Murphy Oil Announces Preliminary Quarterly and Annual Financial Results

Wed Jan 30, 2013 4:53pm EST

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EL DORADO, Ark.--(Business Wire)--
Murphy Oil Corporation (NYSE: MUR) announced today that its net income in the
fourth quarter of 2012 was $158.7 million ($0.82 per diluted share) compared to
a net loss of $113.9 million ($0.59 per 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
($239.6 million 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 $368.6 million. 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 $108.3 million
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 $4.0 million ($0.02 per diluted share) in the 2011 quarter. Income
from continuing operations in the fourth quarter of 2012 was $162.4 million
($0.84 per diluted share), but was a loss of $117.9 million ($0.61 per diluted
share) a year ago. 

For the year of 2012, net income totaled $970.9 million ($4.99 per diluted
share) compared to $872.7 million ($4.49 per diluted share) in 2011. Net income
included income from discontinued operations of $6.8 million ($0.04 per diluted
share) in 2012 and $143.2 million ($0.74 per diluted share) in 2011. Income from
continuing operations for the years of 2012 and 2011 totaled $964.1 million
($4.95 per diluted share) and $729.5 million ($3.75 per 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 operations            162.4              (117.9  )       964.1            729.5       
 Income (loss) from discontinued operations          (3.7   )           4.0             6.8              143.2       
                                                                                                                     
 Net income (loss)                             $     158.7              (113.9  )       970.9            872.7       
                                                                                                                     
 Income (loss) per Common share - Diluted:                                                                           
 Income (loss) from continuing operations      $     0.84               (0.61   )       4.95             3.75        
 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 $145.0 million in the
fourth quarter of 2012 compared to a loss of $144.6 million 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 $108.3 million 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 day                                         132,918         108,771    112,591         103,160  
 Natural Gas Sales Volume - MCF per day                                        473,487         487,991    490,124         457,365  
 Total BOE Production Volume - BOE per day                                     211,833         190,103    194,278         179,388  
                                                                                                                                   
 Average Realized Oil Sales Price - $ per Bbl.                          $      92.82           96.67      95.58           94.18    
 Average Realized North American Natural Gas Sales Price - $ per MCF    $      3.34            3.67       2.65            4.08     
 Average Realized Sarawak Natural Gas Sales Price - $ per MCF           $      6.78            7.85       7.50            7.10     
                                                                                                                                   
                                                                                                                                   


Exploration expenses totaled $137.2 million in the fourth quarter 2012, down
from $185.6 million 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 190,103 barrels 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 108,771
barrels per day in 2011. The oil production increase in the current year was
primarily attributable to an ongoing development drilling program in the Eagle
Ford Shale area of South Texas as well as purchase of additional working
interests in the Thunder Hawk and Front Runner fields in the Gulf of Mexico
during 2012. Natural gas sales volumes averaged 473 million cubic feet per day
in quarter four 2012, down 3% from the 488 million cubic feet per day sold in
the prior year`s quarter. The 2012 reduction was primarily attributable to lower
gas volumes produced at the Tupper area 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 $7.85
per MCF a year ago. 

Refining and Marketing (R&M)

The Company`s refining and marketing business generated a quarterly profit from
continuing operations of $38.5 million in the fourth quarter 2012 compared to a
profit of $61.0 million in the same quarter a year earlier. U.S. R&M continuing
operations generated earnings of $22.0 million in the fourth quarter of 2012
compared to earnings of $50.7 million in the 2011 quarter. The earnings
reduction for this business in 2012 was principally the result of an impairment
charge of $39.6 million 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 14.1 cents per gallon in
the 2012 quarter compared to 13.0 cents 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
$16.5 million in the 2012 quarter compared to a profit of $10.3 million 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 gallon            $      0.141           0.130      0.129         0.156         
 U.S. Retail Merchandise sales per store month    $      154,730         157,425    156,429       158,144       
 U.K. Refinery Inputs - Bbls. per day                    133,599         138,492    132,613       135,391       
 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 $21.1 million in the fourth
quarter of 2012, well below the net costs of $34.3 million 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 $3.5 million from foreign currencies, compared to an
after-tax charge of $11.6 million 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 $3.7 million ($0.02 per diluted share)
in the fourth quarter 2012, compared to income of $4.0 million ($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 $905.0 million for the full year
2012 compared to $614.2 million 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 $13.1 million
after-tax gain on sale of gas storage assets in Spain. Unfavorable effects in
2012 included lower North American 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 $380.9 million in 2012, down from $489.4 million
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 179,388 barrel 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 103,160 barrels 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 457 million
cubic feet per day in 2011 to 490 million 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 Eagle Ford 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 Western
Canada 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 $94.18 per barrel in 2011.
North American natural gas was sold at an average price of $2.65 per MCF in
2012, significantly below the 2011 average of $4.08 per MCF. However, natural
gas volumes produced offshore Sarawak were sold for $7.50 per MCF in 2012, up
from $7.10 per MCF in the prior year. 

Refining and Marketing (R&M)

The Company`s refining and marketing continuing operations generated a profit of
$157.6 million in the year of 2012 compared to a profit of $190.3 million in
2011. U.S. R&M profits from continuing operations were $105.4 million in 2012
compared to $223.6 million 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 12.9 cents in 2012 compared to 15.6
cents in 2011. Ethanol production operating results were adversely affected by
both weaker crush spreads and a $39.6 million after-tax asset impairment charge
related to the Hereford, Texas plant. The U.K. R&M business produced a net
profit of $52.2 million in 2012 compared to a net loss of $33.3 million 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 $98.5 million in the year of 2012 compared to
costs of $75.0 million 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 $20.7
million. 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 2011 essentially due to higher levels of interest capitalized to oil
development projects in the current year. 

Discontinued Operations

Income from discontinued operations was $6.8 million in 2012 compared to $143.2
million in 2011. The 2011 results primarily related to income for two U.S.
refineries sold in late 2011, including $113.1 million of operating profits and
an $18.7 million 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 200,000 barrels of oil
equivalent per day in the first quarter of 2013. Sales volumes of oil and
natural gas are projected to average 202,000 barrels 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 $0.90 per diluted
share. The first quarter estimate includes projected exploration expense of
between $70 million and $140 million, and a loss from our downstream businesses
of approximately $10 million. 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 Murphy Oil`s Web site, 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 operations                     $    162,391,000         (117,953,000    )    
                                                                                                            
 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.                                                          
                                                                                                            
                                                                                                            


Murphy Oil Corporation
Barry Jeffery, 870-864-6501 



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