Form 8-K MURPHY OIL CORP /DE For: Jul 30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Date of report (Date of earliest event reported): July 29, 2015

 

 

 

MURPHY OIL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

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Item 2.02.   Results of Operations and Financial Condition

 

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

 

On July 29, 2015, Murphy Oil Corporation issued a news release announcing its preliminary earnings and well results for the second quarter that ended on June 30, 2015.    The full text of this news release is attached hereto as Exhibit 99.1.

 

 

Item 9.01.  Financial Statements and Exhibits

 

 

 

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Signature

 

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

 

 

 

 

Date:  July 30, 2015

 

 

 

 

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Exhibit Index

 

 

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Exhibit 99.1

 

MURPHY OIL ANNOUNCES PRELIMINARY SECOND QUARTER 2015 EARNINGS

AND WELL RESULTS

 

 

EL DORADO, Arkansas, July 29, 2015 – Murphy Oil Corporation (NYSE: MUR) announced today a net loss of $73.8 million ($0.42 per diluted share) in the 2015 second quarter, down from net income of $129.4 million ($0.72 per diluted share) in the second quarter a year ago.  The net loss from continuing operations in the 2015 second quarter was $89.0 million ($0.51 per diluted share) compared to a profit of $142.7 million ($0.79 per diluted share) earned in the second quarter a year ago.

Adjusted earnings (loss), which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, in the second quarter of 2015 showed a loss of $83.1 million ($0.48 per diluted share).  This was a decrease of $244.8 million ($1.38 per diluted share) compared to the prior year’s quarter primarily attributed to significantly lower realized sales prices in the current quarter compared to a year ago.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for continuing operations totaled $321.9 million in the second quarter 2015, down from $792.3 million in the second quarter of 2014.  EBITDA per barrel of oil equivalent (boe) sold was $18.17 in the 2015 quarter compared to $40.20 in the 2014 quarter.  Earnings before interest, taxes, depreciation, amortization and exploration expenses (EBITDAX) totaled $386.9 million in the second quarter 2015, down from $927.1 million in the second quarter of 2014.  EBITDAX per barrel of oil equivalent (boe) sold was $21.84 in the 2015 quarter compared to $47.04 in the 2014 quarter.  Both EBITDA and EBITDAX were greatly impacted by the drop in WTI and Brent oil prices by 44% between the comparative quarterly periods.

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Second quarter 2015 highlights were as follows:

Roger W. Jenkins, President and Chief Executive Officer, commented, “We continue to streamline our portfolio with the final sale of the U.K. downstream assets.  Our recent gas discovery at Permai in Block H Malaysia will reduce complexity and development costs in our floating LNG project.  We achieved first production from the Medusa subsea expansion ahead of schedule, which along with the Kodiak completion milestone, reduced our risk for Gulf of Mexico (GOM) future production levels.  We remain focused on organizational efficiency, capital allocation and reducing operating expenses.  We addressed general and administrative costs by reducing our workforce by 7%.  Murphy remains well-positioned financially to carry out our plans and evaluate opportunities to improve our business going forward.”

Operations Summary

North America Onshore

In the Eagle Ford Shale, second quarter 2015 production, which was comprised of 90% liquids, averaged near 60,800 barrels of oil equivalent per day (boepd) net.  As planned, we continue to operate four drilling rigs and two completion spreads and we expect to stay near this level of activity for the rest of the year.  We brought 36 new wells on line in the second quarter and have brought 58% of our total estimated wells for the year online in the first half.  Production in the

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third quarter of 2015 is estimated to average over 59,000 boepd with the 2015 full year outlook now expected to average near 59,000 boepd, slightly ahead of annual production for 2014.

In Western Canada, natural gas production from the Montney in the second quarter of 2015 was 192 million cubic feet per day (mmcfd).  We continue to see above plan sub-surface performance from our new wells in the Montney.

Global Offshore

In our global offshore business we continue to reduce our exploration focus areas to the GOM and Southeast Asia.  We have restructured the exploration function to report to our Global Offshore business leader as we concentrate our exploration efforts and better allocate capital across the offshore business while lowering overall exploration costs.

In Malaysia, in the second quarter we completed a five-well drilling program for natural gas at the Belum field in shallow water offshore Sarawak.  The Belum field has lower nitrogen content that will blend into our current gas production fields and allow us to de-risk our 250 mmcfd contractual volume on demand.  We are currently drilling oil wells at the Permas shallow water development.  Sarawak gas production for the second quarter was 111 mmcfd supported by strong gas nominations and liquids production was near 14,700 bopd.  We successfully finalized the planned outage in early second quarter at our Sarawak facilities to complete regulator-required inspections and major maintenance.  Production offshore Sabah averaged near 30,900 boepd for the second quarter with 85% liquids.  At the Gumusut-Kakap main facility, planned maintenance activities to install gas handling and injection systems commenced on June 9 and were recently completed ahead of schedule.  Early this month, we had a gas discovery at the Permai exploration well in Block H where we operated the well with a 42% working interest, our eighth consecutive success in the area around the Rotan field floating LNG project.

In the GOM, production for the quarter was over 22,900 boepd with 61% liquids.  The Medusa two-well expansion achieved first oil in the second quarter with the wells starting up on April 30 and June 19, respectively.  Development work at the non-operated Kodiak project continues, where the first of two wells has been drilled and completed to plan and fabrication of topside facilities is underway. The Sea Eagle prospect in Mississippi Canyon Block 692 failed to encounter commercial quantities of hydrocarbon and will be expensed as a dry hole.  The well, which we operated with a 35% working interest, was not included in our second quarter guidance as it was expected to reach total depth in the third quarter.  Our drilling operations team

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completed the well 30 days ahead of schedule and $25 million gross under budget with the sixth generation drillship, Ocean Black Rhino.

Recognizing our lack of exploration success, we plan to focus rig commitments on our lower risk appraisal wells in blocks where we have had prior exploration success.  We will allocate capital to higher return opportunities near existing infrastructure, such as Thunder Bird and Dalmatian South, and not invest in the higher risk, higher cost wells at this time.

Production & Guidance

Second quarter production averaged 201,952 boepd, ahead of our guidance of 197,000 boepd, primarily attributed to new well performance in the Eagle Ford Shale and risked startup of the Medusa expansion project.  Details for third quarter and full year 2015 guidance can be found in the attached tables.  Production for the third quarter is estimated to be 200,000 boepd.  We have increased our full year production guidance to a range of 200,000 to 208,000 boepd.  Capital expenditures remain unchanged from previous guidance and are currently forecast to be $2.3 billion for 2015.

Earnings Conference Call

The public is invited to access the Company’s conference call to discuss second quarter 2015 results on Thursday, July 30 at 12:00 p.m. CDT, 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 1-888-296-4174.  The telephone reservation number for the call is 5679022.  Replays of the call will be available through the same address on Murphy Oil’s website, and a recording of the call will be available through August 3, 2015, by calling 1-888-203-1112 and referencing reservation number 5679022.  A replay of the conference call will also be available on the Murphy website for 30 days after the event and via Thomson StreetEvents for their service subscribers.

Financial Data

Summary financial data and operating statistics for the second quarter 2015 with comparisons to 2014 are contained in the following tables.  Additionally, a schedule indicating the impacts of items affecting comparability of earnings between periods and schedules comparing EBITDA and EBITDAX between periods are included with these tables as well as guidance for the third quarter.

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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, 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 deterioration in the business or prospects of Murphy, adverse developments in Murphy business’ markets, and adverse developments in the U.S. or global capital markets, credit markets or economies in general.  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 2014 Annual Report on Form 10-K on file with the U.S. Securities and Exchange Commission.  Murphy undertakes no duty to publicly update or revise any forward-looking statements.

This news release also contains certain historical non-GAAP measures of financial performance 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 measures are broadly used to value and compare companies in the crude oil and natural gas industry.  Please see the attached schedules for reconciliations of the differences between      non-GAAP measures used in this news release and the most directly comparable GAAP financial measures.

The Securities and Exchange Commission requires oil and 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.  The SEC permits the optional disclosure of probable and possible reserves; however, we have not disclosed the Company's probable and possible reserves in our 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 and in other reports on file with the SEC, available from Murphy Oil Corporation's offices or website at http://ir.murphyoilcorp.com.

 

 

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1Represents cash invested in Canadian government securities with maturities greater than 90 days at the date of  acquisition.

 

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Non-GAAP Financial Measures

Presented above is a reconciliation of Net income (loss) to Adjusted earnings (loss).  Adjusted earnings (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 earnings (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 earnings (loss) are presented net of applicable income taxes.

 

 

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Non-GAAP Financial Measures

Presented above is a reconciliation of Income (loss) from continuing operation to Earnings before interest, taxes, depreciation and amortization (EBITDA).  Management believes EBITDA 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.  EBITDA is a non-GAAP financial measure 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.

 

*Includes effect of gain on sale of 10% interest in Malaysia in 2015.

 

 

 

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Non-GAAP Financial Measures

Presented above is a reconciliation of Income (loss) from continuing operation to Earnings before interest, taxes, depreciation, amortization and exploration (EBITDAX).  Management believes EBITDAX 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.  EBITDAX is a non-GAAP financial measure 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.

 

* Includes effect of gain on sale of 10% interest in Malaysia in 2015.

 

 

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Note:Corporate and other above includes unallocated administrative expenses, interest income and net interest expense, the impacts of foreign exchange, and income taxes associated with these income and expense items.

 

 

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