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With Gas and Oil Prices Up, Murphy Oil Rides a Surge

3 min read

Murphy Oil Corp., the petroleum exploration and production titan with a century of history in El Dorado, reported optimistic first-quarter financial results last week in a world of surging oil and gasoline prices.

And officials for the company, which moved its headquarters to Houston from south Arkansas a year ago, see optimistic signs for the industry for the first time since the COVID-19 pandemic caused a commodities price collapse 13 months ago.

The company reported a quarterly loss of $287 million on Thursday, about $1.87 per share. But the results surpassed Wall Street’s predictions, and Murphy stock was up above $20 a share on Monday morning, up from $16.96 a week earlier. And earnings adjusted for one-off gains and losses amounted to a positive 6 cents per share, compared with what the Associated Press described as an expected loss of 16 cents per share in an average of six analysts’ computations for Zacks Investment Research.

Gasoline prices in Arkansas are a dollar a gallon higher now than they were a year ago, and prices are expected to keep rising. Demand is surging with traffic, surveys show.

“Commodity prices rebounded significantly in the first quarter with oil realizations averaging $58 per barrel, slightly above the WTI benchmark, which we haven’t seen since before the pandemic,” Murphy President and CEO Roger Jenkins said in a conference call with investors on Thursday. “Our natural gas realization prices averaged $2.55 per thousand cubic feet.”

Murphy Oil had first-quarter revenue of $380 million in the period, short of analysts’ expectations. Shares in the company are up 53% since Jan. 1, compared with an S&P 500 index increase of 11%.

“Along with stronger well results, Murphy significantly reduced our costs from previous years. In 2018, our average well cost has dropped from approximately $6.3 million per well to now $4.5 million per well in the first quarter of ’21, with stand-alone completion costs down 40% during that period,” Jenkins said on the call, in which he also answered questions from analysts. “I’m proud of the work our team has done and the meaningful impact it is having on our company’s bottom line.”

Stephen Richardson, an analyst for Evercore ISI covering the oil and gas industry as well as the global chemicals sector, asked Jenkins about the potential for mining lithium from Murphy’s Arkansas land holdings. Canada’s Standard Lithium Ltd. and the global chemical giant Lanxess have combined to build a lithium extraction test plant in Union County, and it has been producing battery-grade ingredients for months.

“Considering [Murphy Oil’s] legacy in Arkansas, I thought — I was wondering if you could talk a little bit about if indeed the corporation still has land or mineral rights in those areas and if you’ve contemplated any role for Murphy in that emerging business, which looks like it will have pretty significant growth over the next couple of years?” Richardson asked.

“We do have about 10,000 acres of royalty lands in Union County, Arkansas, the home of the founding Murphy family in our corporation,” Jenkins replied. “We do have royalty income from brine. We are closely monitoring the extraction of the brine for lithium. There’s — as you know, by covering that company, I believe, that there’s a project, a big large-scale extraction project, and we’re monitoring that. And we are not today working to add in that region, but we are experiencing or have long-term knowledge about that particular situation.”

Jenkins said that like most companies, Murphy reviews opportunities regularly, and considering the transitions going on in the energy sector today, “naturally being part of that [lithium extraction] would allow us to have more focus and information around that particular item. And I’d rather just leave it at that today, Steve, if you don’t mind.”

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