Murphy Oil(MUR) - 2023 Q2 - Quarterly Report

Part I – Financial Information Financial Statements The unaudited consolidated financial statements detail the company's financial position and performance for the periods ended June 30, 2023 Consolidated Balance Sheets Total assets slightly decreased to $10.25 billion while total equity increased to $5.39 billion as of June 30, 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $869,148 | $972,325 | | Total assets | $10,249,530 | $10,308,952 | | Total current liabilities | $1,034,508 | $1,257,834 | | Total liabilities | $4,860,847 | $5,160,059 | | Total equity | $5,388,683 | $5,148,893 | Consolidated Statements of Operations Q2 2023 net income fell to $98.3 million due to lower revenues, while H1 2023 net income rose to $289.9 million Key Operating Results (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues and other income | $814,588 | $1,101,057 | $1,656,304 | $1,654,018 | | Operating income | $164,877 | $551,608 | $461,673 | $509,484 | | Net Income Attributable to Murphy | $98,286 | $350,557 | $289,930 | $237,221 | | Diluted EPS | $0.62 | $2.23 | $1.84 | $1.50 | Consolidated Statements of Cash Flows Net cash from operations for H1 2023 decreased to $749.7 million, with increased cash used in investing activities Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by continuing operations | $749,667 | $959,241 | | Net cash required by investing activities | ($694,753) | ($599,269) | | Net cash required by financing activities | ($176,629) | ($447,542) | | Net decrease in cash and cash equivalents | ($122,608) | ($89,165) | | Cash and cash equivalents at end of period | $369,355 | $432,019 | Notes to Consolidated Financial Statements The notes detail accounting policies, segment information, debt, and other key financial data for the company's E&P business - Murphy Oil Corporation is an international oil and natural gas exploration and production company, with primary production in the United States and Canada[15] Disaggregation of Revenue - Six Months Ended June 30 (in thousands) | Revenue Source | 2023 | 2022 | | :--- | :--- | :--- | | Crude oil and condensate | $1,374,220 | $1,672,620 | | Natural gas liquids | $45,960 | $76,687 | | Natural gas | $175,887 | $231,520 | | Sales of purchased natural gas | $56,751 | $86,785 | | Total revenue from sales to customers | $1,652,818 | $2,067,612 | - As of June 30, 2023, the company had capitalized exploratory well costs of $193.4 million pending determination of proved reserves[36] - On July 31, 2023, the company agreed to sell certain non-core Canadian assets for C$150 million, with the transaction expected to close in Q3 2023[41] - The company had no outstanding borrowings under its $800 million revolving credit facility as of June 30, 2023[43] - During the six months ended June 30, 2023, the company paid a total of $199.8 million in contingent consideration related to prior acquisitions from PAI and LLOG, settling these liabilities[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial results for Q2 and H1 2023, focusing on the impact of commodity prices and sales volumes Summary of Operations Q2 2023 net income declined to $92.5 million due to lower prices, despite a year-over-year increase in production volumes - Q2 2023 net income from continuing operations was $92.5 million, down $317.9 million from Q2 2022, mainly due to lower revenues from lower pricing, and higher exploration and lease operating expenses[99] - H1 2023 net income from continuing operations was $306.5 million, a decrease of $39.0 million from H1 2022, driven by higher operating and exploration expenses, offset by lower other operating expenses[100] Average Commodity Prices | Commodity | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | WTI Crude Oil (per barrel) | $73.78 | $108.41 | | NYMEX Natural Gas (per MMBTU) | $2.12 | $7.39 | Results of Operations E&P segment income fell sharply in Q2 2023 to $139.1 million, driven by lower commodity prices despite higher production volumes Adjusted EBITDA Reconciliation (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to Murphy (GAAP) | $98.3 | $350.6 | $289.9 | $237.2 | | EBITDA attributable to Murphy (Non-GAAP) | $373.2 | $685.3 | $836.6 | $748.8 | | Adjusted EBITDA attributable to Murphy (Non-GAAP) | $412.1 | $632.0 | $889.4 | $993.2 | - U.S. E&P earnings fell by $322.6 million in Q2 2023 vs Q2 2022, primarily due to lower revenues ($281.6 million) from lower prices, and higher exploration costs ($80.5 million) related to the Chinook 7 dry hole[120] - Canadian E&P earnings decreased by $44.7 million in Q2 2023 vs Q2 2022, mainly due to lower revenues ($51.5 million) from lower commodity pricing[121] Total Production Volumes (BOEPD) | Period | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Q2 | 190,695 | 173,173 | +10% | | H1 | 185,250 | 161,579 | +15% | Financial Condition and Liquidity Cash from operations decreased in H1 2023 while capital expenditures rose, with liquidity supported by a revolving credit facility - Net cash from operations decreased by $209.5 million in H1 2023 compared to H1 2022, primarily due to lower revenue, contingent consideration payments, and higher lease operating expenses[148] Capital Expenditures - Six Months Ended June 30 (in millions) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Exploration and production | $688.4 | $611.4 | | Corporate | $9.9 | $10.5 | | Total capital expenditures | $698.3 | $621.9 | - As of June 30, 2023, the company had $769.6 million available on its committed Revolving Credit Facility (RCF)[154] Outlook The company provides Q3 production guidance and full-year capex plans, focusing on shareholder returns and debt reduction - Q3 2023 production is forecasted to average between 188.0 and 196.0 MBOEPD (excluding NCI)[160] - Full-year 2023 capital expenditure is expected to be between $950.0 million and $1,025.0 million (excluding NCI)[161] - The company will utilize surplus cash, including proceeds from the C$150 million Canadian asset sale, for shareholder returns and debt reduction[159][162] Canadian Natural Gas Fixed Price Forward Sales Contracts | Period | Volume (MMcf/d) | Price/Mcf | | :--- | :--- | :--- | | Jul-Dec 2023 | 250 | C$2.35 | | Jan-Dec 2024 | 162 | C$2.39 | | Jul 2023 - Oct 2024 | 25 | US$1.98 | | Nov-Dec 2024 | 15 | US$1.98 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate, commodity price, and foreign currency risks with no derivative contracts in place - The company is exposed to market risks including interest rates, commodity prices, and foreign currency exchange rates[166] - As of June 30, 2023, there were no derivative commodity contracts or foreign exchange contracts in place[167] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[169] - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2023[170] Part II – Other Information Legal Proceedings Ongoing legal proceedings are considered routine and are not expected to have a material adverse financial impact - Murphy and its subsidiaries are engaged in legal proceedings considered routine and incidental to business, which are not expected to have a material adverse effect on the company's financial condition or liquidity[171] Risk Factors No additional risk factors have been identified since the 2022 Form 10-K report - The company has not identified any additional risk factors beyond those disclosed in its 2022 Form 10-K report[172] Exhibits This section indexes all exhibits filed with or incorporated by reference into the Form 10-Q report - An index of exhibits filed with the Form 10-Q is provided on page 42 of the report[173]