Murphy Oil Corporation Announces Second Quarter 2018 Results

Company Murphy Oil Corporation 
Tags Production/Development, Exploration, Upstream Activities, Capital Spending, Strategy - Corporate, Financial & Operating Data
Date August 08, 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 reservepotential 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 capitalallocation 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 wellon 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 gaslift 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 wellthat 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 capitalprojects 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  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.

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   

  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   

  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 

  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   
                             
                             

  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   

  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). 
  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 oilequivalent 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   

  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. 
  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. 
  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   

  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   

  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. 
  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 

  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 

  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 

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

  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. 
  U.S. dollar equivalent. 
  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 

  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: EvaluateEnergy® ©2020 EvaluateEnergy Ltd