Murphy Oil Corporation Announces Third Quarter 2018 Financial and Operating Results

Source Press Release
Company Murphy Oil Corporation 
Tags Capital Spending, Guidance, Financial & Operating Data, Strategy - Corporate
Date November 07, 2018

EL DORADO, Ark.--(BUSINESS WIRE)--Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the third quarter ended September 30, 2018, including net income of $94 million, or $0.54 per diluted share. Third quarter highlights and recent announcements include:

Financial highlights for the third quarter include:

  • Generated net income of $94 million, or $0.54 per diluted share
  • Achieved oil price realization of over $69 per barrel, which is the highest quarterly year-to-date realization
  • Realized EBITDA of over $28 per barrel of oil equivalent sold
  • Registered annualized year-to-date EBITDA to average capital employed of 21 percent
  • Returned 12 percent of operating cash flow to shareholders through long-standing dividend
  • Preserved balance sheet strength with approximately 30 percent net debt to total capital employed

Operating highlights for the third quarter include:

  • Produced 169 thousand barrels of oil equivalent per day, with 58 percent liquids
  • Increased production in the profitable Kaybob Duvernay by over 2.5 times, year-over-year
  • Delineated Samurai-2 sidetrack accumulation and confirmed the presence of high-quality reservoir sands leading to increased discovered resource

In early October, announced the following:

  • Entered into accretive oil-weighted Gulf of Mexico joint venture with Petrobras
  • Received upgrade to ‘BB+’ with a ‘Stable Outlook’ from Fitch Ratings
  • Amended Credit Agreement with less restrictive covenants

THIRD QUARTER 2018 RESULTS

Murphy recorded net income of $94 million, or $0.54 per diluted share, for the third 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 $61 million, or $0.35 per diluted share. The adjusted income excludes the following after-tax items: an unrealized mark-to-market gain on crude oil derivative contracts of $21 million, proceeds from an Ecuador arbitration settlement of $21 million, a loss on foreign exchange of $18 million and a net gain of $9 million relating to the combination of Brunei working interest income in the Brunei portion of the Gumusut-Kakap Field, partially offset by an incremental redetermination expense related to the Malaysian portion thereof. There is no change to Murphy’s working interest in the quarter in the Gumusut-Kakap Field. The Ecuador arbitration settlement relates to a change in fiscal terms for a block previously owned by the company. Details for third quarter results can be found in the attached schedules.

Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $433 million, or $28.23 per barrel of oil equivalent (BOE) sold. Earnings before interest, taxes, depreciation, amortization and exploration expenses (EBITDAX) totaled $455 million, or $29.60 per BOE sold. Details for third quarter EBITDA and EBITDAX reconciliation can be found in the attached schedules.

In the third quarter 2018, the company produced 169 thousand barrels of oil equivalent per day (MBOEPD). Production exceeded the high end of guidance primarily driven by outperformance in the Tupper Montney onshore Canada, outperformance in Sarawak natural gas in Malaysia and higher than forecasted volumes due to a delay to late in the third quarter and extended into the fourth quarter for the scheduled turnaround in the non-operated Hibernia Field offshore Canada.

“Now with three-quarters of the year behind us, we continue to successfully implement our 2018 plan with third quarter production exceeding the high end of our guidance range. We continue to benefit from a diverse, oil-weighted portfolio that generates high cash flow per barrel metrics, driving over a 20 percent return on cash flow to capital employed. Our high price realizations, competitive cash returns, long-standing dividend policy and successful exploration program along with our recently announced accretive Gulf of Mexico joint venture will continue to reward our shareholders over the long-term,” stated Roger W. Jenkins, President and Chief Executive Officer.

FINANCIAL POSITION

As of September 30, 2018, the company had $2.8 billion of outstanding long-term, fixed-rate notes while maintaining $2.0 billion of liquidity. The fixed-rate notes have a weighted average maturity of 8.0 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 over 98 MBOEPD in the third quarter, a 15 percent increase year-over-year.

Eagle Ford Shale – Production in the quarter averaged 46 MBOEPD, with 88 percent liquids. As planned, the company brought nine operated wells online during the quarter, all in the Catarina area.

Tupper Montney – Natural gas production in the quarter averaged over 240 million cubic feet per day (MMCFD).

Kaybob Duvernay – During the quarter, the company achieved record production averaging 10 MBOEPD with 61 percent liquids. Murphy has increased production in this profitable play for six consecutive quarters. As planned, the company brought ten operated wells online across the Kaybob Duvernay acreage: a five well pad in Kaybob West, a three well pad in Kaybob North and a two well pad in Kaybob East. All these wells are performing at or above pre-drill estimates with average initial gross production rates over 30 days (IP30 rate) ranging from approximately 725 to over 1,200 barrels of oil equivalent per day (BOEPD). With these wells being brought online, the company has advanced the appraisal of the play, with the exception of the Two Creeks area, which is expected to occur next year.

“As part of our long-term strategy, we plan to continue increasing production, while spending within cash flow, across our North American onshore assets. In the Eagle Ford Shale, we are executing on our field development plan with over 1,800 locations remaining in our undrilled inventory. In the Kaybob Duvernay we are growing production and lowering costs, while adding a deep inventory of future quality locations and in the Tupper Montney, we are consistently achieving all our targets. From a cost perspective, I am especially pleased with the lease operating expense across our North American onshore business in the quarter, of just over $6 per barrel of oil equivalent,” commented Jenkins.

Global Offshore

The offshore business produced over 70 MBOEPD for the third quarter, with 71 percent liquids.

Malaysia & Brunei – Production in the quarter averaged 47 MBOEPD, with 61 percent liquids. Block K and Sarawak averaged 28 thousand barrels of liquids per day, while Sarawak natural gas production averaged 106 MMCFD. The Kikeh gas lift project was completed, successfully commissioned and tested in the quarter.

North America Production in the quarter for the Gulf of Mexico and offshore Canada averaged 24 MBOEPD, with 90 percent liquids.

In the Gulf of Mexico, the company commenced installation of the Dalmatian subsea pump late in the third quarter. Subsequent to quarter end, the installation was completed. Currently, the project is delivering incremental production of 7,000 BOEPD (gross), with rates exceeding 11,000 BOEPD (gross), an increase of 250 percent from prior quarter production.

EXPLORATION

Gulf of Mexico Exploration – During the third quarter, Murphy continued drilling the Samurai-2 appraisal sidetrack (Green Canyon 476) of the previously announced Samurai-2 discovery well (Green Canyon 432). Total depth was reached in mid-October. The well successfully delineated the Samurai accumulation and confirmed the presence of high-quality reservoir sands and resources on the company’s Green Canyon Block 476. The sands encountered in the sidetrack are equivalent and hydrostatically connected to those announced in the Samurai-2 well. Following the logging of the sidetrack appraisal well, Murphy is increasing the previously announced discovered resource to approximately 90 million barrels of oil equivalent (MMBOE). At this time, Murphy and its partner are evaluating development plans for the Samurai discovery, as well as possible drilling plans for 2019.

Mexico Exploration – During the third quarter, Murphy submitted the drilling permit to the Comisión Nacional de Hidrocarburos (“CNH”) for the Deepwater Block 5 Exploration Plan. Following the CNH approval, the company plans to spud the exploration prospect in the first quarter of 2019.

Vietnam Exploration – Murphy expects to spud the LDT-1X well, in Block 15-01/05 in the Cuu Long Basin, in the first quarter of 2019.

SUBSEQUENT TO QUARTER END

On October 10, 2018, Murphy announced it entered into a definitive agreement to form a new joint venture company with Petrobras America Inc. (“PAI”), a subsidiary of Petrobras. The joint venture, which will be owned 80 percent by Murphy and 20 percent by PAI, will be comprised of all Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations. The transaction has an effective date of October 1, 2018 and is expected to close by year end 2018. Murphy will pay cash consideration of $900 million to PAI, subject to normal closing adjustments. The company currently anticipates accounting for the PAI share of this transaction as a ‘non-controlling interest’ after closing.

In conjunction with the joint venture, the company entered into an amendment of its existing Credit Agreement. In addition to permitting the contribution of assets to the joint venture, the amendment, which will be fully effective upon the closing of the joint venture transaction, removes certain covenants and increases financial flexibility.

Also, subsequent to quarter end, Fitch Ratings upgraded Murphy’s debt rating to ‘BB+’ from ‘BB’ with a ‘Stable Outlook’.

“As we anticipated, the announcement of our joint venture formation with Petrobras has been well received. This transaction ties directly to our long-term strategy. The improvement in our bond rating is reflective of our increased high-value oil production growth, accretive cash flow and long-standing, strong balance sheet,” stated Jenkins.

PRODUCTION AND CAPITAL EXPENDITURE GUIDANCE

The company is maintaining full year 2018 production guidance to be in the range of 168,500 to 170,500 BOEPD. In addition, full year capital expenditures are being maintained at $1.18 billion. Production for the fourth quarter 2018 is estimated to be in the range of 167,000 to 169,000 BOEPD. Full year and fourth quarter production, as well as capital expenditures guidance excludes any impact from the previously announced Gulf of Mexico joint venture.

“Several recent events across many of our assets are affecting our fourth quarter production. The Gulf of Mexico was impacted by an active hurricane and tropical storm season early in the quarter. Malaysia was impacted by a series of mechanical issues affecting both operated and non-operated facilities. In offshore Canada, the turnaround in the non-operated Hibernia Field was extended into the fourth quarter. We have rectified these issues and have restored production to expected levels. Lastly, the Eagle Ford Shale is still being negatively impacted by excessive rains causing wide-spread flooding washing out roads to some of our key producing areas,” commented Jenkins. “Looking forward, we are eager to close our cash flow providing Gulf of Mexico transaction before year end, and then early in the new year provide our formal 2019 annual guidance. Directionally, we remain committed to our strategy of delivering free cash flow in addition to covering our dividend while growing oil-weighted production,” Jenkins added.

CONFERENCE CALL AND WEBCAST SCHEDULED FOR NOVEMBER 8, 2018

Murphy will host a conference call to discuss third quarter 2018 financial and operating results on Thursday, November 8, 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 10390401.

FINANCIAL DATA

Summary financial data and operating statistics for third 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 fourth quarter and full year 2018.

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 the 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.

RESERVES REPORTING TO THE SECURITIES AND EXCHANGE COMMISSION

The SEC requires oil and natural gas companies, in their filings with the SEC, to disclose proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms in this new release, such as “resource”, “gross resource”, “recoverable resource”, “recoverable oil”, “resource base”, “EUR”, or “estimated ultimate recovery” and similar terms that the SEC’s rules prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our most recent Annual Report on Form 10-K filed with the 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 .

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      Nine Months Ended 
        September 30,      September 30, 
        2018    2017 1      2018    2017 1 
                       
Revenues                       
Revenue from sales to customers      659,806      511,192        1,921,910      1,498,093   
(Loss) gain on crude contracts        (2,223    (13,573        (69,349    50,365   
Gain on sale of assets and other income        17,214      700        26,035      134,780   
Total revenues        674,797      498,319        1,878,596      1,683,238   
                       
Costs and expenses                       
Lease operating expenses        133,141      112,751        406,226      346,072   
Severance and ad valorem taxes        15,067      10,816        40,100      32,771   
Exploration expenses, including undeveloped                               
lease amortization        21,838      28,492        69,911      77,356   
Selling and general expenses        64,107      51,374        173,324      155,438   
Depreciation, depletion and amortization        241,833      243,636        710,563      714,782   
Accretion of asset retirement obligations        11,099      10,654        32,041      31,638   
Redetermination expense        11,332            11,332       
Other expense (benefit)        (34,387    2,454        (44,776    10,988   
Total costs and expenses        464,030      460,177        1,398,721      1,369,045   
Operating income from continuing operations        210,767      38,142        479,875      314,193   
                       
Other income (loss)                       
Interest and other income (loss)        (19,478    (53,019        (19,445    (106,345   
Interest expense, net        (44,492    (48,681        (134,264    (138,423   
Total other loss        (63,970    (101,700        (153,709    (244,768   
                       
Income (loss) from continuing operations before income taxes        146,797      (63,558        326,166      69,425   
Income tax expense (benefit)        51,038      2,760        15,801      95,602   
Income (loss) from continuing operations        95,759      (66,318        310,365      (26,177   
Income (loss) from discontinued operations,                               
net of income taxes        (1,815    425        (2,650    1,177   
                       
NET INCOME (LOSS)      93,944      (65,893        307,715      (25,000   
                       
INCOME (LOSS) PER COMMON SHARE – BASIC                       
Continuing operations      0.55      (0.38        1.79      (0.15   
Discontinued operations        (0.01          (0.01    0.01   
Net Income (Loss)      0.54      (0.38        1.78      (0.14   
                       
INCOME (LOSS) PER COMMON SHARE – DILUTED                       
Continuing operations      0.55      (0.38        1.78      (0.15   
Discontinued operations        (0.01          (0.01    0.01   
Net Income (Loss)      0.54      (0.38        1.77      (0.14   
                       
Cash dividends per Common share        0.25      0.25        0.75      0.75   
                       
Average Common shares outstanding (thousands)                       
Basic        173,047      172,573        172,949      172,509   
Diluted        174,175      172,573        174,202      172,509   
                               
1 Reclassified to conform to current presentation. 

                       
MURPHY OIL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Thousands of dollars) 
                       
        Three Months Ended      Nine Months Ended 
        September 30,      September 30, 
        2018    2017      2018    2017 
Operating Activities                       
Net income (loss)      93,944      (65,893      307,715      (25,000 
Adjustments to reconcile net income (loss) to net cash provided by continuing operations activities:                       
Loss (Income) from discontinued operations        1,815      (425      2,650      (1,177 
Depreciation, depletion and amortization        241,833      243,636        710,563      714,782   
Dry hole costs (credits)        4,537      (3,043      4,526      (1,139 
Amortization of undeveloped leases        8,770      20,553        31,544      40,859   
Accretion of asset retirement obligations        11,099      10,654        32,041      31,638   
Deferred income tax (benefit) charge        17,734      (36,697      (138,755    (3,567 
Pretax (gain) loss from disposition of assets        (124    (117      (6    (130,765 
Net (increase) decrease in noncash operating working capital        (87,990    (41,511      (2,550    1,070   
Other operating activities, net        80,781      100,179        49,217      192,097   
Net cash provided by continuing operations activities        372,399      227,336        996,945      818,798   
                       
Investing Activities                       
Property additions and dry hole costs        (243,212    (274,763      (858,356    (706,417 
Proceeds from sales of property, plant and equipment        505      4,843        1,128      69,146   
Purchases of investment securities 1        –      –        –      (212,661 
Proceeds from maturity of investment securities 1        –      36,635        –      320,828   
Net cash required by investing activities        (242,707    (233,285      (857,228    (529,104 
                       
Financing Activities                       
Borrowings of debt, net of issuance costs        –      541,772        –      541,772   
Repayments of debt        –      (550,000      –      (550,000 
Capital lease obligation payments        (2,516    (2,704      (7,164    (14,687 
Withholding tax on stock-based incentive awards        –      (70      (6,922    (7,151 
Cash dividends paid        (43,263    (43,143      (129,780    (129,421 
Net cash required by financing activities        (45,779    (54,145      (143,866    (159,487 
                       
Effect of exchange rate changes on cash and cash equivalents        (37,489    (1,186      (13,107    (5,797 
Net increase (decrease) in cash and cash equivalents        46,424      (61,280      (17,256    124,410   
Cash and cash equivalents at beginning of period        901,308      1,058,487        964,988      872,797   
Cash and cash equivalents at end of period      947,732      997,207        947,732      997,207   
                               
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      Nine Months Ended 
        September 30,      September 30, 
        2018    2017      2018    2017 
Net income (loss)      93.9      (65.9      307.7      (25.0 
Discontinued operations loss (income)        1.8      (0.4      2.7      (1.2 
Income from continuing operations        95.7      (66.3      310.4      (26.2 
Adjustments:                       
Mark-to-market (gain) loss on crude oil derivative contracts        (20.6    11.8        0.8      (28.9 
Foreign exchange losses (gains)        17.6      43.9        14.1      86.6   
Impact of tax reform        –      –        (120.0    –   
Seal insurance proceeds        (7.0    –        (15.2    –   
Ecuador arbitration settlement        (20.5    –        (20.5    –   
Brunei working interest income        (16.0    –        (16.0    –   
Malaysia/ Brunei unitization/ redetermination expense        7.0      –        7.0      –   
Write-off of previously suspended exploration wells        4.5      –        4.5      –   
Deferred tax on undistributed foreign earnings        –      4.7        –      65.2   
Tax benefits on investments in foreign areas        –      –        –      (32.9 
Gain on sale of assets        –      –        –      (96.0 
Oil Insurance Limited dividends        –      –        –      (2.8 
Total adjustments after taxes        (35.0    60.4        (145.3    (8.8 
Adjusted income (loss)      60.7      (5.9      165.1      (35.0 
                       
Adjusted income (loss) per diluted share      0.35      (0.03      0.95      (0.20 
                               

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      Nine Months Ended 
        September 30, 2018      September 30, 2018 
        Pretax    Tax    Net      Pretax    Tax    Net 
Exploration & Production:                               
Canada        (9.7    2.7      (7.0      (21.0    5.8      (15.2 
Malaysia        11.3      (4.3    7.0        11.3      (4.3    7.0   
Other International        (11.5    –      (11.5      (11.5    –      (11.5 
Total E&P        (9.9    (1.6    (11.5      (21.2    1.5      (19.7 
Corporate 1:        (34.1    10.6      (23.5      (11.6    (114.0    (125.6 
Total adjustments      (44.0    9.0      (35.0      (32.8    (112.5    (145.3 

     
  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      Nine Months Ended 
        September 30,      September 30, 
        2018    2017      2018    2017 
Net income (loss) (GAAP)      93.9      (65.9      307.7      (25.0 
Discontinued operations loss (income)        1.8      (0.4      2.7      (1.2 
Income tax expense (benefit)        51.0      2.8        15.8      95.6   
Interest expense, net        44.5      48.7        134.3      138.4   
Depreciation, depletion and amortization expense        241.8      243.6        710.6      714.8   
EBITDA (Non-GAAP)      433.0      228.8        1,171.1      922.6   
Foreign exchange losses (gains)        17.9      50.3        13.3      99.1   
Mark-to-market (gain) loss on crude oil derivative contracts        (26.0    18.1        1.1      (44.5 
Gain on sale of assets        –      –        –      (130.8 
Accretion of asset retirement obligations        11.1      10.7        32.0      31.6   
Seal insurance proceeds        (9.7    –        (21.0    –   
Ecuador arbitration settlement        (26.0    –        (26.0    –   
Brunei working interest income        (16.0    –        (16.0    –   
Malaysia/ Brunei unitization/ redetermination expense        11.3      –        11.3      –   
Write-off of previously suspended exploration wells        4.5      –        4.5      –   
Oil Insurance Limited dividends        –      –        –      (4.4 
Adjusted EBITDA (Non-GAAP)      400.1      307.9        1,170.3      873.6   
                       
Memo:                       
Adjusted EBITDA (Non-GAAP)        400.1      307.9        1,170.3      873.6   
Exploration expense included in Adjusted EBITDA        (4.5    –        (4.5    –   
Exploration expenses        21.8      28.5        69.9      77.4   
Adjusted EBITDAX (Non-GAAP)        417.4      336.4        1,235.7      951.0   
                       
Total barrels of oil equivalents sold (thousands of barrels)        15,336.8      14,879.2        45,912.0      44,215.1   
                       
EBITDA per barrel of oil equivalents sold      28.23      15.38        25.51      20.87   
Adjusted EBITDA per barrel of oil equivalents sold      26.09      20.69        25.49      19.76   
Adjusted EBITDAX per barrel of oil equivalents sold      27.22      22.61        26.91      21.51   
                               

Non-GAAP Financial Measures

Presented above is a reconciliation of Net income (loss) to Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings before interest, taxes, depreciation, amortization, and exploration expenses (EBITDAX). Management believes EBITDA, adjusted EBITDA, and adjusted 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, adjusted EBITDA, and adjusted 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 equivalent sold, adjusted EBITDA per barrel of oil equivalent sold, adjusted EBITDAX per barrel of oil equivalents sold. Management believes EBITDA per barrel of oil equivalent sold, adjusted EBITDA per barrel of oil equivalent sold, and adjusted 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, adjusted EBITDA per barrel of oil equivalent sold, and adjusted 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
September 30, 2018 
    Three Months Ended
September 30, 2017 
        Revenues    Income
(Loss) 
    Revenues    Income
(Loss) 
Exploration and production                       
United States 1      348.7      91.6        209.4      (11.2 
Canada        107.1      12.5        81.9      (3.2 
Malaysia        201.2      54.1        220.5      67.7   
Other        19.9      1.3        –      (11.0 
Total exploration and production        676.9      159.5        511.8      42.3   
Corporate 1        (2.1    (63.8      (13.5    (108.6 
Revenue/income from continuing operations        674.8      95.7        498.3      (66.3 
Discontinued operations, net of tax        –      (1.8      –      0.4   
Total revenues/net income (loss)      674.8      93.9        498.3      (65.9 
                       
                       
                       
      Nine Months Ended
September 30, 2018 
    Nine Months Ended
September 30, 2017 
        Revenues    Income
(Loss) 
    Revenues    Income
(Loss) 
Exploration and production                       
United States      945.6      200.3        646.3      (21.8 
Canada 2        333.8      46.7        388.1      102.6   
Malaysia        640.7      208.4        594.4      173.9   
Other        19.9      (28.8      –      (10.9 
Total exploration and production        1,940.0      426.6        1,628.8      243.8   
Corporate 3        (61.4    (116.2      54.4      (270.0 
Revenue/income from continuing operations        1,878.6      310.4        1,683.2      (26.2 
Discontinued operations, net of tax        –      (2.7      –      1.2   
Total revenues/net income (loss)      1,878.6      307.7        1,683.2      (25.0 

     
  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 (losses) of ($2.2) million and ($13.6) million are included in the Corporate segment for the three months ended September 30, 2018 and 2017, respectively. Realized and unrealized gains (losses) of ($69.3) million and $50.4 million are included in the Corporate segment for the nine months ended September 30, 2018 and 2017, respectively. Corporate segment loss for the three-month periods ended September 30, 2018 and 2017 included foreign exchange losses of $16.8 million and $50.3 million, respectively. Corporate segment loss for the nine-month periods ended September 30, 2018 and 2017 included foreign exchange losses of $14.0 million and $99.1 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 nine-month period ended September 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 SEPTEMBER 30, 2018 AND 2017 
                                 
                                 
        United                         
(Millions of dollars)        States 1      Canada      Malaysia      Other      Total 
Three Months Ended September 30, 2018                                 
Oil and gas sales and other revenues      348.7        107.1        201.2        19.9        676.9   
Lease operating expenses        52.0        31.5        49.4        0.2        133.1   
Severance and ad valorem taxes        14.8        0.3        –        –        15.1   
Depreciation, depletion and amortization        132.6        58.6        44.3        1.0        236.5   
Accretion of asset retirement obligations        4.5        1.9        4.7        –        11.1   
Redetermination expense        –        –        11.3        –        11.3   
Exploration expenses                                 
Dry holes        –        –        –        4.5        4.5   
Geological and geophysical        0.4        –        0.1        0.7        1.2   
Other exploration        1.6        0.2        –        5.5        7.3   
        2.0        0.2        0.1        10.7        13.0   
Undeveloped lease amortization        7.8        0.2        –        0.8        8.8   
Total exploration expenses        9.8        0.4        0.1        11.5        21.8   
Selling and general expenses        14.0        6.4        3.4        6.2        30.0   
Other        4.5        (9.5      0.6        0.6        (3.8 
Results of operations before taxes        116.5        17.5        87.4        0.4        221.8   
Income tax provisions (benefits)        24.9        5.0        33.3        (0.9      62.3   
Results of operations (excluding                                           
corporate overhead and interest)      91.6        12.5        54.1        1.3        159.5   
                                 
Three Months Ended September 30, 2017                                 
Oil and gas sales and other revenues      209.4        81.9        220.5        –        511.8   
Lease operating expenses        43.5        28.7        40.6        –        112.8   
Severance and ad valorem taxes        10.5        0.3        –        –        10.8   
Depreciation, depletion and amortization        128.5        45.9        63.7        1.0        239.1   
Accretion of asset retirement obligations        4.3        2.0        4.4        –        10.7   
Exploration expenses                                 
Dry holes        (0.6      –        (2.5      –        (3.1 
Geological and geophysical        0.1        –        –        1.5        1.6   
Other exploration        1.5        0.2        –        7.7        9.4   
        1.0        0.2        (2.5      9.2        7.9   
Undeveloped lease amortization        20.4        0.2        –        –        20.6   
Total exploration expenses        21.4        0.4        (2.5      9.2        28.5   
Selling and general expenses        13.2        7.3        4.6        5.1        30.2   
Other        4.2        0.1        1.4        –        5.7   
Results of operations before taxes        (16.2      (2.8      108.3        (15.3      74.0   
Income tax provisions (benefits)        (5.0      0.4        40.6        (4.3      31.7   
Results of operations (excluding                                           
corporate overhead and interest)      (11.2      (3.2      67.7        (11.0      42.3   

  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) NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 
                                 
                                 
        United                         
(Millions of dollars)        States 1      Canada 2      Malaysia      Other      Total 
Nine Months Ended September 30, 2018                                 
Oil and gas sales and other revenues      945.6        333.8        640.7        19.9        1,940.0   
Lease operating expenses        162.6        91.0        152.4        0.2        406.2   
Severance and ad valorem taxes        39.2        0.9        –        –        40.1   
Depreciation, depletion and amortization        382.4        171.1        141.9        2.4        697.8   
Accretion of asset retirement obligations        13.4        5.8        12.8        –        32.0   
Redetermination expense        –        –        11.3        –        11.3   
Exploration expenses                                 
Dry holes        –        –        –        4.5        4.5   
Geological and geophysical        6.5        –        0.6        4.3        11.4   
Other exploration        5.1        0.3        –        17.0        22.4   
        11.6        0.3        0.6        25.8        38.3   
Undeveloped lease amortization        29.2        0.6        –        1.7        31.5   
Total exploration expenses        40.8        0.9        0.6        27.5        69.8   
Selling and general expenses        39.0        20.7        8.3        18.1        86.1   
Other        12.4        (20.9      (0.8      1.2        (8.1 
Results of operations before taxes        255.8        64.3        314.2        (29.5      604.8   
Income tax provisions (benefits)        55.5        17.6        105.8        (0.7      178.2   
Results of operations (excluding                                           
corporate overhead and interest)      200.3        46.7        208.4        (28.8      426.6   
                                 
Nine Months Ended September 30, 2017                                 
Oil and gas sales and other revenues      646.3        388.1        594.4        –        1,628.8   
Lease operating expenses        135.7        76.8        133.6        –        346.1   
Severance and ad valorem taxes        31.6        1.2        –        –        32.8   
Depreciation, depletion and amortization        402.3        136.6        160.0        2.9        701.8   
Accretion of asset retirement obligations        12.8        5.9        12.9        –        31.6   
Exploration expenses                                 
Dry holes        (1.9      –        0.8        –        (1.1 
Geological and geophysical        1.0        0.1        –        6.0        7.1   
Other exploration        5.5        0.3        –        24.8        30.6   
        4.6        0.4        0.8        30.8        36.6   
Undeveloped lease amortization        39.4        1.4        –        –        40.8   
Total exploration expenses        44.0        1.8        0.8        30.8        77.4   
Selling and general expenses        38.7        20.9        10.2        15.0        84.8   
Other        11.5        0.7        9.4        –        21.6   
Results of operations before taxes        (30.3      144.2        267.5        (48.7      332.7   
Income tax provisions (benefits)        (8.5      41.6        93.6        (37.8      88.9   
Results of operations (excluding                                           
corporate overhead and interest)      (21.8      102.6        173.9        (10.9      243.8   

  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      Nine Months Ended 
      September 30,      September 30, 
      2018    2017      2018    2017 
                       
United States – Eagle Ford Shale                       
Lease operating expense      8.26    6.93      8.23    7.60 
Severance and ad valorem taxes        3.48    2.56      3.22    2.54 
Depreciation, depletion and amortization (DD&A) expense        24.43    25.42      24.59    25.74 
                       
United States – Gulf of Mexico                       
Lease operating expense      10.29    12.48      12.79    10.61 
DD&A expense        17.57    20.07      17.25    21.13 
                       
Canada – Onshore                       
Lease operating expense      4.33    5.49      4.69    5.11 
Severance and ad valorem taxes        0.07    0.08      0.07    0.11 
DD&A expense        10.69    10.03      10.47    9.97 
                       
Canada – Offshore                       
Lease operating expense      22.42    13.25      13.36    9.76 
DD&A expense        14.76    13.66      13.47    12.96 
                       
Malaysia – Sarawak                       
Lease operating expense      7.29    5.28      8.07    5.49 
DD&A expense        8.19    8.53      8.55    8.09 
                       
Malaysia – Block K                       
Lease operating expense      19.98    10.50      17.77    14.07 
DD&A expense        15.16    16.20      14.72    14.65 
                       
Total oil and gas operations                       
Lease operating expense      8.68    7.58      8.85    7.83 
Severance and ad valorem taxes        0.98    0.73      0.87    0.74 
DD&A expense        15.77    16.07      15.48    15.87 

                       
MURPHY OIL CORPORATION OTHER FINANCIAL DATA (unaudited) (Millions of dollars) 
                       
        Three Months Ended      Nine Months Ended 
        September 30,      September 30, 
        2018    2017      2018    2017 
Capital expenditures                       
Exploration and production                       
United States      128.2    204.7        454.6    427.5 
Canada        89.0    68.7        291.3    204.6 
Malaysia        41.3    (3.4      85.8    7.7 
Other        21.2    13.6        38.9    54.9 
Total        279.7    283.6        870.6    694.7 
                       
Corporate        12.2    3.1        22.4    6.9 
Total capital expenditures        291.9    286.7        893.0    701.6 
                       
Charged to exploration expenses 1                       
United States        2.0    1.0        11.6    4.6 
Canada        0.2    0.2        0.3    0.4 
Malaysia        0.1    (2.5      0.6    0.8 
Other        10.7    9.2        25.8    30.8 
Total charged to exploration expenses        13.0    7.9        38.3    36.6 
                       
Total capitalized      278.9    278.8        854.7    665.0 

     
  Excludes amortization of undeveloped leases of $8.8 million and $20.6 million for the three months ended September 30, 2018 and 2017, respectively, and $31.5 million and $40.9 million for the nine months ended September 30, 2018 and 2017, respectively. 

               
MURPHY OIL CORPORATION 
CONDENSED BALANCE SHEETS (unaudited) 
(Millions of dollars) 
               
        September 30, 2018      December 31, 2017 
Assets               
Cash and cash equivalents      947.7      965.0 
Other current assets        433.6      406.6 
Property, plant and equipment – net        8,244.2      8,220.0 
Other long-term assets        401.2      269.3 
Total assets      10,026.7      9,860.9 
               
Liabilities and Stockholders' Equity               
Current maturities of long-term debt      10.5      9.9 
Other current liabilities        865.1      824.3 
Long-term debt 1        2,903.9      2,906.5 
Other long-term liabilities        1,480.3      1,500.0 
Total stockholders' equity        4,766.9      4,620.2 
Total liabilities and stockholders' equity      10,026.7      9,860.9 

     
  Includes a capital lease on production equipment of $128.4 million at September 30, 2018 and $134.0 million at December 31, 2017. 

                     
MURPHY OIL CORPORATION STATISTICAL SUMMARY (unaudited) 
                     
      Three Months Ended      Nine Months Ended 
      September 30,      September 30, 
      2018    2017      2018    2017 
Net crude oil and condensate produced – barrels per day      87,755    84,230      88,781    89,580 
United States – Eagle Ford Shale      33,757    33,070      32,347    33,281 
– Gulf of Mexico      14,530    10,240      14,253    11,309 
Canada – Onshore      6,096    3,240      5,242    2,729 
– Offshore      5,570    6,225      7,237    8,100 
– Heavy 1      –    –      –    201 
Malaysia – Sarawak      11,608    11,508      11,936    12,727 
– Block K      15,661    19,947      17,200    21,233 
Brunei      533    –      566    – 
                     
Net crude oil and condensate sold – barrels per day      85,598    92,033      87,745    89,597 
United States – Eagle Ford Shale      33,757    33,070      32,347    33,281 
– Gulf of Mexico      14,530    10,240      14,253    11,309 
Canada – Onshore      6,096    3,240      5,242    2,729 
– Offshore      5,116    6,533      7,197    7,812 
– Heavy 1      –    –      –    201 
Malaysia – Sarawak      9,469    13,083      12,080    13,350 
– Block K      16,169    25,867      16,471    20,915 
Brunei      461    –      155    – 
                     
Net natural gas liquids produced – barrels per day      9,556    9,128      9,525    9,140 
United States – Eagle Ford Shale      6,663    6,669      6,735    6,812 
– Gulf of Mexico      1,109    910      1,112    967 
Canada – Onshore      1,095    510      1,005    410 
Malaysia – Sarawak      689    1,039      673    951 
                     
Net natural gas liquids sold – barrels per day      9,641    9,213      9,642    9,165 
United States – Eagle Ford Shale      6,663    6,669      6,735    6,812 
– Gulf of Mexico      1,109    910      1,112    967 
Canada – Onshore      1,095    510      1,005    410 
Malaysia – Sarawak      774    1,124      790    976 
                     
Net natural gas sold – thousands of cubic feet per day      428,790    362,901      424,733    379,182 
United States – Eagle Ford Shale      32,718    29,476      32,172    32,862 
– Gulf of Mexico      14,798    11,232      13,968    11,654 
Canada – Onshore      272,061    223,032      266,077    220,121 
Malaysia – Sarawak      106,183    90,181      106,016    106,481 
– Block K      3,030    8,980      6,500    8,064 
                     
Total net hydrocarbons produced – equivalent barrels per day 2      168,776    153,842      169,095    161,917 
Total net hydrocarbons sold – equivalent barrels per day 2      166,704    161,730      168,176    161,959 
                     
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      Nine Months Ended 
        September 30,      September 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        72.08      48.49      68.29      48.42 
– Gulf of Mexico          70.46      47.82        67.41      47.48 
Canada 2 – Onshore          58.52      43.15        57.67      43.64 
– Offshore          73.92      51.26        69.94      50.35 
Malaysia – Sarawak 3          63.82      52.62        66.25      52.07 
– Block K 3          68.67      51.36        66.35      50.95 
Brunei          74.37      –        74.37      – 
                           
Natural gas liquids – dollars per barrel                           
United States – Eagle Ford Shale        27.65      17.89      22.96      16.12 
– Gulf of Mexico          34.49      19.00        26.85      17.84 
Canada 2 – Onshore          41.06      22.77        40.28      22.48 
Malaysia – Sarawak 3          69.64      49.66        70.26      49.94 
                           
Natural gas – dollars per thousand cubic feet                           
United States – Eagle Ford Shale        2.27      2.44      2.26      2.53 
– Gulf of Mexico          2.48      2.49        2.40      2.56 
Canada 2 – Onshore          1.41      1.84        1.42      1.99 
Malaysia – Sarawak 3          3.91      3.60        3.72      3.50 
– Block K 3          0.24      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 SEPTEMBER 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        10/1/2018        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        10/1/2018        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 FOURTH QUARTER 2018 GUIDANCE 
                 
        Liquids        Gas 
        BOPD        MCFD 
Production – net                 
U.S. – Eagle Ford Shale        36,000        29,100 
– Gulf of Mexico        18,500        14,300 
                 
Canada – Tupper Montney        –        230,400 
– Kaybob Duvernay and Placid Montney        8,500        37,600 
– Offshore        6,200        – 
Malaysia – Sarawak        11,900        101,600 
– Block K / Brunei        17,000        6,400 
                 
                 
Total net production (BOEPD)            167,000 - 169,000     
                 
Total net sales (BOEPD)            173,000 - 175,000     
                 
Realized oil prices (dollars per barrel):                 
Malaysia – Sarawak            $69.50     
– Block K            $76.80     
                 
Realized natural gas price ($ per MCF):                 
Malaysia – Sarawak            $4.00     
                 
Exploration expense ($ millions)            $42     
                 
                 
                 
FULL YEAR 2018 GUIDANCE 
                 
Total production (BOEPD)            168,500 to 170,500     
                 
Capital expenditures ($ billions)            $1.18     

Contacts

Murphy Oil Corporation
Investor Contacts:
Kelly Whitley, 281-675-9107
kelly_whitley@murphyoilcorp.com
or
Bryan Arciero, 832-319-5374
bryan_arciero@murphyoilcorp.com
or
Emily McElroy, 870-864-6324
emily_mcelroy@murphyoilcorp.com

Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd