Murphy Oil Corporation (MUR)

[OilStockReport]

Market is reacting positively to the recent 10q

Third quarter 2010 vs. 2009

United States exploration and production operations reported quarterly earnings of $14.6 million in the third quarter of 2010 compared to earnings of $6.0 million in the 2009 quarter. Earnings improved in the 2010 period due mostly to higher oil and natural gas sales prices. Oil and natural gas production volumes were higher in 2010 primarily due to the Thunder Hawk field, which came on production in the third quarter 2009. But oil and natural gas volume declines at mature fields in the Gulf of Mexico somewhat offset the volumes produced at Thunder Hawk. Depreciation expense was down $13.4 million in 2010 due to lower oil and natural gas production volumes and lower per unit depletion rates in 2010. Exploration expenses in the 2010 period increased $8.0 million from the prior year primarily due to higher seismic acquisition costs and undeveloped leasehold amortization in the Eagle Ford shale area in South Texas.

Operations in Canada had earnings of $39.1 million in the third quarter 2010 compared to earnings of $44.6 million in the 2009 quarter. Canadian earnings decreased in the 2010 quarter mostly due to lower oil sales volumes, higher extraction costs for synthetic operations and higher exploration expense. Oil production decreased in the 2010 period compared to 2009 primarily due to more downtime for maintenance at Syncrude in the current period. Natural gas volumes increased in 2010 mostly due to continued ramp-up of Tupper area production. Production expense was unfavorable in 2010 due primarily to higher maintenance costs during the period for synthetic oil operations at Syncrude. Exploration expenses were $4.5 million higher in the 2010 period primarily due to more leasehold amortization expense for undeveloped oil and gas prospective acreage in Alberta.

Operations in Malaysia reported earnings of $167.6 million in the 2010 third quarter compared to earnings of $156.2 million during the same period in 2009. Earnings rose in 2010 in Malaysia primarily caused by higher crude oil and natural gas sales prices. The 2010 quarter also benefited from higher natural gas sales volumes, which were mostly associated with stronger demand for production from offshore Sarawak gas fields. Oil production was lower in 2010 compared to 2009 due to less production at the Kikeh field, offshore Sabah. Depreciation expense was higher in the 2010 period by $17.3 million due to larger natural gas sales volumes compared to the 2009 quarter.

United Kingdom operations earned $4.9 million in the 2010 quarter compared to $2.1 million in the 2009 quarter. The improvement was primarily due to higher crude oil sales prices in the 2010 quarter compared to 2009. The 2010 quarter also benefited from higher crude oil and natural gas sales volumes and higher realized sales prices for natural gas. Production expense was lower in 2010 than 2009 due to less maintenance costs in the current period, while 2010 depreciation expense exceeded 2009 levels due to higher oil and gas sales volumes.

Operations in Republic of the Congo generated a loss of $20.2 million in the third quarter of 2010 compared to a loss of $11.5 million in the 2009 quarter. The offshore Azurite field commenced oil production in the third quarter of 2009, but the initial oil sale did not occur until quarter four of 2009. Development operations continued at Azurite during 2010 as the Company brought onstream the second producing well during the second quarter of the current year. Due to delays and complications with completing wells, production levels have, thus far, been below Company expectations at the Azurite field. Production levels at Azurite are expected to ramp-up as additional wells are brought onstream. Expenses for production and depreciation relate to crude oil produced and sold at the Azurite field. Exploration expenses in 2010 primarily included 3D seismic acquired over a portion of the MPS and MPN offshore blocks. Exploration expenses in 2009 primarily related to costs for two unsuccessful exploratory wells in the MPS block. Income taxes during the 2010 quarter related to taxes associated with Azurite production volumes.

Other international operations reported a loss of $19.3 million in the third quarter of 2010 compared to a loss of $13.3 million in the 2009 period. The unfavorable variance in the just completed quarter was primarily related to higher 2010 seismic activity costs in Indonesia as well as higher administrative costs associated with exploration activities in this and other foreign jurisdictions.

On a worldwide basis, the Company’s crude oil, condensate and gas liquids prices averaged $65.45 per barrel in the third quarter 2010 compared to $61.13 in the 2009 period. Total hydrocarbon production averaged 181,733 barrels of oil equivalent per day in the 2010 third quarter, a 12% increase from the 162,004 barrels equivalent per day produced in the 2009 quarter. Average crude oil and liquids production was 119,899 barrels per day in the third quarter of 2010 compared to 131,637 barrels per day in the third quarter of 2009, with the decrease primarily attributable to lower oil production at the Kikeh field, offshore Sabah, Malaysia. Crude oil production in the heavy oil area in Canada was lower in 2010 mostly due to less production in the Seal area caused by a higher royalty rate. Synthetic oil production was lower in the 2010 quarter than 2009 due to lower gross production at Syncrude caused by more downtime for maintenance. North American natural gas sales prices averaged $4.24 per thousand cubic feet (MCF) in the 2010 third quarter compared to $3.01 per MCF in the same quarter of 2009. Natural gas produced in 2010 offshore Sarawak Malaysia was sold at $5.71 per MCF compared to an average of $3.31 per MCF during the 2009 third quarter. Natural gas sales volumes averaged 371 million cubic feet per day in the third quarter 2010, more than double the 182 million cubic feet per day of sales in the 2009 quarter. The significant increase in natural gas sales volumes in 2010 was primarily due to natural gas produced in 2010 offshore Sarawak Malaysia from fields that came on stream in September 2009 and were ramping up over the balance of 2009 and into 2010. Additionally, more natural gas was sold from the Kikeh field to meet third party demand during 2010, and natural gas production increased at Tupper in Western Canada as development of the field continued.