Murphy Oil Corporation Announces Third Quarter 2018 Financial and Operating Results

EL DORADO, Ark.–(BUSINESS WIRE)–Murphy Oil Corporation (NYSE: MUR) today announced its financial and
operating results for the third quarter ended September 30, 2018,
including net income of $94 million, or $0.54 per diluted share. Third
quarter highlights and recent announcements include:

Financial highlights for the third quarter include:

  • Generated net income of $94 million, or $0.54 per diluted share
  • Achieved oil price realization of over $69 per barrel, which is the
    highest quarterly year-to-date realization
  • Realized EBITDA of over $28 per barrel of oil equivalent sold
  • Registered annualized year-to-date EBITDA to average capital employed
    of 21 percent
  • Returned 12 percent of operating cash flow to shareholders through
    long-standing dividend
  • Preserved balance sheet strength with approximately 30 percent net
    debt to total capital employed

Operating highlights for the third quarter include:

  • Produced 169 thousand barrels of oil equivalent per day, with 58
    percent liquids
  • Increased production in the profitable Kaybob Duvernay by over 2.5
    times, year-over-year
  • Delineated Samurai-2 sidetrack accumulation and confirmed the presence
    of high-quality reservoir sands leading to increased discovered
    resource

In early October, announced the following:

  • Entered into accretive oil-weighted Gulf of Mexico joint venture with
    Petrobras
  • Received upgrade to ‘BB+’ with a ‘Stable Outlook’ from Fitch Ratings
  • Amended Credit Agreement with less restrictive covenants

THIRD QUARTER 2018 RESULTS

Murphy recorded net income of $94 million, or $0.54 per diluted share,
for the third quarter 2018. The company reported adjusted income, which
excludes both the results of discontinued operations and certain other
items that affect comparability of results between periods, of $61
million, or $0.35 per diluted share. The adjusted income excludes the
following after-tax items: an unrealized mark-to-market gain on crude
oil derivative contracts of $21 million, proceeds from an Ecuador
arbitration settlement of $21 million, a loss on foreign exchange of $18
million and a net gain of $9 million relating to the combination of
Brunei working interest income in the Brunei portion of the
Gumusut-Kakap Field, partially offset by an incremental redetermination
expense related to the Malaysian portion thereof. There is no change to
Murphy’s working interest in the quarter in the Gumusut-Kakap Field. The
Ecuador arbitration settlement relates to a change in fiscal terms for a
block previously owned by the company. Details for third quarter results
can be found in the attached schedules.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
totaled $433 million, or $28.23 per barrel of oil equivalent (BOE) sold.
Earnings before interest, taxes, depreciation, amortization and
exploration expenses (EBITDAX) totaled $455 million, or $29.60 per BOE
sold. Details for third quarter EBITDA and EBITDAX reconciliation can be
found in the attached schedules.

In the third quarter 2018, the company produced 169 thousand barrels of
oil equivalent per day (MBOEPD). Production exceeded the high end of
guidance primarily driven by outperformance in the Tupper Montney
onshore Canada, outperformance in Sarawak natural gas in Malaysia and
higher than forecasted volumes due to a delay to late in the third
quarter and extended into the fourth quarter for the scheduled
turnaround in the non-operated Hibernia Field offshore Canada.

“Now with three-quarters of the year behind us, we continue to
successfully implement our 2018 plan with third quarter production
exceeding the high end of our guidance range. We continue to benefit
from a diverse, oil-weighted portfolio that generates high cash flow per
barrel metrics, driving over a 20 percent return on cash flow to capital
employed. Our high price realizations, competitive cash returns,
long-standing dividend policy and successful exploration program along
with our recently announced accretive Gulf of Mexico joint venture will
continue to reward our shareholders over the long-term,” stated Roger W.
Jenkins, President and Chief Executive Officer.

FINANCIAL POSITION

As of September 30, 2018, the company had $2.8 billion of outstanding
long-term, fixed-rate notes while maintaining $2.0 billion of liquidity.
The fixed-rate notes have a weighted average maturity of 8.0 years and a
weighted average coupon of 5.5 percent. The next senior note maturity
for the company is in 2022. There were no borrowings on the $1.1 billion
unsecured senior credit facility at quarter end.

REGIONAL OPERATIONS SUMMARY

North American Onshore

The North American onshore business produced over 98 MBOEPD in the third
quarter, a 15 percent increase year-over-year.

Eagle Ford Shale – Production in the quarter averaged 46 MBOEPD,
with 88 percent liquids. As planned, the company brought nine operated
wells online during the quarter, all in the Catarina area.

Tupper Montney – Natural gas production in the quarter averaged
over 240 million cubic feet per day (MMCFD).

Kaybob Duvernay – During the quarter, the company achieved record
production averaging 10 MBOEPD with 61 percent liquids. Murphy has
increased production in this profitable play for six consecutive
quarters. As planned, the company brought ten operated wells online
across the Kaybob Duvernay acreage: a five well pad in Kaybob West, a
three well pad in Kaybob North and a two well pad in Kaybob East. All
these wells are performing at or above pre-drill estimates with average
initial gross production rates over 30 days (IP30 rate) ranging from
approximately 725 to over 1,200 barrels of oil equivalent per day
(BOEPD). With these wells being brought online, the company has advanced
the appraisal of the play, with the exception of the Two Creeks area,
which is expected to occur next year.

“As part of our long-term strategy, we plan to continue increasing
production, while spending within cash flow, across our North American
onshore assets. In the Eagle Ford Shale, we are executing on our field
development plan with over 1,800 locations remaining in our undrilled
inventory. In the Kaybob Duvernay we are growing production and lowering
costs, while adding a deep inventory of future quality locations and in
the Tupper Montney, we are consistently achieving all our targets. From
a cost perspective, I am especially pleased with the lease operating
expense across our North American onshore business in the quarter, of
just over $6 per barrel of oil equivalent,” commented Jenkins.

Global Offshore

The offshore business produced over 70 MBOEPD for the third quarter,
with 71 percent liquids.

Malaysia & Brunei – Production in the quarter averaged 47
MBOEPD, with 61 percent liquids. Block K and Sarawak averaged 28
thousand barrels of liquids per day, while Sarawak natural gas
production averaged 106 MMCFD. The Kikeh gas lift project was completed,
successfully commissioned and tested in the quarter.

North America – Production in the quarter for the Gulf of
Mexico and offshore Canada averaged 24 MBOEPD, with 90 percent liquids.

In the Gulf of Mexico, the company commenced installation of the
Dalmatian subsea pump late in the third quarter. Subsequent to quarter
end, the installation was completed. Currently, the project is
delivering incremental production of 7,000 BOEPD (gross), with rates
exceeding 11,000 BOEPD (gross), an increase of 250 percent from prior
quarter production.

EXPLORATION

Gulf of Mexico Exploration – During the third quarter, Murphy
continued drilling the Samurai-2 appraisal sidetrack (Green Canyon 476)
of the previously announced Samurai-2 discovery well (Green Canyon 432).
Total depth was reached in mid-October. The well successfully delineated
the Samurai accumulation and confirmed the presence of high-quality
reservoir sands and resources on the company’s Green Canyon Block 476.
The sands encountered in the sidetrack are equivalent and
hydrostatically connected to those announced in the Samurai-2
well. Following the logging of the sidetrack appraisal well, Murphy is
increasing the previously announced discovered resource to approximately
90 million barrels of oil equivalent (MMBOE). At this time, Murphy and
its partner are evaluating development plans for the Samurai discovery,
as well as possible drilling plans for 2019.

Mexico Exploration – During the third quarter, Murphy submitted
the drilling permit to the Comisión Nacional de Hidrocarburos (“CNH”)
for the Deepwater Block 5 Exploration Plan. Following the CNH approval,
the company plans to spud the exploration prospect in the first quarter
of 2019.

Vietnam Exploration – Murphy expects to spud the LDT-1X well, in
Block 15-01/05 in the Cuu Long Basin, in the first quarter of 2019.

SUBSEQUENT TO QUARTER END

On October 10, 2018, Murphy announced it entered into a definitive
agreement to form a new joint venture company with Petrobras America
Inc. (“PAI”), a subsidiary of Petrobras. The joint venture, which will
be owned 80 percent by Murphy and 20 percent by PAI, will be comprised
of all Gulf of Mexico producing assets from Murphy and PAI with Murphy
overseeing the operations. The transaction has an effective date of
October 1, 2018 and is expected to close by year end 2018. Murphy will
pay cash consideration of $900 million to PAI, subject to normal closing
adjustments. The company currently anticipates accounting for the PAI
share of this transaction as a ‘non-controlling interest’ after closing.

In conjunction with the joint venture, the company entered into an
amendment of its existing Credit Agreement. In addition to permitting
the contribution of assets to the joint venture, the amendment, which
will be fully effective upon the closing of the joint venture
transaction, removes certain covenants and increases financial
flexibility.

Also, subsequent to quarter end, Fitch Ratings upgraded Murphy’s debt
rating to ‘BB+’ from ‘BB’ with a ‘Stable Outlook’.

“As we anticipated, the announcement of our joint venture formation with
Petrobras has been well received. This transaction ties directly to our
long-term strategy. The improvement in our bond rating is reflective of
our increased high-value oil production growth, accretive cash flow and
long-standing, strong balance sheet,” stated Jenkins.

PRODUCTION AND CAPITAL EXPENDITURE GUIDANCE

The company is maintaining full year 2018 production guidance to be in
the range of 168,500 to 170,500 BOEPD. In addition, full year capital
expenditures are being maintained at $1.18 billion. Production for the
fourth quarter 2018 is estimated to be in the range of 167,000 to
169,000 BOEPD. Full year and fourth quarter production, as well as
capital expenditures guidance excludes any impact from the previously
announced Gulf of Mexico joint venture.

“Several recent events across many of our assets are affecting our
fourth quarter production. The Gulf of Mexico was impacted by an active
hurricane and tropical storm season early in the quarter. Malaysia was
impacted by a series of mechanical issues affecting both operated and
non-operated facilities. In offshore Canada, the turnaround in the
non-operated Hibernia Field was extended into the fourth quarter. We
have rectified these issues and have restored production to expected
levels. Lastly, the Eagle Ford Shale is still being negatively impacted
by excessive rains causing wide-spread flooding washing out roads to
some of our key producing areas,” commented Jenkins. “Looking forward,
we are eager to close our cash flow providing Gulf of Mexico transaction
before year end, and then early in the new year provide our formal 2019
annual guidance. Directionally, we remain committed to our strategy of
delivering free cash flow in addition to covering our dividend while
growing oil-weighted production,” Jenkins added.

CONFERENCE CALL AND WEBCAST SCHEDULED FOR NOVEMBER 8, 2018

Murphy will host a conference call to discuss third quarter 2018
financial and operating results on Thursday, November 8, 2018, at 11:00
a.m. ET. The call can be accessed either via the Internet through the
Investor Relations section of Murphy Oil’s website at http://ir.murphyoilcorp.com
or via the telephone by dialing toll free 1-888-886-7786, reservation
number 10390401.

FINANCIAL DATA

Summary financial data and operating statistics for third quarter 2018,
with comparisons to the same period from the previous year, are
contained in the following schedules. Additionally, a schedule
indicating the impacts of items affecting comparability of results
between periods and schedules comparing EBITDA and EBITDAX between
periods are included with these schedules as well as guidance for the
fourth quarter and full year 2018.

ABOUT MURPHY OIL CORPORATION

Murphy Oil Corporation is a global independent oil and natural gas
exploration and production company. The company’s diverse resource base
includes offshore production in Southeast Asia, Canada and the Gulf of
Mexico, as well as North America onshore plays in the Eagle Ford Shale,
Kaybob Duvernay and Montney. Additional information can be found on the
company’s website at http://www.murphyoilcorp.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are generally identified through the
inclusion of words such as “aim”, “anticipate”, “believe”, “drive”,
“estimate”, “expect”, “expressed confidence”, “forecast”, “future”,
“goal”, “guidance”, “intend”, “may”, “objective”, “outlook”, “plan”,
“position”, “potential”, “project”, “seek”, “should”, “strategy”,
“target”, “will” or variations of such words and other similar
expressions. These statements, which express management’s current views
concerning future events or results, are subject to inherent risks and
uncertainties. Factors that could cause one or more of these future
events or results not to occur as implied by any forward-looking
statement include, but are not limited to, increased volatility or
deterioration in the level of crude oil and natural gas prices,
deterioration in the success rate of our exploration programs or in our
ability to maintain production rates and replace reserves, reduced
customer demand for our products due to environmental, regulatory,
technological or other reasons, adverse foreign exchange movements,
political and regulatory instability in the markets where we do
business, natural hazards impacting our operations, any other
deterioration in our business, markets or prospects, any failure to
obtain necessary regulatory approvals, any inability to service or
refinance our outstanding debt or to access debt markets at acceptable
prices, and adverse developments in the U.S. or global capital markets,
credit markets or economies in general. For further discussion of
factors that could cause one or more of these future events or results
not to occur as implied by any forward-looking statement, see “Risk
Factors” in our most recent Annual Report on Form 10-K filed with the
U.S. Securities and Exchange Commission (SEC) and any subsequent
Quarterly Report on Form 10-Q or Current Report on Form 8-K that we
file, available from the SEC’s website and from Murphy Oil Corporation’s
website at http://ir.murphyoilcorp.com.
Murphy Oil Corporation undertakes no duty to publicly update or revise
any forward-looking statements.

RESERVES REPORTING TO THE SECURITIES AND EXCHANGE COMMISSION

The SEC requires oil and natural gas companies, in their filings with
the SEC, to disclose proved reserves that a company has demonstrated by
actual production or conclusive formation tests to be economically and
legally producible under existing economic and operating conditions. We
may use certain terms in this new release, such as “resource”, “gross
resource”, “recoverable resource”, “recoverable oil”, “resource base”,
“EUR”, or “estimated ultimate recovery” and similar terms that the SEC’s
rules prohibit us from including in filings with the SEC. Investors
are urged to consider closely the disclosures and risk factors in our
most recent Annual Report on Form 10-K filed with the SEC and any
subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K
that we file, available from the SEC’s website and from Murphy Oil
Corporation’s website at http://ir.murphyoilcorp.com.

NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP financial measures that
management believes are good tools for internal use and the investment
community in evaluating Murphy Oil Corporation’s overall financial
performance. These non-GAAP financial measures are broadly used to value
and compare companies in the crude oil and natural gas industry,
although not all companies define these measures in the same way. In
addition, these non-GAAP financial measures are not a substitute for
financial measures prepared in accordance with GAAP, and should
therefore be considered only as supplemental to such GAAP financial
measures. Please see the attached schedules for reconciliations of the
differences between the non-GAAP financial measures used in this news
release and the most directly comparable GAAP financial measures.

MURPHY OIL CORPORATION

SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Thousands of dollars, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
2018

2017 1

2018

2017 1

Revenues
Revenue from sales to customers $ 659,806 511,192 1,921,910 1,498,093
(Loss) gain on crude contracts (2,223 ) (13,573 ) (69,349 ) 50,365
Gain on sale of assets and other income 17,214 700 26,035 134,780
Total revenues 674,797 498,319 1,878,596 1,683,238
Costs and expenses
Lease operating expenses 133,141 112,751 406,226 346,072
Severance and ad valorem taxes 15,067 10,816 40,100 32,771

Exploration expenses, including undeveloped

lease amortization

21,838 28,492 69,911 77,356
Selling and general expenses 64,107 51,374 173,324 155,438
Depreciation, depletion and amortization 241,833 243,636 710,563 714,782
Accretion of asset retirement obligations 11,099 10,654 32,041 31,638
Redetermination expense 11,332 11,332
Other expense (benefit) (34,387 ) 2,454 (44,776 ) 10,988
Total costs and expenses 464,030 460,177 1,398,721 1,369,045
Operating income from continuing operations 210,767 38,142 479,875 314,193
Other income (loss)
Interest and other income (loss) (19,478 ) (53,019 ) (19,445 ) (106,345 )
Interest expense, net (44,492 ) (48,681 ) (134,264 ) (138,423 )
Total other loss (63,970 ) (101,700 ) (153,709 ) (244,768 )
Income (loss) from continuing operations before income taxes 146,797 (63,558 ) 326,166 69,425
Income tax expense (benefit) 51,038 2,760 15,801 95,602
Income (loss) from continuing operations 95,759 (66,318 ) 310,365 (26,177 )
Income (loss) from discontinued operations,
net of income taxes (1,815 ) 425 (2,650 ) 1,177
NET INCOME (LOSS) $ 93,944 (65,893 ) 307,715 (25,000 )
INCOME (LOSS) PER COMMON SHARE – BASIC
Continuing operations $ 0.55 (0.38 ) 1.79 (0.15 )
Discontinued operations (0.01 ) (0.01 ) 0.01
Net Income (Loss) $ 0.54 (0.38 ) 1.78 (0.14 )
INCOME (LOSS) PER COMMON SHARE – DILUTED
Continuing operations $ 0.55 (0.38 ) 1.78 (0.15 )
Discontinued operations (0.01 ) (0.01 ) 0.01
Net Income (Loss) $ 0.54 (0.38 ) 1.77 (0.14 )
Cash dividends per Common share 0.25 0.25 0.75 0.75
Average Common shares outstanding (thousands)
Basic 173,047 172,573 172,949 172,509
Diluted 174,175 172,573 174,202 172,509

1 Reclassified to conform to current presentation.

MURPHY OIL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Thousands of dollars)

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Operating Activities
Net income (loss) $ 93,944 (65,893 ) 307,715 (25,000 )
Adjustments to reconcile net income (loss) to net cash provided by
continuing operations activities:
Loss (Income) from discontinued operations 1,815 (425 ) 2,650 (1,177 )
Depreciation, depletion and amortization 241,833 243,636 710,563 714,782
Dry hole costs (credits) 4,537 (3,043 ) 4,526 (1,139 )
Amortization of undeveloped leases 8,770 20,553 31,544 40,859
Accretion of asset retirement obligations 11,099 10,654 32,041 31,638
Deferred income tax (benefit) charge 17,734 (36,697 ) (138,755 ) (3,567 )
Pretax (gain) loss from disposition of assets (124 ) (117 ) (6 ) (130,765 )
Net (increase) decrease in noncash operating working capital (87,990 ) (41,511 ) (2,550 ) 1,070
Other operating activities, net 80,781 100,179 49,217 192,097
Net cash provided by continuing operations activities 372,399 227,336 996,945 818,798
Investing Activities
Property additions and dry hole costs (243,212 ) (274,763 ) (858,356 ) (706,417 )
Proceeds from sales of property, plant and equipment 505 4,843 1,128 69,146
Purchases of investment securities 1 (212,661 )
Proceeds from maturity of investment securities 1 36,635 320,828
Net cash required by investing activities (242,707 ) (233,285 ) (857,228 ) (529,104 )
Financing Activities
Borrowings of debt, net of issuance costs 541,772 541,772
Repayments of debt (550,000 ) (550,000 )
Capital lease obligation payments (2,516 ) (2,704 ) (7,164 ) (14,687 )
Withholding tax on stock-based incentive awards (70 ) (6,922 ) (7,151 )
Cash dividends paid (43,263 ) (43,143 ) (129,780 ) (129,421 )
Net cash required by financing activities (45,779 ) (54,145 ) (143,866 ) (159,487 )
Effect of exchange rate changes on cash and cash equivalents (37,489 ) (1,186 ) (13,107 ) (5,797 )
Net increase (decrease) in cash and cash equivalents 46,424 (61,280 ) (17,256 ) 124,410
Cash and cash equivalents at beginning of period 901,308 1,058,487 964,988 872,797
Cash and cash equivalents at end of period $ 947,732 997,207 947,732 997,207

1 Investments are Canadian government securities with
maturities greater than 90 days at the date of acquisition.

MURPHY OIL CORPORATION

SCHEDULE OF ADJUSTED INCOME (LOSS)

(unaudited)

(Millions of dollars, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Net income (loss) $ 93.9 (65.9 ) 307.7 (25.0 )
Discontinued operations loss (income) 1.8 (0.4 ) 2.7 (1.2 )
Income from continuing operations 95.7 (66.3 ) 310.4 (26.2 )
Adjustments:
Mark-to-market (gain) loss on crude oil derivative contracts (20.6 ) 11.8 0.8 (28.9 )
Foreign exchange losses (gains) 17.6 43.9 14.1 86.6
Impact of tax reform (120.0 )
Seal insurance proceeds (7.0 ) (15.2 )
Ecuador arbitration settlement (20.5 ) (20.5 )
Brunei working interest income (16.0 ) (16.0 )
Malaysia/ Brunei unitization/ redetermination expense 7.0 7.0
Write-off of previously suspended exploration wells 4.5 4.5
Deferred tax on undistributed foreign earnings 4.7 65.2
Tax benefits on investments in foreign areas (32.9 )
Gain on sale of assets (96.0 )
Oil Insurance Limited dividends (2.8 )
Total adjustments after taxes (35.0 ) 60.4 (145.3 ) (8.8 )
Adjusted income (loss) $ 60.7 (5.9 ) 165.1 (35.0 )
Adjusted income (loss) per diluted share $ 0.35 (0.03 ) 0.95 (0.20 )

Non-GAAP Financial Measures

Presented above is a reconciliation of Net income (loss) to Adjusted
income (loss). Adjusted income (loss) excludes certain items that
management believes affect the comparability of results between periods.
Management believes this is important information to provide because it
is used by management to evaluate the Company's operational performance
and trends between periods and relative to its industry competitors.

Contacts

Murphy Oil Corporation
Investor Contacts:
Kelly
Whitley, 281-675-9107
kelly_whitley@murphyoilcorp.com
or
Bryan
Arciero, 832-319-5374
bryan_arciero@murphyoilcorp.com
or
Emily
McElroy, 870-864-6324
emily_mcelroy@murphyoilcorp.com

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