UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549







FORM 8-K





CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934





Date of report (Date of earliest event reported): May 2, 2018







MURPHY OIL CORPORATION

(Exact name of registrant as specified in its charter)



       300 Peach Street

P.O. Box 7000, El Dorado AR71730-7000

(Address of principal executive offices)(Zip Code)     







Registrant’s telephone number, including area code 870-862-6411



                                                  Not applicable                                                  

(Former Name or Former Address, if Changed Since Last Report)





Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):



Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company [  ]



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    [  ]



 

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Item 2.02.   Results of Operations and Financial Condition



The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”



On May 2, 2018, Murphy Oil Corporation issued a news release announcing its financial and operating results for the quarter ended March 31, 2018.    The full text of this news release is attached hereto as Exhibit 99.1.





Item 9.01.  Financial Statements and Exhibits







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Signature



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.









Date:  May 2, 2018









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Exhibit Index





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Exhibit 99.1

MURPHY OIL CORPORATION ANNOUNCES FIRST QUARTER 2018

FINANCIAL AND OPERATING RESULTS



EL DORADO, Arkansas, May 2, 2018 – Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the first quarter ended March 31, 2018, including income from continuing operations of $169 million, or $0.97 per diluted share.

Financial highlights for the first quarter include:

Operating highlights for the first quarter include:

FIRST QUARTER 2018 RESULTS

Murphy recorded income from continuing operations of $169 million, or $0.97 per diluted share, for the first 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 $40 million, or $0.23 per diluted share. The adjusted income excludes the following items: after-tax gain of $120 million associated with 2017 U.S. tax reform and a $12 million after-tax gain on foreign exchange, partially offset by a mark-to-market after-tax loss on crude oil derivative contracts of $11 million. Net cash provided from continuing operations was $279 million. This includes a one-time cash payment of $35 million for a Canadian tax withholding associated with repatriating cash from Canada to the U.S. The tax expense associated with the repatriation of cash was recorded in 2017. Details for first quarter results can be found in the attached schedules.

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Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $373 million, or $24.78 per barrel of oil equivalent (BOE) sold. Earnings before interest, taxes, depreciation, amortization and exploration expenses (EBITDAX) totaled $402 million, or $26.70 per BOE sold. Details for first quarter EBITDA and EBITDAX reconciliation can be found in the attached schedules.

Production in the first quarter 2018 averaged 168,000 barrels of oil equivalent per day (BOEPD). Offshore production exceeded guidance primarily driven by Gulf of Mexico wells at Kodiak and Habanero coming back online with production levels above expectations, as well as higher uptime across all offshore assets (3,000 BOEPD). Onshore production in the Tupper Montney also exceeded production guidance primarily due to wells performing above expectation (900 BOEPD). This was partially offset by lower U.S. onshore production in the Eagle Ford Shale (1,500 BOEPD) due to the continued recovery of shut-in wells from offset operators’ frac operations as well as underperformance of wells in the Midland Basin (800 BOEPD).

“Over the course of the first quarter, we had strong production results from our offshore assets in Malaysia and the Gulf of Mexico and our onshore Canadian assets in the Tupper Montney and Kaybob Duvernay. We were also able to achieve competitive margins across our oil-weighted assets for the U.S. and Malaysia operating areas. We continue to maintain our key balance sheet metrics while delivering on our 2018 plans. Our diverse, high margin portfolio coupled with the recent improvement in oil prices allows Murphy to generate free cash flow above our dividend this year,” stated Roger W. Jenkins, President and Chief Executive Officer.

FINANCIAL POSITION

As of March 31, 2018, the company had $2.8 billion of outstanding long-term, fixed-rate notes and $939 million in cash and cash equivalents. The fixed-rate notes have a weighted average maturity of 8.5 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.

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REGIONAL OPERATIONS SUMMARY

North American Onshore

The North American onshore business produced 92 thousand barrels of oil equivalent per day (MBOEPD) in the first quarter, with 47 percent liquids.

Eagle Ford Shale  – Production in the quarter averaged 43 MBOEPD, with 88 percent liquids. During the quarter, the company brought six operated wells online, all of which were in the Tilden area in the Lower Eagle Ford Shale with average initial production rates over 30 days (IP30 rate) exceeding 700 BOEPD. By employing Gen 5.0 completions in the Tilden area, IP30 rates have improved 115 percent over the past six years.

“In the first quarter, we had planned limited well delivery, as a result of focusing our drilling activity on a ten well pad in the Karnes area. These ten wells are part of the 22 operated wells we expect to bring online in the second quarter. The ten well pad at Karnes is important to learnings in the area as we were able to test a staggered lateral completion style that we believe could be beneficial for future pads. With the wells recently being placed on production, early indications are positive and we look forward to giving more conclusive results in the coming quarters,” stated Jenkins. “Our first quarter production was temporarily affected by a large number of our best Catarina wells being shut in for offset fracs from peers in the area. All of these wells have recently been brought back online,” Jenkins added.

Tupper Montney – Natural gas production in the quarter averaged 240 million cubic feet per day (MMCFD). The company drilled the remaining three wells on a five well pad, with all five wells expected to be brought online in the second quarter.  

Full cycle break-even costs, with a ten percent rate of return, continue to decrease and are currently C$1.90 AECO per thousand cubic feet (MCF). As a result of long-term forward sales contracts and other marketing agreements, Murphy achieved strong first quarter netbacks in the Tupper Montney of C$2.20 per MCF, consisting of a blended sales price of C$2.47 per MCF less C$0.27 per MCF of transportation costs. Furthermore, the company continues to significantly reduce its future multi-year exposure to AECO prices through a combination of forward sales contracts and market diversification to the Malin, Chicago, Emerson and Dawn markets.

Kaybob Duvernay – Production increased 92 percent from first quarter 2017, averaging near 5,500 BOEPD with 70 percent liquids. During the first quarter, the company continued appraising the play by drilling 12 wells and bringing online eight wells, including Murphy’s first wells in the Simonette area. The IP30 rates at the 15-16 two well pad averaged 985 BOEPD with 70 percent liquids, and one well at 01-12 averaged 900 BOEPD IP30 with 80 percent liquids. The 12-29 two well pad in the Kaybob East area flowed at an average of 1,040 BOEPD with 80% liquids. The 16-3 three well pad in the Saxon area was placed online just prior to quarter end, with the wells flowing above expectations.

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“Our appraisal of the Kaybob Duvernay is paying off. Since entering the play in 2016, we have meaningfully reduced drilling and completion costs, with recent pacesetter wells averaging below the $8.0 million mark. We are well on our way to achieving planned drilling and completions costs of $6.5 million per well that have average lateral lengths of approximately 9,000 feet. Currently, production rates are exceeding our expectations,” commented Jenkins.

Global Offshore

The offshore business produced over 75 MBOEPD for the first quarter, with 72 percent liquids. 

Malaysia & Brunei – Production in the quarter averaged over 51 MBOEPD, with 63 percent liquids. Block K and Sarawak averaged over 31 thousand barrels of liquids per day, while Sarawak natural gas production averaged 107 MMCFD. The company continues to progress the Kikeh DTU gas lift project with expected startup in the third quarter 2018, as well as preparing for the production startup of Block H FLNG in 2020. 

North America – Production in the quarter for the Gulf of Mexico and East Coast Canada averaged 24 MBOEPD, with 91 percent liquids. The non-operated Kodiak well resumed production during the quarter with rates exceeding expectations. The well achieved gross rates over 25 MBOEPD, with net rates more than 6,100 BOEPD. The non-operated Habanero well was also brought back online during the quarter and is producing above expectations.

EXPLORATION

Gulf of Mexico Exploration – During the first quarter, Murphy farmed into the Highgarden prospect (GC 895). At the March 2018 Gulf of Mexico lease sale, Murphy and it’s co-venturer were also the high bidder for two blocks with Miocene prospects, one at GC 939 and the other at MC 599.

Brazil Exploration – During the first quarter, Murphy and its co-venturers, ExxonMobil and QGEP, were the successful bidders on blocks 430 and 573 in the Sergipe-Alagoas basin, with no well commitments. These two blocks are strategically located next to the company’s existing four block position.

“We continue to execute on our focused exploration strategy by increasing our acreage in plays where we envision adding low-cost resources with meaningful upside. In the Gulf of Mexico, we are excited to get back to work as we recently spud our operated Samurai (GC 432) appraisal well with our new partner BHP. This well is consistent with our strategy of pursuing oil-weighted, lower risk opportunities with competitive returns and low finding and development costs,” commented Jenkins. 

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PRODUCTION AND CAPITAL EXPENDITURE GUIDANCE

Production for the second quarter 2018 is estimated to be in the range of 166 to 169 MBOEPD, with updated full year 2018 production guidance in the range of 167 to 170 MBOEPD. The low end of the full year production guidance is being increased by 1,000 BOEPD from the previous guidance.

Full year capital expenditure guidance is being increased by five percent from $1.06 billion to $1.11 billion. Approximately three-quarters of the additional capital is attributable to the increased working interest to drill the Samurai appraisal well, increased working interest in Vietnam and workovers at the Medusa field in the Gulf of Mexico.

“We are pleased with our first quarter production where our offshore fields delivered high-margin results for our company. We are increasing the midpoint of our annual guidance after our strong first quarter results. In the second quarter, we look forward to delivering 22 operated wells in the Eagle Ford Shale as well as re-igniting our exploration program in the Gulf of Mexico. Also, following spring break-up, we will be resuming our drilling and completions activities in the Duvernay,” stated Jenkins. 

Details for production can be found in the attached schedules.

CONFERENCE CALL AND WEBCAST SCHEDULED FOR MAY 3, 2018

Murphy will host a conference call to discuss first quarter 2018 financial and operating results on Thursday, May 3, 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 18948426.

FINANCIAL DATA

Summary financial data and operating statistics for first 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 second quarter and full year 2018.

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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.

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Investor Contacts:

Kelly Whitley, kelly_whitley@murphyoilcorp.com, 281-675-9107

Amy Garbowicz, amy_garbowicz@murphyoilcorp.com, 281-675-9201

Emily McElroy, emily_mcelroy@murphyoilcorp.com, 870-864-6324

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MURPHY OIL CORPORATION

SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited)

(Thousands of dollars, except per share amounts)





1 Reclassified to conform to current presentation.

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MURPHY OIL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Thousands of dollars)



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

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MURPHY OIL CORPORATION

SCHEDULE OF ADJUSTED INCOME (LOSS)

(unaudited)

(Millions of dollars, except per share amounts)







Non-GAAP Financial Measures

Presented above is a reconciliation of Net income 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 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.







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 to reflect comparable disclosure.

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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)









1 Certain pretax items that increase (decrease) EBITDA and EBITDAX above include:





2 Gain (loss) on foreign exchange principally relates to the revaluation of intercompany loans denominated in US dollars and recorded in functional currency Canadian dollar business (this loan was settled in the first quarter of 2018) and revaluation of Malaysian Ringgit monetary assets and liabilities.

3 Gain (loss) on sale of assets in the three months ended March 31, 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 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 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.

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MURPHY OIL CORPORATION

FUNCTIONAL RESULTS OF OPERATIONS (unaudited)

(Millions of dollars)





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 ($29.5) million and $37.1 million are included in the Corporate segment for the three months ended March 31, 2018 and 2017, respectively. Corporate segment income (loss) for the three-month periods ended March 31, 2018 and 2017 included foreign exchange gains (losses) of $16.6 million and ($13.8) 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 three-month period ended March 31, 2018 included a credit to income tax expense of $120.0 million related to an IRS interpretation of the Tax Cuts and Jobs Act.  



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MURPHY OIL CORPORATION

OIL AND GAS OPERATING RESULTS (unaudited)

THREE MONTHS ENDED MARCH 31,  2018 AND 2017

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 to reflect comparable disclosure.

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

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MURPHY OIL CORPORATION

PRODUCTION-RELATED EXPENSES

(unaudited)

(Dollars per barrel of oil equivalents sold)





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MURPHY OIL CORPORATION

OTHER FINANCIAL DATA

(unaudited)

(Millions of dollars)



1 Excludes amortization of undeveloped leases of $13.2 million and $10.0 million for the three months ended March 31, 2018 and 2017,  
   respectively.

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1 Includes a capital lease on production equipment of $125.3 million at March 31, 2018 and $134.0 million at December 31, 2017.

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MURPHY OIL CORPORATION

STATISTICAL SUMMARY

(unaudited)





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.

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MURPHY OIL CORPORATION

STATISTICAL SUMMARY (Continued)

(unaudited) 





1 U.S. dollar equivalent.

2 The Company sold the Seal area heavy oil field in January 2017.

3 Prices are net of payments under the terms of the respective production sharing contracts.

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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.







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MURPHY OIL CORPORATION

SECOND QUARTER 2018 GUIDANCE



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