Yahoo Finance How Was Murphy Oil’s Operational Performance in 1Q16?
Why Did Murphy Oil Shares Fall despite Its 1Q16 Earnings Beat?
Murphy Oil’s 1Q16 operational performance
For 1Q16, Murphy Oil (MUR) reported total production of 196.6 MBoe (thousand barrels of oil equivalent) per day. It exceeded its 1Q16 production guidance range of 190–194 MBoe per day.
Murphy Oil’s 1Q16 production is lower than ~11%—compared to its 1Q15 production of ~222 MBoe per day. Sequentially, its 1Q16 production is lower by ~2%—compared to 4Q15. Other upstream companies from the S&P 500 (SPY) like Range Resources (RRC) and Devon Energy (DVN) reported ~4% and flat YoY (year-over-year) growth in their 1Q16 production volumes, respectively. ConocoPhillips (COP) reported an ~2% YoY decline in its 1Q16 production volumes. The Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3x Shares (GUSH) is a leveraged ETF that invests in oil and gas exploration and production companies.
Murphy Oil’s capex and production guidance
In February 2016, Murphy Oil lowered its 2016 capex guidance to $580 million from the previously announced $825 million. It maintained the previously announced 2016 production guidance range of 180–185 Mboe per day. Murphy Oil’s 2016 production guidance is lower by ~12%—compared to its 2015 total production of ~208 MBoe per day.
For 2Q16, Murphy Oil expects its total production to be 177–180 Mboe per day—a mid-point decrease of ~11% compared to 2Q15.
Murphy Oil’s divestitures
On April 27, 2016, Murphy Oil announced divestiture of its Syncrude Canada Limited asset to Suncor Energy (SU) for 937 million Canadian dollars. Murphy Oil expects to close this transaction mid-2016. Syncrude Canada Limited’s oil sands property is located in Alberta, Canada. It produced around 15.6 MBoe per day in 1Q16. While commenting on the transaction, Murphy Oil’s president and CEO, Roger W. Jenkins, said that “The sale of Syncrude will further place our focus in North America on our unconventional assets while simultaneously strengthening the financial flexibility of our balance sheet.”
On April 1, 2016, Murphy Oil closed the previously announced divestiture of its Montney midstream assets located in Canada for 538 million Canadian dollars. In order to deal with lower energy prices and raise cash, other upstream players like Devon Energy (DVN), Chesapeake Energy (CHK), Anadarko Petroleum (APC), and Range Resources (RRC) also recently completed divestitures. In order to deal with lower energy prices and increase liquidity, ConocoPhillips (COP) raised low-cost debt in 1Q16.
In the next part, we’ll discuss how Wall Street analysts reacted to the earnings.
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