Exploration & Production | Quarterly / Earnings Reports | Second Quarter (2Q) Update
Murphy Sees Production Upswing While Income Freefalls in 2Q
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Second quarter 2014 highlights:
- Set a quarterly production record from continuing operations of over 210,000 barrels of oil equivalent per day (boepd)
- Produced an Eagle Ford Shale (EFS) quarterly record of 52,814 net boepd up 6% from first quarter 2014 and 33% from second quarter 2013
- Achieved first production at the Dalmatian project in the Gulf of Mexico (GOM) with both wells performing above expectations
- Reduced lease operating expenses per barrel of oil equivalent (boe) for global operations by 8% in the first half of 2014 compared to the first half of 2013
- Added 100 million boe of proved reserves at mid-year and remain on track for reserve replacement in excess of 150% for the fourth straight year
- Initiated a $125 million share repurchase of Company Common stock approved by our Board of Directors on May 14, 2014, bringing our total stock repurchases since October 2012 to approximately 18 million shares
Roger W. Jenkins, President and Chief Executive Officer, commented, "We continue to make progress on three fronts: profitable production and reserves growth, execution at EFS, and lowering operating expenses. Production growth in the second half of the year is supported by completing all of the Siakap North-Petai well work, full start up of the Dalmatian field, the addition of 97 new EFS wells through mid-year, completion of Syncrude unplanned maintenance, further progress in the start up efforts at the non-operated Kakap-Gumusut field, and the addition of 7 wells through the first half of this year in our Sarawak oil projects. We are pleased with all facets of EFS execution, especially supply cost reductions and well downspacing results. Once again we will more than replace our production in 2014 and our overall operating expenses continue to trend down this year even with the initial start up of several fields."
Murphy has updated its individual E&P sectors, which can be accessed below:
Murphy On Track to Add 200 Eagle Ford Wells in 2014
Murphy Utilizes New Completion Techniques in the Montney
Murphy's GoM Dalmation Wells 'Better Than Expected'
Production Rates
Second quarter production averaged 210,191 boepd. This was approximately 3% below our guidance of 217,000 boepd for the quarter. The shortfall for the quarter was primarily attributed to the global offshore business in Malaysia with lower oil and gas volumes related to a well operational delay on Kikeh, continued unplanned downtime at a third party methanol plant that processes Kikeh associated gas, a rig mobilization delay at a Sarawak oil platform, and various downtime events at shallow- and deep-water facilities.
Based on production levels in the just completed second quarter as well as early in the third quarter, the Company is now revising its projected full year 2014 production to a range of 220,000 to 225,000 barrels of oil per day (bopd). Several factors led to this reduction, including slower than expected recovery at Syncrude following unscheduled maintenance downtime in the second quarter, an unplanned short-term outage at the Kikeh production facility, and revisions for further risking of production through third-party operated facilities. The mid-point of the new range would represent an 8% increase from 2013 production levels.
Financial Results
Adjusted earnings, which exclude both the results of discontinued operations and certain other items that affect comparability of results between periods, in the second quarter of 2014 was $161.7 million ($0.90 per diluted share). This was a decrease of $100.0 million ($0.48 per diluted share) compared to the prior year's quarter. Adjusted earnings were lower in the 2014 quarter compared to the prior year primarily due to higher exploration expenses, higher extraction costs in Malaysia associated with several new field start ups, lower realized oil and natural gas sales prices for Sarawak production, unfavorable effects in the U.S. from commodity contracts, and higher financing costs. Realized Sarawak oil and gas prices in the current quarter were unfavorably impacted by larger revenue sharing payments required under the production sharing contracts.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for continuing operations totaled $792.3 million in the second quarter 2014, down from $850.7 million in the second quarter of 2013. EBITDA per barrel of oil equivalent sold was $40.20 in the 2014 quarter compared to $44.95 in the 2013 quarter. EBITDA was lower in 2014 mostly due to higher exploration costs, increased revenue sharing in Malaysia and the effects of oil commodity contracts.
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