) (295,819 )
 
Financing Activities
Capital lease obligation payments (2,244 ) (2,323 ) (4,648 ) (11,983 )
Withholding tax on stock-based incentive awards (280 ) (1,273 ) (6,922 ) (7,081 )
Cash dividends paid   (43,259 ) (43,142 ) (86,517 ) (86,278 )
Net cash required by financing activities   (45,783 ) (46,738 ) (98,087 ) (105,342 )
       
Effect of exchange rate changes on cash and cash equivalents   3,331   (7,743 ) 24,382   (4,611 )
Net increase (decrease) in cash and cash equivalents (37,307 ) 182,634 (63,680 ) 185,690
Cash and cash equivalents at beginning of period   938,615   875,853   964,988   872,797  
Cash and cash equivalents at end of period $ 901,308   1,058,487   901,308   1,058,487  

1

  Investments are Canadian government securities with maturities greater than 90 days at the date of acquisition.
 
 

MURPHY OIL CORPORATION
SCHEDULE OF ADJUSTED INCOME (LOSS)
(unaudited)
(Millions of dollars, except per share amounts)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Net income (loss) $ 45.5 (17.6 ) 213.8 40.9
Discontinued operations loss (income)   0.4 0.2   0.8   (0.8 )

Income (loss) from continuing operations

45.9 (17.4 ) 214.6 40.1
Adjustments:
Mark-to-market (gain) loss on crude oil derivative contracts 10.1 (14.7 ) 21.4 (40.7 )
Foreign exchange losses (gains) 7.1 31.1 (4.8 ) 42.7
Impact of tax reform (120.0 )
Seal insurance proceeds (8.2 )
Deferred tax on undistributed foreign earnings 5.8 60.4
Tax benefits on investments in foreign areas (21.1 ) (32.9 )
Gain on sale of assets (96.0 )
Oil Insurance Limited dividends   (2.8 )   (2.8 )
Total adjustments after taxes   17.2 (1.7 ) (111.6 ) (69.3 )
Adjusted income (loss) $ 63.1 (19.1 ) 103.0   (29.2 )
 
Adjusted income (loss) per diluted share $ 0.36 (0.11 ) 0.59   (0.17 )
 
 

Non-GAAP Financial Measures

Presented above is a reconciliation of Net income (loss) to Adjusted income (loss). Adjusted income (loss) excludes certain items that management believes affect the comparability of results between periods. Management believes this is important information to provide because it is used by management to evaluate the Company's operational performance and trends between periods and relative to its industry competitors. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company's financial results. Adjusted income (loss) is a non-GAAP financial measure and should not be considered a substitute for Net income (loss) as determined in accordance with accounting principles generally accepted in the United States of America.

Note:  

Amounts shown above as reconciling items between Net income (loss) and Adjusted income (loss) are presented net of applicable income taxes based on the estimated statutory rate in the applicable tax jurisdiction. The pretax and income tax impacts for adjustments shown above are as follows by area of operations.

 
 
    Three Months Ended     Six Months Ended
June 30, 2018 June 30, 2018
Pretax   Tax   Net Pretax   Tax   Net
 
Exploration & Production:
Canada (11.3 ) 3.1 (8.2 )
Other International          
Total E&P (11.3 ) 3.1 (8.2 )
Corporate 1:   24.7 (7.5 ) 17.2 22.5   (125.9 ) (103.4 )
Total adjustments $ 24.7 (7.5 ) 17.2 11.2   (122.8 ) (111.6 )

1

 

In 2018, the Company reported realized and unrealized gains and losses on crude oil contracts in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company. The 2017 amounts have been reclassified from the Exploration and Production business for comparable disclosure.

 
 

MURPHY OIL CORPORATION
SCHEDULE OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTIZATION (EBITDA) AND EXPLORATION EXPENSES (EBITDAX)
(unaudited)
(Millions of dollars, except per barrel of oil equivalents sold)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Net income (loss) (GAAP) $ 45.5 (17.6 ) 213.8 40.9
Discontinued operations loss (income) 0.4 0.2 0.8 (0.8 )
Income tax expense (benefit) 36.4 (4.5 ) (35.2 ) 92.8
Interest expense, net 44.7 45.1 89.8 89.7
Depreciation, depletion and amortization expense   238.0 235.0   468.7   471.1  
EBITDA (Non-GAAP) 1 $ 365.0 258.2   737.9   693.7  
 
Exploration expenses   19.2 20.2   48.1   48.9  
EBITDAX (Non-GAAP) 1 $ 384.2 278.4   786.0   742.6  
 
Total barrels of oil equivalents sold (thousands of barrels) 15,532.0 14,578.5 30,575.8 29,335.9
 
EBITDA per barrel of oil equivalents sold $ 23.50 17.71 24.13 23.65
 
EBITDAX per barrel of oil equivalents sold $ 24.74 19.10 25.71 25.31
 
 
1   Certain pretax items that increase (decrease) EBITDA and EBITDAX above include:
    Three Months Ended     Six Months Ended
June 30, June 30,
2018   2017 2018   2017
 
Gain (loss) on foreign exchange 2 $ (12.2 ) (35.9 ) 4.4 (49.2 )
Mark-to-market gain (loss) on crude oil derivative contracts (12.7 ) 22.6 (27.1 ) 62.6
Gain (loss) on sale of assets 3 0.2 (1.3 ) (0.1 ) 130.6
Accretion of asset retirement obligations   (11.0 ) (10.4 ) (20.9 ) (21.0 )
$ (35.7 ) (25.0 ) (43.7 ) 123.0  
2  

Gain (loss) on foreign exchange principally relates to the revaluation of Malaysian Ringgit monetary assets and liabilities. In 2017 foreign exchange also includes revaluation of intercompany loans (settled in the first quarter of 2018).

3

Gain (loss) on sale of assets in the six months ended June 30, 2017 primarily consists of a pretax gain of $132.4 million related to the sale of the Seal heavy oil asset in Canada.

 
 

Non-GAAP Financial Measures

Presented above is a reconciliation of Net income (loss) to Earnings before interest, taxes, depreciation and amortization (EBITDA) and Earnings before interest, taxes, depreciation, amortization, and exploration expenses (EBITDAX). Management believes EBITDA and EBITDAX are important information to provide because they are used by management to evaluate the Company's operational performance and trends between periods and relative to its industry competitors. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company's financial results. EBITDA and EBITDAX are non-GAAP financial measures and should not be considered a substitute for Net income (loss) or Cash provided by operating activities as determined in accordance with accounting principles generally accepted in the United States of America.

Presented above is EBITDA per barrel of oil equivalents sold and EBITDAX per barrel of oil equivalents sold. Management believes EBITDA per barrel of oil equivalents sold and EBITDAX per barrel of oil equivalents sold are important information because they are used by management to evaluate the Company’s profitability of one barrel of oil equivalent sold in that period. EBITDA per barrel of oil equivalent sold and EBITDAX per barrel of oil equivalent sold are non-GAAP financial metrics.

MURPHY OIL CORPORATION
FUNCTIONAL RESULTS OF OPERATIONS (unaudited)
(Millions of dollars)

                     
     

Three Months Ended
June 30, 2018

   

Three Months Ended
June 30, 2017

      Revenues  

Income
(Loss)

    Revenues  

Income
(Loss)

Exploration and production            
United States 1 $ 318.8 72.6 212.5 (9.6 )
Canada 108.4 9.7 88.2 5.2
Malaysia 228.6 83.9 176.5 47.7
Other           (15.0 )       7.2  
Total exploration and production 655.8 151.2 477.2 50.5
Corporate 1       (37.6 )   (105.3 )     31.1   (67.9 )
Revenue/income from continuing operations 618.2 45.9 508.3 (17.4 )
Discontinued operations, net of tax           (0.4 )       (0.2 )

Total revenues/net income (loss)

    $ 618.2     45.5       508.3   (17.6 )
 
                     
     

Six Months Ended
June 30, 2018

   

Six Months Ended
June 30, 2017

      Revenues  

Income
(Loss)

    Revenues   Income
(Loss)
Exploration and production
United States $ 596.9 108.7 436.7 (10.6 )

Canada 2

226.7 34.3 306.1 105.8
Malaysia 439.5 154.3 373.9 106.3
Other           (30.5 )       0.1  
Total exploration and production 1,263.1 266.8 1,116.7 201.6
Corporate 3       (59.3 )   (52.2 )     68.2   (161.5 )
Revenue/income from continuing operations 1,203.8 214.6 1,184.9 40.1
Discontinued operations, net of tax           (0.8 )       0.8  

Total revenues/net income

    $ 1,203.8     213.8       1,184.9   40.9  
1  

In 2018, the Company reported realized and unrealized gains and losses on crude oil contracts in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company. The 2017 amounts have been reclassified from the U.S. Exploration and production business to reflect comparable disclosure. Realized and unrealized gains (losses) of ($37.6) million and $26.9 million are included in the Corporate segment for the three months ended June 30, 2018 and 2017, respectively. Realized and unrealized gains (losses) of ($67.1) million and $63.9 million are included in the Corporate segment for the six months ended June 30, 2018 and 2017, respectively. Corporate segment loss for the three-month periods ended June 30, 2018 and 2017 included foreign exchange losses of $12.6 million and $35.6 million, respectively. Corporate segment loss for the six-month periods ended June 30, 2018 and 2017 included foreign exchange gains of $2.8 million and $51.7 million, respectively.

2 2017 revenue includes a pretax gain of $132.4 million ($96.0 million after-tax) related to the sale of the Seal heavy oil asset in Canada.
3

Income for the six-month period ended June 30, 2018 included a credit to income tax expense of $120.0 million related to an IRS interpretation of the Tax Cuts and Jobs Act.

 
 

MURPHY OIL CORPORATION
OIL AND GAS OPERATING RESULTS (unaudited)
THREE MONTHS ENDED JUNE 30, 2018 AND 2017

    United                
(Millions of dollars)     States 1     Canada     Malaysia     Other     Total
Three Months Ended June 30, 2018                              
Oil and gas sales and other revenues $ 318.8 108.4 228.6 655.8
Lease operating expenses 52.0 29.2 55.4 136.6
Severance and ad valorem taxes 12.7 0.2 12.9
Depreciation, depletion and amortization 128.3 56.8 49.8 0.7 235.6
Accretion of asset retirement obligations 4.5 1.9 4.6 11.0
Exploration expenses
Geological and geophysical 0.2 0.3 0.7 1.2
Other exploration       2.4                 5.9       8.3  
2.6 0.3 6.6 9.5
Undeveloped lease amortization       8.7       0.2           0.7       9.6  
Total exploration expenses       11.3       0.2     0.3       7.3       19.1  
Selling and general expenses 10.5 6.6 2.0 5.9 25.0
Other       6.9       0.3     (0.1 )     1.1       8.2  
Results of operations before taxes 92.6 13.2 116.6 (15.0 ) 207.4
Income tax provisions       20.0       3.5     32.7             56.2  
Results of operations (excluding
corporate overhead and interest)
    $ 72.6       9.7     83.9       (15.0 )     151.2  
                               
Three Months Ended June 30, 2017                              
Oil and gas sales and other revenues $ 212.5 88.2 176.5 477.2
Lease operating expenses 44.3 25.5 41.4 111.2
Severance and ad valorem taxes 10.4 0.3 10.7
Depreciation, depletion and amortization 135.5 46.0 48.3 1.0 230.8
Accretion of asset retirement obligations 4.2 1.9 4.3 10.4
Exploration expenses
Dry holes (1.0 ) (1.0 )
Geological and geophysical 0.6 0.1 0.7
Other exploration       2.0       0.1           8.1       10.2  
1.6 0.1 8.2 9.9
Undeveloped lease amortization       10.2       0.1                 10.3  
Total exploration expenses       11.8       0.2           8.2       20.2  
Selling and general expenses 10.1 6.4 3.2 5.0 24.7
Other       10.1       0.6     2.9             13.6  
Results of operations before taxes (13.9 ) 7.3 76.4 (14.2 ) 55.6
Income tax provisions (benefits)       (4.3 )     2.1     28.7       (21.4 )     5.1  
Results of operations (excluding
corporate overhead and interest)
    $ (9.6 )     5.2     47.7       7.2       50.5  
1  

In 2018, the Company reported realized and unrealized gains and losses on crude oil contracts in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company. The 2017 amounts have been reclassified from the Exploration and Production business for comparable disclosure.

 
 

MURPHY OIL CORPORATION
OIL AND GAS OPERATING RESULTS (unaudited)
SIX MONTHS ENDED JUNE 30, 2018 AND 2017

    United                
(Millions of dollars)     States 1     Canada 2     Malaysia     Other     Total
Six Months Ended June 30, 2018                              
Oil and gas sales and other revenues $ 596.9 226.7 439.5 1,263.1
Lease operating expenses 110.5 59.5 103.1 273.1
Severance and ad valorem taxes 24.5 0.5 25.0
Depreciation, depletion and amortization 249.9 112.5 97.5 1.5 461.4
Accretion of asset retirement obligations 8.9 3.9 8.1 20.9
Exploration expenses
Geological and geophysical 6.2 0.5 3.6 10.3
Other exploration       3.6       0.1             11.3       15.0  
9.8 0.1 0.5 14.9 25.3
Undeveloped lease amortization       21.4       0.4             1.0       22.8  
Total exploration expenses       31.2       0.5       0.5       15.9       48.1  
Selling and general expenses 24.9 14.3 4.8 11.9 55.9
Other       7.7       (11.4 )     (1.3 )     1.0       (4.0 )
Results of operations before taxes 139.3 46.9 226.8 (30.3 ) 382.7
Income tax provisions (benefits)       30.6       12.6       72.5       0.2       115.9  
Results of operations (excluding
corporate overhead and interest)
    $ 108.7       34.3       154.3       (30.5 )     266.8  
                               
Six Months Ended June 30, 2017                              
Oil and gas sales and other revenues $ 436.7 306.1 373.9 1,116.7
Lease operating expenses 92.2 48.1 93.0 233.3
Severance and ad valorem taxes 21.1 0.9 22.0
Depreciation, depletion and amortization 273.8 90.5 96.2 1.9 462.4
Accretion of asset retirement obligations 8.4 3.9 8.7 21.0
Exploration expenses
Dry holes (1.3 ) 3.2 1.9
Geological and geophysical 0.9 0.1 4.6 5.6
Other exploration       4.0       0.1             17.0       21.1  
3.6 0.2 3.2 21.6 28.6
Undeveloped lease amortization       19.0       1.3                   20.3  
Total exploration expenses       22.6       1.5       3.2       21.6       48.9  
Selling and general expenses 25.6 13.6 5.5 9.9 54.6
Other       7.3       0.6       8.0             15.9  
Results of operations before taxes (14.3 ) 147.0 159.3 (33.4 ) 258.6
Income tax provisions (benefits)       (3.7 )     41.2       53.0       (33.5 )     57.0  
Results of operations (excluding
corporate overhead and interest)
    $ (10.6 )     105.8       106.3       0.1       201.6  
1  

In 2018, the Company reported realized and unrealized gains and losses on crude oil contracts in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company. The 2017 amounts have been reclassified from the Exploration and Production business for comparable disclosure.

2 2017 revenue includes a pretax gain of $132.4 million related to the sale of Seal heavy oil assets in Canada.
 
 

MURPHY OIL CORPORATION
PRODUCTION-RELATED EXPENSES
(unaudited)
(Dollars per barrel of oil equivalents sold)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
United States – Eagle Ford Shale
Lease operating expense $ 8.09 7.95 8.22 7.92
Severance and ad valorem taxes 3.15 2.49 3.08 2.53
Depreciation, depletion and amortization (DD&A) expense 24.50 25.47 24.67 25.90
 
United States – Gulf of Mexico
Lease operating expense $ 11.02 8.60 14.10 9.78
DD&A expense 16.86 22.60 17.08 21.61
 
Canada – Onshore
Lease operating expense $ 4.92 4.93 4.88 4.91
Severance and ad valorem taxes 0.03 0.08 0.06 0.10
DD&A expense 10.55 9.87 10.36 9.94
 
Canada – Offshore
Lease operating expense $ 9.94 9.09 10.50 8.39
DD&A expense 12.57 12.03 13.06 12.68
 
Malaysia – Sarawak
Lease operating expense $ 9.42 4.85 8.41 5.59
DD&A expense 9.01 8.02 8.71 7.90
 
Malaysia – Block K
Lease operating expense $ 17.32 16.37 16.73 16.59
DD&A expense 14.61 14.76 14.51 13.56
 
Total oil and gas operations
Lease operating expense $ 8.80 7.63 8.93 7.95
Severance and ad valorem taxes 0.83 0.74 0.82 0.75
DD&A expense 15.17 15.82 15.09 15.77
 
 

MURPHY OIL CORPORATION
OTHER FINANCIAL DATA
(unaudited)
(Millions of dollars)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Capital expenditures
Exploration and production
United States $ 178.9 124.3 326.4 222.7
Canada 83.3 47.8 202.3 136.0
Malaysia 25.4 9.3 44.5 11.1
Other   8.0 16.1 17.7 41.4
Total   295.6 197.5 590.9 411.2
 
Corporate   5.1 3.0 10.2 3.8
Total capital expenditures   300.7 200.5 601.1 415.0
 
Charged to exploration expenses 1
United States 2.6 1.6 9.8 3.6
Canada 0.1 0.1 0.2
Malaysia 0.3 0.5 3.2
Other   6.6 8.2 14.9 21.6
Total charged to exploration expenses   9.5 9.9 25.3 28.6
 
Total capitalized $ 291.2 190.6 575.8 386.4
1  

Excludes amortization of undeveloped leases of $9.6 million and $10.3 million for the three months ended June 30, 2018 and 2017, respectively, and $22.8 million and $20.3 million for the six months ended June 30, 2018 and 2017, respectively.

 
 
MURPHY OIL CORPORATION
CONDENSED BALANCE SHEETS (unaudited)
(Millions of dollars)
       
June 30, 2018 December 31, 2017
Assets
Cash and cash equivalents $ 901.3 965.0
Other current assets 414.0 406.6
Property, plant and equipment – net 8,208.1 8,220.0
Other long-term assets   422.0 269.3
Total assets $ 9,945.4 9,860.9
 
Liabilities and Stockholders' Equity
Current maturities of long-term debt $ 9.7 9.9
Other current liabilities 893.9 824.3
Long-term debt 1 2,897.3 2,906.5
Other long-term liabilities 1,472.9 1,500.0
Total stockholders' equity   4,671.6 4,620.2
Total liabilities and stockholders' equity $ 9,945.4 9,860.9
1   Includes a capital lease on production equipment of $122.9 million at June 30, 2018 and $134.0 million at December 31, 2017.
 
 

MURPHY OIL CORPORATION
STATISTICAL SUMMARY
(unaudited)

           
Three Months Ended Six Months Ended
June 30,

June 30,

2018 2017 2018 2017
 
Net crude oil and condensate produced – barrels per day 90,067 89,033 89,303 92,300
United States – Eagle Ford Shale 31,936 33,195 31,630 33,397
– Gulf of Mexico 15,365 11,329 14,113 11,844
Canada – Onshore 5,254 3,051 4,809 2,470
– Offshore 7,982 8,199 8,085 9,053
– Heavy 1 303
Malaysia – Sarawak 11,354 13,176 12,103 13,346
– Block K 17,596 20,083 17,981 21,887
Brunei 580 582
 
Net crude oil and condensate sold – barrels per day 89,995 86,851 88,838 88,361
United States – Eagle Ford Shale 31,936 33,195 31,630 33,397
– Gulf of Mexico 15,365 11,329 14,113 11,844
Canada – Onshore 5,254 3,051 4,809 2,470
– Offshore 7,333 8,938 8,255 8,463
– Heavy 1 303
Malaysia – Sarawak 13,491 13,495 13,407 13,486
– Block K 16,616 16,843 16,624 18,398
 
Net natural gas liquids produced – barrels per day 10,120 9,374 9,510 9,145
United States – Eagle Ford Shale 6,824 6,921 6,772 6,884
– Gulf of Mexico 1,391 880 1,114 996
Canada – Onshore 1,033 457 959 359
Malaysia – Sarawak 872 1,116 665 906

 

Net natural gas liquids sold – barrels per day 9,880 8,902 9,643 9,140
United States – Eagle Ford Shale 6,824 6,921 6,772 6,884
– Gulf of Mexico 1,391 880 1,114 996
Canada – Onshore 1,033 457 959 359
Malaysia – Sarawak 632 644 798 901

 

Net natural gas sold – thousands of cubic feet per day 424,836 386,700 422,673 387,457
United States – Eagle Ford Shale 32,679 34,835 31,894 34,583
– Gulf of Mexico 14,284 11,625 13,548 11,868
Canada – Onshore 264,748 220,171 263,036 218,641
Malaysia – Sarawak 105,199 112,993 105,932 114,767
– Block K 7,926 7,076 8,263 7,598
 
Total net hydrocarbons produced – equivalent barrels per day 2 170,993 162,857 169,259 166,021
Total net hydrocarbons sold – equivalent barrels per day 2 170,681 160,203 168,927 162,077
1   The Company sold the Seal area heavy oil field in January 2017.
2 Natural gas converted on an energy equivalent basis of 6:1.
 
 

MURPHY OIL CORPORATION
STATISTICAL SUMMARY (Continued)
(unaudited)

           
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Weighted average Exploration and Production sales prices
Crude oil and condensate – dollars per barrel
United States 1 – Eagle Ford Shale $ 68.14 47.42 $ 66.24 48.44
– Gulf of Mexico 68.11 46.65 65.81 47.73
Canada 2 – Onshore 59.45 42.04 57.12 41.43
– Offshore 72.40 47.78 68.69 49.54
Malaysia – Sarawak 3 69.72 48.66 67.13 51.43
– Block K 3 67.20 50.07 65.20 49.42
 
Natural gas liquids – dollars per barrel
United States – Eagle Ford Shale $ 21.29 14.35 $ 20.62 14.99
– Gulf of Mexico 23.27 15.57 23.01 17.69
Canada 2 – Onshore 36.66 21.16 39.83 20.18
Malaysia – Sarawak 3 69.61 57.34 70.57 52.40
 
Natural gas – dollars per thousand cubic feet
United States – Eagle Ford Shale $ 2.11 2.49 $ 2.25 2.38
– Gulf of Mexico 2.18 2.74 2.36 2.62
Canada 2 – Onshore 1.17 1.89 1.42 1.97
Malaysia – Sarawak 3 3.86 3.48 3.62 3.58
– Block K 3 0.25 0.25 0.24 0.24
1  

In 2018, the Company reported realized and unrealized gains and losses on crude oil contracts in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company. The 2017 amounts have been reclassified from the Exploration and Production business for comparable disclosure.

2 U.S. dollar equivalent.
3 Prices are net of payments under the terms of the respective production sharing contracts.
 
 
MURPHY OIL CORPORATION
COMMODITY HEDGE POSITIONS (unaudited)
AS OF JUNE 30, 2018
           
Volumes Price Remaining Period
Area Commodity Type (Bbl/d) (USD/Bbl) Start Date End Date
United States WTI Fixed price derivative swap 1 21,000 $54.88 7/1/2018 12/31/2018
 
Volumes Price Remaining Period
Area Commodity Type (MMcf/d) (Mcf) Start Date End Date
Montney Natural Gas Fixed price forward sales 59 C$2.81 7/1/2018 12/31/2020
1  

Realized and unrealized gains and losses on Fixed price derivatives swaps are reported in the Corporate segment to reflect how segments are currently evaluated, how resources are allocated and how risk is managed by the Company.

 
 

MURPHY OIL CORPORATION
THIRD QUARTER 2018 GUIDANCE

         
Liquids Gas
BOPD MCFD
Production – net
U.S. – Eagle Ford Shale

41,775

31,650

– Gulf of Mexico

15,625

14,100
 
Canada – Tupper Montney

234,500

– Kaybob Duvernay and Placid Montney

7,200

32,000

– Offshore

5,000

Malaysia – Sarawak 11,900

99,250

– Block K / Brunei

16,800

3,700

 
 
Total net production (BOEPD)

166,500 - 168,500

 
Total net sales (BOEPD) 164,000 - 166,000
 
Realized oil prices (dollars per barrel):
Malaysia – Sarawak $61.70
– Block K $66.60
 
Realized natural gas price ($ per MCF):
Malaysia – Sarawak $4.00
 
Exploration expense ($ millions)

$32

 
 
FULL YEAR 2018 GUIDANCE
 
Total production (BOEPD) 168,500 to 170,500
 
Capital expenditures ($ billions) $1.18

Source: Murphy Oil Corporation

Murphy Oil Corporation
Investor Contacts:
Kelly Whitley, 281-675-9107
kelly_whitley@murphyoilcorp.com
or
Amy Garbowicz, 281-675-9201
amy_garbowicz@murphyoilcorp.com
or
Emily McElroy, 870-864-6324
emily_mcelroy@murphyoilcorp.com

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