QUOTE AND NEWS
CNNMoney.com  Jan 31  Comment 
President Trump's travel ban on the citizens of seven Muslim-majority countries has created confusion and concern across the Middle East and parts of Asia.




 

Murphy Oil Corporation (NYSE:MUR) is an oil and natural gas company that produces, refines and markets petroleum products. The company owns and operates oil and natural gas wells in North America, the North Sea, Ecuador, Malaysia and the Congo, and runs 3 refineries.[1]

All but two of Murphy USA's retail gasoline stations are located in front of Wal-Mart Stores (WMT), though the company has decided to increase its independence by purchasing the land underneath its stations.[2] Both the partnership with Wal-Mart and the spike in oil prices have caused the company's revenues to increase substantially over the last few years. Murphy is susceptible to extreme weather events; following Hurricane Katrina in 2005, the company's margins fell as a result of damage to its Gulf Coast refineries. MUR competes with companies like Valero Energy (VLO), Petro-Canada (PCZ), and Marathon Oil (MRO).[3]

Business Financials

Murphy Oil recorded revenues of $18,423.8 million during 2007, an increase of 29% over 2006, while operating income for the company increased 21%, to total $1,246.6 million in 2007.[4] The increases in revenue and operating income were the result of higher oil prices, more refining capacity and an increase in the profitability of the company's marketing segment.

[5]

The refining and marketing branch of the company earned its highest net profits in 2007, with an increase of $95.1 million from 2006, because of larger profit margins in the US caused by the Meraux, Louisiana, refinery becoming fully operational, as well as lower repair costs following Hurricane Katrina. Murphy's U.S. refineries had profit margins that averaged $4.28 per barrel in 2007, $3.48 in 2006 and $2.96 in 2005[6]; again, the differences were a result of Hurricane Katrina and subsequent refinery repairs.

Error creating thumbnail[7]

Sales from its US and UK gasoline stations represented 48.8% of the company’s revenues in 2007, 51.7% in 2006 and 44.6% in 2005. The company is planning to expand its number of retail gasoline stations, expecting the revenue from this business segment to grow.[8] During 2007 the company withdrew from the less profitable Canadian retail market, closing its eight gas stations in the country.[9]

Error creating thumbnail[10]

Trends and Forces

Murphy Benefits from Wal-Mart's Success

All but 2 of Murphy USA's 976 stations are located in front of Wal-Mart supercenters in the south and midwest.[11] This partnership benefits both Murphy USA, with an increased customer base, and Wal-Mart, with the additional service the stations provide its customers. Murphy, like Wal-Mart, advertises competitive prices and uses promotions to encourage customers to purchase both gasoline and retail products from their stores.[12] While the promotions and competitive prices lower the stations' margins, the increased business brought in by the practice results in an overall increase in operating profit. Despite the partnership, Murphy found that it was in its best interest to end the rental agreement it had with Wal-Mart and began to purchase the land beneath its stations. Owning the land under the stores releases Murphy from its rental agreement and eliminates the need for extensions or future rental negotiations. As of February 2008, the company had acquired 730 of these sites, and plans to purchase more in the future.[13]

Rising Oil Prices Increase MUR’s Revenue

Murphy Oil Corporation's revenues were $4.1 billion higher in 2007 than in 2006 mostly due to higher sales volumes and prices for gasoline, and higher crude oil prices. The company’s average realized sales price per barrel of oil was $62.05 in 2007, up 20% from the 2006 average of $51.62 per barrel. In the U.S., the Company’s average realized price was slightly higher at $65.57 per barrel, up 14% from 2006.[14] Based on 2007 sales volumes, the company calculated that each $1.00 per barrel and $0.10 per MCF fluctuation in prices would have changed revenue from exploration and production operations by $19.8 million and $1.4 million, respectively.[15]

Natural Disasters and Extreme Weather Disrupt Revenue

Murphy’s refining and marketing operations generated its highest earnings to date in 2007. This segment of the company earned $205.7 million in 2007, after earning $110.6 million in 2006 and $131.6 million in 2005. The decline in earnings after 2005, and the 86% revenue increase in 2007 was primarily due to higher repair costs and lower crude oil volumes at the company's Louisiana refinery 2006. In late August 2005, the Meraux refinery in Louisiana was damaged by severe flooding and high winds from Hurricane Katrina and was shut down for repairs until mid-2006.[16] Total Hurricane Katrina expenses, after taxes, for refining and marketing operations were $1.9 million in 2007, $67.1 million in 2006 and $28.7 million in 2005[17]; the sharp drop in 2007 spending means the company is essentially over the effects of the hurricane.

Oil Prices and Declining US Production have Led Murphy to Invest in International and Technological Growth

Murphy's U.S. drilling and production segment has lower production in the past few years, especially its largest U.S. reserve, the Medusa field, in the Gulf of Mexico. The company expects production from this field to fall from an average of about 7,000 barrels and 7 MMCF per day in 2007 to an average of 4,900 barrels of oil and 4 MMCF of natural gas in 2008.[18] With oil prices at record highs, it has become more profitable for Murphy to explore in more expensive, riskier drilling areas. The acquisition of the rights to explore the one million acre section of Browse Basin off the northwest coast of Australia is an attempt by the company to obtain new reserves and expand the company's operations into a new region.[19] Foreign government, however, pose their own risks to the company. In 2007, for example, the company's international operations were hampered by the government of Ecuador. In October 2007, the government of Ecuador passed a law that increased its share of excess revenue (all sales above a set base price) from 50% to 99%[20], cutting into Murphy's operating profits in Ecuador and making operations in the area less lucrative.

Legislation Supporting the Development of Renewable Energy Threatens the Long-Term Strength of Hydrocarbons in the U.S.

Whether it’s because of the desire for energy independence, the rising price of oil, or fears of climate change, public opinion has turned away from petroleum, and is driving government policy changes that encourage the adoption of alternative fuels. Environmentalists have been calling for a shift to renewable energy for years, and though the river of change is running slow, it is running deep. The Energy Independence and Security Act of 2007 is the first step towards a grander series of changes. By forcing automakers to achieve 35 mpg by 2020 and setting a Renewable Fuel Standard of 36 billion gallons of biofuels in 2022[21], the Act has potential to get the ball rolling to greatly reduce American dependence on hydrocarbons.

Already, 26 states across the country have adopted Renewable Energy Standards to increase the share of renewables in their energy mixes, while both Democratic candidates for President have pledged to reduce carbon emissions 80%, to below 1990 levels by 2050.[22][23] While the Republican candidate isn't so tough on climate action, he still supports a strong cap-and-trade system. In emerging markets like China and India, the drive for economic growth supersedes environmental concerns, but Murphy accounts for 1% of the crude oil refined in the U.S. and over 2% of U.S. retail sales, so a changing American environmental and energy legislation landscape would hamper its business without the development of some effective carbon sequestration technology.[24]

Competition

In 2007, Murphy owned approximately 1.0% of the crude oil refining capacity in the United States between its refineries in Louisian and Wisconsin, and its Murphy USA gas stations accounted for approximately 2.2% of the U.S. retail gasoline market based on overall sales MUR is often overshadowed by its larger competitors in the US markets ChevronTexaco (CVX), BP (BP), and Exxon Mobil (XOM), which had a combined revenue of over $900 billion dollars in 2007.

Murphy's closest competitors are Petro-Canada (PCZ) and Marathon Oil (MRO), which compete with Murphy in production, refining and the marketing side of the oil industry.

Delek US Holdings (DK), Valero Energy (VLO), and Tesoro Petroleum (TSO) compete in both the refining and marketing of oil but do not drill for oil or natural gas.

2007 Company Stats. Revenue Operating Income Oil (bbl/d) Natural Gas (mmCf/d) Retail Stations Refinery Throughput (bbl/d)
Delek US Holdings (DK)[25] $4.1 billion $156 million - - 497 56,163
Valero Energy (VLO) [26] $95.3 billion $6.9 billion - - 1385 3,105,000
Petro-Canada (PCZ)[27] $21.3 billion $4.9 billion 297,100 728 1300 339,650
Marathon Oil (MRO)[28] $65.2 billion $6.6 billion 197,000 925 1636 1,016,000
Tesoro Petroleum (TSO)[29] $21.9 billion $967 million - - 911 658,000
Murphy Oil (MUR)[30] $18.4 billion $1.2 billion 91,522 61 1135 286,000




References

  1. | Murphy Oil Corp, Reuters.com
  2. | Murphy Oil Corp, Reuters.com
  3. | Google Finance, MUR
  4. Form 10-k MUR 2007 pg 13
  5. Form 10-k MUR 2007 pg 11
  6. Form 10-k MUR 2007 pg 22
  7. Form 10-k MUR 2007 pg 17
  8. Form 10-k MUR 2007 pg 7
  9. Form 10-k MUR 2007 pg 5
  10. Form 10-k MUR 2007 pg 18
  11. Form 10-k MUR 2007 pg 6
  12. | Murphy USA website, Promotions
  13. | Murphy Oil Corp, Reuters.com
  14. Form 10-k MUR 2007 pg 19
  15. Form 10-k MUR 2007 pg 19
  16. Form 10-k MUR 2007 pg 21
  17. Form 10-k MUR 2007 pg 21
  18. Form 10-k MUR 2007 pg 2
  19. Form 10-k MUR 2007 pg 3
  20. Form 10-k MUR 2007 pg 3
  21. WhiteHouse.gov, Fact Sheet: Energy Independence and Security Act of 2007
  22. CNN Election Center: Issues: Environment
  23. Washington Post: "A Green(er) Obama"
  24. Form 10-k MUR 2007 pg 5
  25. Form 10-k DK 2007
  26. Form 10-k VLO 2007
  27. | Form 10-k PCZ 2007
  28. Form 10-k MRO 2007
  29. Form 10-k TSO 2007
  30. Form 10-k MUR 2007
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki