To date, Murphy Oil (MUR) has been an integrated oil company with divisions in exploration and production, refining, and marketing and retail. In July 2010, the company's board of directors made a decision to sell the company's refining assets. A year later, agreements were reached to sell two-thirds of those assets.
Also in July, Murphy announced an agreement to sell the company's Superior, Wisc. refinery plus related assets to Calumet Specialty Products Partners (CLMT), for $214 million plus approximately $260 million in hydrocarbon assets. In September the company announced the sale of its Meraux, La. refinery for $325 million plus hydrocarbon inventory to Valero Energy (VLO). Still to be sold is Murphy Oil's refinery and retail assets in the United Kingdom.
Using the results from the 2011 second quarter, it appears selling the refineries will not significantly impact the company's total net income. For the quarter, net income from exploration and production was $243 million and income from refining and marketing was $92 million. Looking at the refining and marketing results, marketing profits were $80 million, leaving just $12 million out of $235 million as income from refining operations. The not yet sold, the U.K. refining and marketing division reported a $16 million loss, which is included in the results.
Production vs. prices
Net income for the second quarter of $1.60 per share was up from $1.41 a year earlier. The profit gains were entirely due to higher oil prices. Actual production declined to 170,000 barrels of oil equivalent per day in the 2011 second quarter from 190,000 a year earlier.
Production is close to evenly split between oil and natural gas. Management projections have the company producing 172,000 barrels of proved oil equivalent (BPOE) per day in the third quarter and production ramping up to production levels near 220,000 BPOE by the end of the year.
Recent analyst reports on Murphy Oil have been generally positive. The analysts at Barclays Capital recently maintained their overweight rating on the stock. The Howard Weil analysts have upgraded their rating on MUR to market outperform, up from the previous market perform. The company reports next on Nov. 2.
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