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Murphy Oil Reports 1Q Loss of $198M

3 min read

Murphy Oil Corp., which announced a sale of oil sands assets in Canada a week earlier, on Wednesday reported a preliminary loss of nearly $200 million for the first quarter of 2016, including charges against two properties in Canada.

The El Dorado-based oil and gas giant also announced a 20 percent across-the-board reduction in jobs as part of a “proactive approach” to improving efficiency. The layoffs were first reported April 1 by the Canadian Broadcasting Corp., which said that Murphy worldwide had 1,258 employees at the end of 2015.

Murphy said its loss of $198.8 million, or $1.16 per diluted share, included non-cash impairment charges – charges against earnings that do not require an outlay of cash – of $95.1 million, or $68.9 million net of tax, based on the depreciation of crude oil properties. The company cited the impact of a 30 percent decrease in oil and natural gas prices from the first quarter of 2015.

The impairment charges, which lower earnings during the period the charges are taken, came in conjunction with restructuring charges of $9.3 million, or $6.2 million net of tax.

According to a news release from publicly traded Murphy, the impairments occurred at the Seal heavy oil field in Western Canada and the Terra Nova oil field, not operated by Murphy, in offshore Newfoundland.

On April 27, Murphy announced that its Canadian subsidiary had agreed to sell oil sands assets in Alberta to Suncor Energy for about $744 million. The sale involved Murphy’s 5 percent stake in Syncrude Canada Ltd., one of Canada’s largest oil sands producers.

In January, Murphy reported a net loss for 2015 of $2.27 billion, or $13.03 per share, and in March the company said it had frozen 2016 salaries of named executive officers at 2015 levels. The first-quarter layoffs come on top of similar job reductions in late 2015.

Murphy emphasized that the company’s production volume was solid and that its $144.9 million in capital expenditures for the quarter were in line with its reduced capital spending plan. It also noted that lease operating expenses per barrel of crude were reduced 22 percent quarter over quarter, excluding the Syncrude property being sold.

Murphy reported an adjusted loss, excluding the results of discontinued operations and other items affecting comparability of results, of $112.8 million. Its news release also noted a non-cash loss of $13.3 million reflecting a change in value of open crude oil contracts at the end of the quarter.

The company reported that its average production of 196,600 barrels of oil equivalent per day was ahead of its first quarter projections, but said positive trends were partially offset by delays in bringing in its Kodiak well in the Gulf of Mexico and by downtime for natural gas operations in offshore Malaysia.

“Murphy remains focused on driving down operating and administrative costs across all segments of our business, as demonstrated with our first-quarter results,” President and CEO Roger W. Jenkins said in the statement. “The leaner organization and reduced costs better position the company to weather a possible ‘lower for longer’ commodity price environment.”

Jenkins emphasized first-quarter production strength and said the company had “announced additional portfolio rationalization of non-core assets as we focus more on our unconventional North American onshore business,” language that echoed statements after the sale of Murphy’s Syncrude assets.

Murphy stock (Nasdaq: MUR) closed Wednesday at $32.81, down 62 cents.

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