Murphy Oil Announces Preliminary Quarterly and Annual Financial Results

  Murphy Oil Announces Preliminary Quarterly and Annual Financial Results

Business Wire

EL DORADO, Ark. -- January 30, 2013

Murphy Oil Corporation (NYSE: MUR) announced today that its net income in the
fourth quarter of 2012 was $158.7million ($0.82per diluted share) compared
to a net loss of $113.9million ($0.59per diluted share) in the fourth
quarter of 2011. Net income in the fourth quarter of 2012 was improved over
the same 2011 quarter principally due to lower impairment expenses and income
tax benefits associated with operating losses in two foreign countries in the
current period. The just completed quarter included total impairment charges
of $261.0 million ($239.6million after taxes) associated with both oil
production operations in Republic of the Congo and ethanol production
operations in Hereford, Texas. The Congo impairment related primarily to
unsuccessful drilling operations in the fourth quarter and the removal of
proved oil reserves at year-end 2012 at the Azurite field. The field continues
to produce while we evaluate future options. Operating results in the fourth
quarter of the prior year included an impairment charge for Azurite of
$368.6million. The Hereford ethanol plant was deemed impaired at year-end
2012 due to an expectation of weak future ethanol crush spreads. Income tax
benefits in the upstream business totaled $108.3million associated with tax
deductions for operating losses in Republic of the Congo and Suriname. The
2012 fourth quarter included a loss from discontinued operations of $3.7
million ($0.02 per diluted share), compared to income from discontinued
operations of $4.0million ($0.02 per diluted share) in the 2011 quarter.
Income from continuing operations in the fourth quarter of 2012 was
$162.4million ($0.84 per diluted share), but was a loss of $117.9million
($0.61 per diluted share) a year ago.

For the year of 2012, net income totaled $970.9million ($4.99per diluted
share) compared to $872.7million ($4.49per diluted share) in 2011. Net
income included income from discontinued operations of $6.8million ($0.04per
diluted share) in 2012 and $143.2million ($0.74per diluted share) in 2011.
Income from continuing operations for the years of 2012 and 2011 totaled
$964.1million ($4.95per diluted share) and $729.5million ($3.75per diluted
share), respectively.


Net Income

                                     Three Months Ended    Years Ended
                                      December 31,           December 31,
                                      2012       2011       2012     2011
(Millions of Dollars)
Exploration and Production            $ 145.0     (144.6 )   905.0     614.2
Refining and Marketing                  38.5      61.0       157.6     190.3
Corporate                              (21.1 )   (34.3  )   (98.5 )   (75.0 )

Income (loss) from continuing           162.4     (117.9 )   964.1     729.5
operations
Income (loss) from discontinued        (3.7  )   4.0       6.8      143.2 
operations

Net income (loss)                     $ 158.7    (113.9 )   970.9    872.7 

Income (loss) per Common share –
Diluted:
Income (loss) from continuing         $ 0.84      (0.61  )   4.95      3.75
operations
Net income (loss)                       0.82      (0.59  )   4.99      4.49



Fourth quarter 2012 vs. Fourth quarter 2011

Exploration and Production (E&P)

Income for the Company’s E&P continuing operations was $145.0million in the
fourth quarter of 2012 compared to a loss of $144.6million in the same
quarter of 2011. The improvement in earnings in the fourth quarter 2012
compared to the same period in 2011 was primarily attributable to a larger
impairment charge in Republic of the Congo in 2011 and income tax benefits
recognized in 2012 totaling $108.3million associated with operating losses in
Republic of the Congo and Suriname. The 2012 quarter also benefited from
higher crude oil sales volumes and lower exploration expenses, but these were
mostly offset by lower oil and natural gas sales prices and higher overall
extraction and administrative expenses. The increase in extraction expenses in
the current year was attributable to higher worldwide average crude oil
production and higher depreciation unit rates in Malaysia associated with
ongoing capital development activities.


E&P Metrics
                                                                  
                                       Three Mos. Ended      Years Ended
                                       December 31,          December 31,
                                       2012        2011      2012      2011
Oil Production Volume – Bbls. per        132,918   108,771   112,591   103,160
day
Natural Gas Sales Volume – MCF per       473,487   487,991   490,124   457,365
day
Total BOE Production Volume – BOE        211,833   190,103   194,278   179,388
per day
                                                                       
Average Realized Oil Sales Price – $   $ 92.82     96.67     95.58     94.18
per Bbl.
Average Realized North American        $ 3.34      3.67      2.65      4.08
Natural Gas Sales Price – $ per MCF
Average Realized Sarawak Natural Gas   $ 6.78      7.85      7.50      7.10
Sales Price – $ per MCF



Exploration expenses totaled $137.2million in the fourth quarter 2012, down
from $185.6million in the 2011 quarter. The decrease was primarily
attributable to lower dry hole costs associated with unsuccessful exploratory
drilling in the 2012 quarter in Canada and Brunei, partially offset by higher
dry hole costs in the current quarter in Republic of the Congo.

Additionally, the 2012 quarter had lower leasehold amortization expense in the
Kurdistan region of Iraq compared to the prior year.

Worldwide production totaled 211,833 barrels of oil equivalent per day in the
2012 fourth quarter, an 11% increase from the 190,103barrels of oil
equivalent per day produced in the 2011 quarter. Crude oil, condensate and gas
liquids production was 132,918 barrels per day in the 2012 quarter compared to
108,771barrels per day in 2011. The oil production increase in the current
year was primarily attributable to an ongoing development drilling program in
the EagleFord Shale area of South Texas as well as purchase of additional
working interests in the ThunderHawk and Front Runner fields in the Gulf of
Mexico during 2012. Natural gas sales volumes averaged 473million cubic feet
per day in quarter four 2012, down 3% from the 488million cubic feet per day
sold in the prior year’s quarter. The 2012 reduction was primarily
attributable to lower gas volumes produced at the Tupperarea in Western
Canada due to a planned shut-in of certain wells and virtually no development
drilling in this area in the 2012 quarter because of continued weak North
American natural gas sales prices. Natural gas production in 2012 in the U.S.
was above 2011 levels primarily due to the development drilling program in the
Eagle Ford Shale.

The average sales price for the Company’s crude oil, condensate and gas
liquids was $92.82 per barrel for continuing operations in the 2012 fourth
quarter, down from $96.67 per barrel in the 2011 quarter. Natural gas sales
prices in North America averaged $3.34 per thousand cubic feet (MCF) in the
2012 quarter, down from $3.67 per MCF in the 2011 quarter. Natural gas sold
from fields offshore Sarawak, Malaysia, averaged $6.78 per MCF in the 2012
quarter compared to $7.85per MCF a year ago.

Refining and Marketing (R&M)

The Company’s refining and marketing business generated a quarterly profit
from continuing operations of $38.5million in the fourth quarter 2012
compared to a profit of $61.0million in the same quarter a year earlier. U.S.
R&M continuing operations generated earnings of $22.0million in the fourth
quarter of 2012 compared to earnings of $50.7million in the 2011 quarter. The
earnings reduction for this business in 2012 was principally the result of an
impairment charge of $39.6million after taxes to reduce the carrying value of
the Hereford, Texas ethanol plant. The Company’s U.S. ethanol plants
experienced weaker operating results in the 2012 quarter compared to the prior
year due to depressed ethanol crush spreads. U.S. retail marketing operations
reflected improved results as margins for this business averaged 14.1cents
per gallon in the 2012 quarter compared to 13.0cents per gallon in the 2011
quarter. Retail operations also benefited from improved merchandise margins in
the current quarter compared to a year ago. The U.K. R&M operations posted a
net profit of $16.5million in the 2012 quarter compared to a profit of
$10.3million in 2011, with the improved results based on better overall unit
margins for this business.


Downstream Metrics
                                                                
                                     Three Mos. Ended      Years Ended
                                     December 31           December 31
                                     2012        2011      2012      2011
U.S. Retail Fuel Margins – Per       $ 0.141     0.130     0.129     0.156
gallon
U.S. Retail Merchandise sales per    $ 154,730   157,425   156,429   158,144
store month
U.K. Refinery Inputs – Bbls. per       133,599   138,492   132,613   135,391
day
U.K. R&M Unit Margins – Per Bbl.     $ 2.21      1.38      1.94      (0.67   )
Total Petroleum and Other Product
Sales –
Bbls. per day*                         494,406   465,946   474,949   556,434
                                                                     
*Includes 122,361 bbls. per day in the 2011 year related to discontinued
operations.



Corporate

Corporate activities incurred after-tax costs of $21.1million in the fourth
quarter of 2012, well below the net costs of $34.3million in the 2011
quarter. The 2012 cost reduction was primarily related to favorable effects
from transactions denominated in foreign currencies. The 2012 quarter included
an after-tax benefit of $3.5million from foreign currencies, compared to an
after-tax charge of $11.6million in the 2011 quarter. The Company also had
lower net interest expense in the 2012 quarter due to capitalizing a larger
portion of its financing costs to oil development projects in the current
period. Administrative expenses were higher in the 2012 quarter compared to a
year earlier due to additional costs for professional services and employee
compensation.

Discontinued Operations

The loss from discontinued operations was $3.7million ($0.02 per diluted
share) in the fourth quarter 2012, compared to income of $4.0million ($0.02
per diluted share) in the 2011 fourth quarter. The 2012 quarterly results
included income tax adjustments related to the Company’s former U.S. oil
refineries which were sold in 2011, mostly offset by profits from U.K. oil and
gas production operations. The quarterly profit a year ago was primarily
attributable to results of the U.K. oil and gas production operations. The
sale of these U.K. oil and gas assets is expected to be completed during the
first quarter 2013.

Year 2012 vs. Year 2011

Exploration and Production (E&P)

The Company’s E&P continuing operations earned $905.0million for the full
year 2012 compared to $614.2million in 2011. The improvement in 2012 earnings
versus 2011 was primarily attributable to higher oil production and lower
impairment and exploration expenses in 2012, plus income tax benefits
recognized in the current year related to U.S. tax deductions for losses
incurred in Republic of the Congo and Suriname. The current year also
benefited from marginally higher average crude oil sales prices. The 2011
period included a $13.1million after-tax gain on sale of gas storage assets
in Spain. Unfavorable effects in 2012 included lower NorthAmerican natural
gas sales prices and higher extraction expenses, with the latter caused by
increased production levels and higher overall per-unit depreciation rates.

Total exploration expense was $380.9million in 2012, down from $489.4million
in 2011. Exploration costs were lower in the current year due to more drilling
success in 2012, plus lower geophysical expense in the Gulf of Mexico,
Malaysia, Brunei and the Kurdistan region of Iraq.

Total worldwide production in 2012 was 194,278 barrels of oil equivalent per
day, an 8% increase from 179,388barrel equivalents produced in 2011. Total
crude oil, condensate and gas liquids production averaged 112,591 barrels per
day in 2012, an increase of 9% compared to the 2011 level of 103,160barrels
per day. The increase in the current year was mostly attributable to higher
production in the Eagle Ford Shale area of South Texas and at the Kikeh field,
offshore Sabah, Malaysia. Natural gas sales volumes increased from 457million
cubic feet per day in 2011 to 490million cubic feet per day in 2012. The 7%
increase in gas volumes in the current year was primarily attributable to
higher production in the Tupper area and the EagleFord Shale. Natural gas
volumes would have increased more in 2012 but for the fact that the Company
voluntarily shut-in certain wells and significantly reduced development
drilling in WesternCanada due to depressed North American natural gas sales
prices.

The average sales price for crude oil and other liquids for continuing
operations was $95.58 per barrel in 2012 compared to $94.18per barrel in
2011. North American natural gas was sold at an average price of $2.65per MCF
in 2012, significantly below the 2011 average of $4.08per MCF. However,
natural gas volumes produced offshore Sarawak were sold for $7.50 per MCF in
2012, up from $7.10per MCF in the prior year.

Refining and Marketing (R&M)

The Company’s refining and marketing continuing operations generated a profit
of $157.6million in the year of 2012 compared to a profit of $190.3million
in 2011. U.S. R&M profits from continuing operations were $105.4million in
2012 compared to $223.6million in 2011. Operating results in 2012 for the
U.S. R&M business were lower than 2011 due to weaker retail marketing margins
and significantly lower margins for ethanol production operations. Per gallon
margins for U.S. retail operations averaged 12.9cents in 2012 compared to
15.6cents in 2011. Ethanol production operating results were adversely
affected by both weaker crush spreads and a $39.6million after-tax asset
impairment charge related to the Hereford, Texas plant. The U.K. R&M business
produced a net profit of $52.2million in 2012 compared to a net loss of
$33.3million in 2011. The improvement in U.K. operating results was
attributable to more than a $2.60 per barrel increase in unit margins in the
current year.

Corporate

Corporate after-tax costs were $98.5million in the year of 2012 compared to
costs of $75.0million in 2011. The significant unfavorable variance in 2012
compared to the prior year was mostly associated with foreign currency
effects. Although after-tax effects from transactions denominated in foreign
currencies were minimal in 2012, the prior year benefited from an after-tax
gain of $20.7million. The 2012 period also had higher administrative costs
compared to 2011, primarily associated with more employee compensation and
professional service expenses in the later period. However, net interest
expense was lower in 2012 than 2011essentially due to higher levels of
interest capitalized to oil development projects in the current year.

Discontinued Operations

Income from discontinued operations was $6.8million in 2012 compared to
$143.2million in 2011. The 2011 results primarily related to income for two
U.S. refineries sold in late 2011, including $113.1million of operating
profits and an $18.7million net gain on disposal. Income from discontinued
operations in both years included operating profits for U.K. offshore oil and
gas assets that are expected to be sold in the first quarter 2013.

Steven A. Cossé, President and Chief Executive Officer, commented, “The just
completed 2012 was an important year for our Company. Murphy’s Board decided
to separate our U.S. downstream subsidiary into an independent public company;
the completion of this process is expected during 2013. The U.S. retail
business executed a new contract with Walmart, which will provide growth
opportunities for this company for the next several years. In the oil and gas
business, once again our reserves replacement significantly exceeded our oil
and gas production volumes. We continued growth in our Eagle Ford Shale
operation, where total production averaged 15,000 net barrels of oil
equivalent per day for 2012, with expected 2013 annual production increasing
to 30,000 net barrel equivalents per day. We added acreage and working
interests in Canada and the Gulf of Mexico, while finalizing sale agreements
for our oil and gas properties in the U.K. that are expected to close in the
first quarter of this year. We also paid a $2.50 per share special dividend
and commenced a stock buyback program near year-end.

“We anticipate total worldwide production volumes of 200,000barrels of oil
equivalent per day in the first quarter of 2013. Sales volumes of oil and
natural gas are projected to average 202,000barrels of oil equivalent per day
during the quarter. At the present time, we expect income from continuing
operations in the first quarter to range between $0.55 and $0.90per diluted
share. The first quarter estimate includes projected exploration expense of
between $70million and $140million, and a loss from our downstream
businesses of approximately $10million. Results could vary based on the risk
factors described below.”

The public is invited to access the Company’s conference call to discuss
fourth quarter 2012 results on Thursday, January 31 at 12:00 p.m. CST either
via the Internet through the Investor Relations section of Murphy Oil’s Web
site at http://www.murphyoilcorp.com/ir or via the telephone by dialing
1-888-503-8172. The telephone reservation number for the call is 6962469.
Replays of the call will be available through the same address on MurphyOil’s
Website, and a recording of the call will be available through February 4 by
calling 1-888-203-1112 and referencing reservation number 6962469. Audio
downloads will also be available on the Murphy Web site through March 1 and
via Thomson StreetEvents for their service subscribers.

This press release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. These statements, which
express management’s current views concerning future events or results,
including Murphy’s plans to separate its U.S. downstream business and to
divest its U.K. downstream and U.K. upstream operations, are subject to
inherent risks and uncertainties. Factors that could cause one or more of
these forecasted events not to occur include, but are not limited to, a
failure to obtain necessary regulatory approvals, a failure to obtain
assurances of anticipated tax treatment, a deterioration in the business or
prospects of Murphy or its U.S. downstream business, adverse developments in
Murphy or its U.S. downstream operation’s markets, adverse developments in the
U.S. or global capital markets, credit markets or economies generally or a
failure to execute a sale of the U.K. downstream or U.K. upstream operations
on acceptable terms or in the timeframe contemplated. Factors that could cause
actual results to differ materially from those expressed or implied in our
forward-looking statements include, but are not limited to, the volatility and
level of crude oil and natural gas prices, the level and success rate of our
exploration programs, our ability to maintain production rates and replace
reserves, customer demand for our products, adverse foreign exchange
movements, political and regulatory instability, and uncontrollable natural
hazards. For further discussion of risk factors, see Murphy’s 2011 Annual
Report on Form 10-K and the September 30, 2012 Quarterly Report on Form 10-Q
on file with the U.S. Securities and Exchange Commission. Murphy undertakes no
duty to publicly update or revise any forward-looking statements.





MURPHY OIL CORPORATION
CONSOLIDATED FINANCIAL DATA SUMMARY
(Unaudited)
                                                          
FOURTH QUARTER                           2012                 2011*
                                                              
Revenues                                 $ 7,389,228,000      6,794,033,000
                                                              
Income (loss) from continuing            $ 162,391,000        (117,953,000   )
operations
                                                              
Net income (loss)                        $ 158,687,000        (113,928,000   )
                                                              
Income (loss) from continuing
operations per Common share
Basic                                    $ 0.84               (0.61          )
Diluted                                    0.84               (0.61          )
                                                              
Net income (loss) per Common share
Basic                                    $ 0.82               (0.59          )
Diluted                                    0.82               (0.59          )
                                                              
Average shares outstanding
Basic                                      193,451,849        193,604,685
Diluted                                    194,402,979        194,485,708
                                                              
                                                              
YEAR
                                                              
Revenues                                 $ 28,626,046,000     27,638,121,000
                                                              
Income from continuing operations        $ 964,046,000        729,471,000
                                                              
Net income                               $ 970,876,000        872,702,000
                                                              
Income from continuing operations per
Common share
Basic                                    $ 4.97               3.77
Diluted                                    4.95               3.75
                                                              
Net income per Common share
Basic                                    $ 5.01               4.51
Diluted                                    4.99               4.49
                                                              
Average shares outstanding
Basic                                      193,902,335        193,409,621
Diluted                                    194,668,737        194,512,402
                                                              
*Reclassified to conform to current presentation.
                                                              
                                                              

Contact:

Murphy Oil Corporation
Barry Jeffery, 870-864-6501