- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to -------------
Commission File Number 1-8590
MURPHY OIL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0361522
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 PEACH STREET
P. O. BOX 7000, EL DORADO, ARKANSAS 71731-7000
(Address of principal executive offices) (Zip Code)
(501) 862-6411
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
/X/ Yes / / No
Number of shares of Common Stock, $1.00 par value, outstanding at
June 30, 1994, was 44,830,914.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
---------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and interest-bearing deposits $ 25,560 26,876
Marketable securities 75,729 114,349
--------- ---------
Cash and cash equivalents 101,289 141,225
Accounts receivable, less allowance
for doubtful accounts of $5,495 in
1994 and $5,379 in 1993 196,906 196,214
Inventories
Crude oil and raw materials 63,014 76,741
Finished products 42,483 42,959
Materials and supplies 35,646 32,323
Prepaid expenses 48,303 35,042
Deferred income taxes 19,937 18,497
--------- ---------
Total current assets 507,578 543,001
Investments and noncurrent receivables 29,273 42,518
Property, plant, and equipment, at
cost less accumulated depreciation,
depletion, and amortization of
$2,273,181 in 1994 and $2,180,732
in 1993 1,627,980 1,549,250
Deferred charges and other assets 40,114 34,090
--------- ---------
$ 2,204,945 2,168,859
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term
obligations $ 10,925 10,859
Accounts payable and accrued
liabilities 368,022 372,606
Income taxes 21,017 29,294
--------- ---------
Total current liabilities 399,964 412,759
Notes payable and other long-term
obligations 21,807 21,709
Nonrecourse debt of a subsidiary 108,081 87,509
Deferred income taxes 123,047 117,571
Reserve for dismantlement costs 131,782 123,107
Reserve for major repairs 24,061 26,023
Deferred credits and other liabilities 153,916 157,831
Stockholders' equity
Capital stock
Cumulative Preferred Stock, par $100,
authorized 400,000 shares, none
issued - -
Common Stock, par $1.00, authorized
80,000,000 shares, issued 48,775,314
shares 48,775 48,775
Capital in excess of par value 507,750 507,292
Retained earnings 794,268 772,172
Currency translation adjustments (4,035) (1,514)
Unamortized restricted stock awards (1,364) (660)
Treasury stock, 3,944,400 shares of
Common Stock in 1994, 3,967,631
shares in 1993, at cost (103,107) (103,715)
--------- ---------
Total stockholders' equity 1,242,287 1,222,350
--------- ---------
$ 2,204,945 2,168,859
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The number of pages in this document is 12.
1
<PAGE>
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 417,440 409,702 812,854 792,536
Other operating
revenues 10,115 11,789 19,117 19,892
Interest and
other revenues 7,224 8,824 12,327 16,418
------- ------- ------- -------
Total revenues 434,779 430,315 844,298 828,846
------- ------- ------- -------
COSTS AND EXPENSES
Crude oil, products, and
operating expenses 324,931 316,819 613,192 620,044
Exploration expenses,
including undeveloped
lease amortization 8,175 12,338 20,090 24,100
Selling and general
expenses 17,453 16,803 34,131 33,034
Depreciation, depletion,
and amortization 49,489 41,642 99,918 84,477
Interest expense 2,662 2,330 5,011 3,995
Interest capitalized (1,647) (1,756) (2,878) (2,287)
------- ------- ------- -------
Total costs and
expenses 401,063 388,176 769,464 763,363
------- ------- ------- -------
Income before income taxes
and cumulative effect of
changes in accounting
principles 33,716 42,139 74,834 65,483
Federal and state income
taxes 7,516 14,432 24,838 20,482
Foreign income taxes
(benefits) (1,316) 5,018 (1,208) (1,529)
------- ------- ------- -------
Income before cumulative
effect of changes in
accounting principles 27,516 22,689 51,204 46,530
Cumulative effect of
changes in accounting
principles - - - 15,338
------- ------- ------- -------
NET INCOME $ 27,516 22,689 51,204 61,868
======= ======= ======= =======
Average Common
shares outstanding 44,887,904 44,863,039 44,876,927 44,851,268
Per Common share
Income before
cumulative
effect of
changes in
accounting
principles $ .61 .51 1.14 1.04
Cumulative effect
of changes in
accounting
principles - - - .34
------- ------- ------- -------
Net income $ .61 .51 1.14 1.38
======= ======= ======= =======
Cash dividends
per share of
Common Stock $ .325 .30 .65 .60
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1994 and 1993
(Thousands of dollars)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Income before cumulative effect of
changes in accounting principles $ 51,204 46,530
Adjustments to reconcile above income
to net cash provided by operating
activities
Depreciation, depletion, and amortization 99,918 84,477
Expenditures for major repairs and
dismantlement costs (13,620) (4,566)
Exploratory expenditures charged against
income 14,704 17,660
Amortization of undeveloped leases 5,386 6,440
Deferred and noncurrent income tax charges 1,687 16,749
Gains from disposition of assets (1,041) (978)
Other - net 16,326 12,716
------- -------
174,564 179,028
Net increase in operating working
capital other than cash and cash
equivalents (17,374) (40,099)
Cumulative effect of accounting changes
on working capital - 25,437
Net recoveries (expenditures) on insurance
claim to repair hurricane damage 13,827 (14,876)
Other adjustments related to operating
activities (7,546) (13,123)
------- -------
Net cash provided by operating activities 163,471 136,367
------- -------
INVESTING ACTIVITIES
Capital expenditures requiring cash (196,843) (271,653)
Proceeds from sale of property, plant,
and equipment 2,426 1,805
Other - net (778) 2,605
------- -------
Net cash required by investing
activities (195,195) (267,243)
------- -------
FINANCING ACTIVITIES
Increase (decrease) in notes payable
and other long-term obligations 105 (78)
Increase in nonrecourse debt of a subsidiary 20,631 8,500
Decrease in short-term notes payable - (2,795)
Dividends paid (29,108) (26,850)
Purchase of Common Stock for treasury - (1,636)
------- -------
Net cash required by financing activities (8,372) (22,859)
------- -------
Effect of exchange rate changes on cash and
cash equivalents 160 (460)
------- -------
Net decrease in cash and cash equivalents (39,936) (154,195)
Cash and cash equivalents at January 1 141,225 377,845
------- -------
Cash and cash equivalents at June 30 $ 101,289 223,650
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Cash income taxes paid, net of refunds $ 29,232 18,026
======= =======
Interest paid, net of amounts capitalized $ (529) 2,079
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These notes are an integral part of the accompanying financial
statements of Murphy Oil Corporation and Consolidated
Subsidiaries (Murphy/the Company).
NOTE A - INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of the Company presented
herein have not been audited by independent auditors, except for
the balance sheet at December 31, 1993. In the opinion of the
Company's management, the unaudited financial statements include
all adjustments (consisting only of normal, recurring accruals)
necessary to present fairly the Company's financial position at
June 30, 1994, and the results of operations and cash flows for
the three-month and six-month periods ended June 30, 1994 and
1993, in conformity with generally accepted accounting
principles.
Financial statements and notes to consolidated financial
statements included in this report on Form 10-Q should be read in
conjunction with the Company's 1993 Annual Report on Form 10-K,
as certain notes and other pertinent information have been
abbreviated in or omitted from this report.
Financial results for the six months ended June 30, 1994 are not
necessarily indicative of future results.
NOTE B - ENVIRONMENTAL CONTINGENCIES
The Company's worldwide operations are subject to numerous laws
and regulations designed to protect the environment and/or impose
remediation obligations. In addition, the Company may be
involved in personal injury claims, allegedly caused by exposure
to materials manufactured or used by the Company. Under the
Company's accounting policies, liabilities for environmentally
related obligations are recorded when such obligations are
probable and the cost can be reasonably estimated. In instances
where there is a range of reasonably estimated costs, the Company
will record the most likely amount, or if no amount is most
likely, the minimum of the range. Amounts recorded as
liabilities are reviewed quarterly and adjusted as needed.
Actual cash expenditures often occur a number of years following
recognition of the liabilities.
The Company currently operates or has previously operated certain
sites or facilities, including refineries, oil and gas fields,
service stations, and terminals, for which known or potential
obligations for environmental remediation exist. The Company has
provided an environmental reserve, which includes certain amounts
that are based on anticipated regulatory approval of proposed
remediation processes involving a land farm, formerly used for
disposal of refinery waste, and closure of water basins. If
regulatory authorities require more costly alternatives than the
proposed processes, future expenditures could increase by up to
an estimated $9 million above the amount reserved.
The Company has received notices from the U.S. Environmental
Protection Agency that it is a Potentially Responsible Party
(PRP) at three Superfund sites and has been assigned
responsibility by defendants at another Superfund site. In
addition, the Company is aware of two other sites at which
it could be named as a PRP. The potential total cost to all
parties to perform necessary remediation work at these sites is
substantial. However, based on information currently available,
the Company is a de minimus party, with assigned or potentially
assigned responsibility of less than one percent at all but one
of the sites. The Company was only recently notified that it is
a PRP at the remaining site and has not determined either its
potential total remediation costs at the site or its potentially
assigned responsibility percentage. The Company has recorded a
reserve totaling $.1 million for Superfund sites, and due to
currently available information on the most recent site and the
minor percentages involved on the other sites, the Company does
not expect that its related remediation costs will be material to
its financial condition. Additional information may become known
in the future that would alter this assessment, including a
requirement to bear a pro rata share of costs attributable
to nonparticipating PRP's or indications of additional
responsibility by the Company.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE B - ENVIRONMENTAL CONTINGENCIES (CONTD.)
Although the Company is not aware of any environmental matters
that might have a material effect on its financial condition,
there is the possibility that additional expenditures could be
required at currently unidentified sites, and new or revised
regulatory requirements could necessitate additional expenditures
at known sites. Such expenditures could have a material impact
on the results of operations in a future period.
The Company believes that certain of its environmental
remediation obligations are covered by insurance; however, the
issue is the subject of ongoing litigation and no assurance can
be given that the Company's position will be sustained.
Therefore, no insurance recoveries have been used to reduce the
environmental liabilities recorded at June 30, 1994.
NOTE C - OTHER CONTINGENCIES
The Company's operations and earnings have been and may be
affected by various other forms of governmental action by the
countries in which it operates. Examples of such governmental
action include, but are by no means limited to: tax increases
and retroactive tax claims; restrictions on production; import
and export controls; price controls; currency controls;
allocation of supplies of crude oil and petroleum products and
other goods; expropriation of property; restrictions and
preferences affecting issuance of oil and gas or mineral
leases; laws and regulations intended for the promotion of
safety; and laws and regulations affecting the Company's
relationships with employees, suppliers, customers, shareholders,
and others. Because governmental actions are often motivated by
political considerations, may be taken without full consideration
of their consequences, and may be taken in response to actions of
other governments, it is not practical to attempt to predict the
likelihood of such actions, the form which such actions may take,
or the effect such actions may have on the Company.
On February 19, 1987, the U.S. Department of Energy (DOE)
published a Proposed Remedial Order (PRO) alleging that the
Company received approximately $13.4 million for crude oil and/or
related transportation charges in excess of amounts allowed
under DOE regulations that were in effect from September 1973
through January 1981. The PRO sought restitution of this amount,
plus interest (approximately $24.5 million calculated to the date
of the PRO).
On June 17, 1992, the DOE Office of Hearings and Appeals
sustained all allegations of the PRO and issued a Remedial Order.
The Company appealed the material allegations of the Remedial
Order, and on January 24, 1994, the presiding Federal Energy
Regulatory Commission (FERC) administrative law judge sustained
the position of the Company on most of the material allegations
of the Remedial Order. The administrative law judge's decision
was subject to review by the FERC; however, on July 14, 1994, DOE
and the Company agreed to settle all issues and entered into
a proposed consent order pursuant to which the Company will pay
$10.7 million inclusive of all interest. As an offset to the
$10.7 million payment, the Company will receive approximately
$3.2 million from certain interest owners in the affected
properties, and the Company intends to seek additional
contribution from other interest owners. Notice of the proposed
consent order was published in the "Federal Register" on July 27,
1994, and the DOE will accept comments regarding the proposed
consent order for thirty days from publication, after which time
the agency will determine whether to adopt the proposed consent
order as a final action. Under any circumstances, the Company
believes that adequate accruals have been made.
In the normal course of its business activities, the Company is
required under certain contracts with various governmental
authorities and others to provide letters of credit that may be
drawn upon if the Company fails to perform under those contracts.
At June 30, 1994, letters of credit outstanding amounted to $59.7
million.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE D - BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1994 June 30, 1993
----------------- -----------------
(Millions of Dollars) Revenues Income Revenues Income
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Petroleum
Exploration and production*
United States . . . . $ 54.7 6.9 65.4 10.7
Canada. . . . . . . . 31.2 5.4 18.7 2.9
United Kingdom. . . . 23.6 .8 11.3 .7
Other international . 5.3 1.6 4.9 (3.1)
----- ----- ----- -----
114.8 14.7 100.3 11.2
----- ----- ----- -----
Refining, marketing, and transportation
United States . . . . 219.5 .8 261.0 3.5
Western Europe. . . . 79.6 .5 54.2 1.8
Canada. . . . . . . . 6.6 1.9 8.7 3.0
----- ----- ----- -----
305.7 3.2 323.9 8.3
----- ----- ----- -----
420.5 17.9 424.2 19.5
Intrasegment transfers
elimination. . . . . . . (15.4) (18.7)
----- ----- ----- -----
Total petroleum . . . 405.1 17.9 405.5 19.5
Farm, timber, and real
estate - United States . . 22.5 5.4 16.0 3.6
Corporate and other . . . . 7.2 (2.2) 8.8 (.4)
----- ----- ----- -----
Revenues/income before unusual
or infrequently occurring
items. . . . . . . . . . . 434.8 21.1 430.3 22.7
Refund and settlement of
income tax matters . . . . - 6.4 - -
----- ----- ----- -----
$434.8 27.5 430.3 22.7
===== ===== ===== =====
Six Months Ended Six Months Ended
June 30, 1994 June 30, 1993
----------------- ----------------
(Millions of Dollars) Revenues Income Revenues Income
-------- ------ -------- ------
Petroleum
Exploration and production*
United States. . . . . $115.4 14.6 121.8 17.7
Canada . . . . . . . . 56.7 4.8 35.5 3.3
United Kingdom . . . . 44.1 1.4 25.7 1.5
Other international. . 8.2 2.5 10.1 (2.9)
----- ----- ----- -----
224.4 23.3 193.1 19.6
----- ----- ----- -----
Refining, marketing, and transportation
United States. . . . . 428.9 9.5 480.1 .4
Western Europe . . . . 146.8 1.2 126.1 3.7
Canada . . . . . . . . 13.1 3.6 16.0 5.3
----- ----- ----- -----
588.8 14.3 622.2 9.4
----- ----- ----- -----
813.2 37.6 815.3 29.0
Intrasegment transfers
elimination . . . . . . (27.1) (35.3)
----- ----- ----- -----
Total petroleum . . . 786.1 37.6 780.0 29.0
Farm, timber, and real
estate - United States . . 45.9 12.7 32.4 7.5
Corporate and other . . . . 12.3 (5.5) 16.4 (1.2)
----- ----- ----- -----
Revenues/income before unusual
or infrequently occurring
items. . . . . . . . . . . 844.3 44.8 828.8 35.3
Refund and settlement of
income tax matters . . . . - 6.4 - 11.3
Cumulative effect of changes
in accounting principles for
Income taxes . . . . . . . - - - 31.8
Postretirement benefits other
than pensions, net of
taxes. . . . . . . . . . - - - (16.5)
----- ----- ----- -----
$844.3 51.2 828.8 61.9
===== ===== ===== =====
</TABLE>
*Additional details are presented in the tables on page 11.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1994 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1993
Net income for the second quarter of 1994 totaled $27.5 million,
$.61 a share, compared to $22.7 million, $.51 a share, earned in
the second quarter of 1993. The current quarter included a
benefit of $6.4 million, $.14 a share, for settlement of certain
income tax matters in the U.K.
Excluding unusual items, earnings were $21.1 million, $.47 a
share, in the current quarter. Exploration and production
earnings were up 31 percent and benefited from new sources of
crude oil and gas liquids production and lower exploration
expenses, partially offset by the effect of generally lower crude
oil prices in all operating areas and lower U.S. natural gas
prices. In addition, earnings from farm, timber, and real estate
increased 50 percent compared to the second quarter of 1993, as
results from improved timber operations more than offset lower
residential lot sales, which were down from the record quarter
level established a year ago. Earnings from downstream
operations declined 61 percent in the current quarter; U.S.
operations were down because of lower unit margins and a
reduction in sales of refined products due to a planned
turnaround at the Superior refinery. In West European markets,
unit margins also declined while sales volumes were up from the
second quarter of 1993, which reflected a 38-day turnaround of
the Milford Haven refinery. Results from corporate activities
were unfavorable to last year, primarily reflecting lower income
from interest and miscellaneous sources.
Exploration and production operations earned $14.7 million in the
second quarter of 1994 compared to $11.2 million a year earlier.
U.S. operations earned $6.9 million, down from $10.7 million
a year ago, while international operations earned $7.8 million
compared to $.5 million in the second quarter of 1993. The
Company's crude oil and gas liquids sales prices averaged
$15.73 a barrel in the U.S. and $15.98 in the U.K., each down 11
percent. In Canada, sales prices averaged $14.38 a barrel for
light oil, down eight percent, and $11.16 for heavy oil, up one
percent. The average sales price for synthetic oil from the
Company's five-percent interest in the Canadian Syncrude
project, acquired in late 1993, was $16.64 a barrel. Total crude
oil and gas liquids production averaged 48,904 barrels a day
compared to 34,565 in the second quarter of 1993. U.K.
production more than doubled - production from Block 16/17 ("T"
Block), which commenced in late 1993, and an increased interest
acquired in the Ninian field effective January 1, 1994, accounted
for the increase. Production of synthetic oil in Canada was
affected by a planned turnaround in April and averaged 8,050
barrels a day in the second quarter of 1994. Murphy's average
natural gas sales price in the U.S. was $1.97 a thousand cubic
feet (MCF) in the second quarter of 1994 compared to $2.21 a year
ago, down 11 percent. The average natural gas sales price in
Canada increased from $1.19 an MCF a year ago to $1.51, up 27
percent. In Spain, the price averaged $2.42 an MCF, a decrease
of 12 percent. U.K. prices averaged $2.39 an MCF compared to
$2.33 a year ago. Total natural gas sales averaged 262,881 MCF a
day in the current quarter compared to 262,630 in the second
quarter of 1993. Sales of natural gas in the U.S. averaged
205,542 MCF a day, down three percent from a year ago, while
sales increased in the U.K. and Spain. Exploration expenses
totaled $8.2 million in the current quarter compared to $12.3
million a year ago, including $3.1 million and $5.1 million,
respectively, in international operations. During the current
quarter, the Company logged and cored a potentially producible
natural gas accumulation in a well drilled on Mobile Block 908.
The cost of the well, $14.4 million, has been capitalized pending
further evaluation, which includes the results of a well
currently in progress on nearby Mobile Block 863. Supporting
tables on page 11 provide additional details of the results of
exploration and production operations for the second quarter of
each year.
Earnings from refining, marketing, and transportation operations
declined from $8.3 million in the second quarter of 1993 to $3.2
million in the current quarter. U.S. operations earned $.8
million compared to $3.5 million a year ago. Operations in
Western Europe earned $.5 million, down from $1.8 million a year
ago. Profits from purchasing, transporting, and reselling crude
oil in Canada were $1.9 million in the current quarter compared
to $3 million in the second quarter of 1993, with the
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
RESULTS OF OPERATIONS (CONTD.)
decline due primarily to lower crude trading margins. Refinery
crude runs were 141,933 barrels a day compared to 133,894 in the
second quarter of 1993. Refined product sales were 161,378
barrels a day, up from 147,179 a year ago.
Earnings from farm, timber, and real estate operations increased
from $3.6 million in the second quarter of 1993 to $5.4 million
in the current quarter, with timber operations contributing $4.5
million, an increase of 112 percent over the prior year.
Sawtimber harvested increased from 7.7 million board feet to 13.7
million in the current quarter, and the average sales price was
up 19 percent. Lumber sales increased 38 percent, and average
lumber prices were up six percent. Thirty-two lots were sold at
the Chenal Valley development in western Little Rock during the
second quarter of 1994 compared to 84 a year ago.
Corporate functions reflected a loss of $2.2 million in the
current quarter compared to a loss of $.4 million in the second
quarter of 1993.
SIX MONTHS ENDED JUNE 30, 1994 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1993
The Company's net income for the six months ended June 30, 1994
was $51.2 million, $1.14 a share, compared to $61.9 million,
$1.38 a share, in 1993. Earnings for the first six months of
1994 included the previously discussed benefit of $6.4 million,
$.14 a share, for settlement of U.K. tax matters. Unusual items
included in the Company's net income for the six months ended
June 30, 1993 were benefits of $11.3 million, $.25 a share, from
refund of U.K. income taxes, and $15.3 million, $.34 a share,
from recording the cumulative effect of accounting changes
adopted effective January 1, 1993.
Excluding the unusual items, earnings for the first six months of
1994 totaled $44.8 million, $1.00 a share, compared to $35.3
million, $.79 a share, for the first half of 1993. All operating
segments registered improved earnings over those for the prior
year. The largest increase both in absolute dollars and on a
percentage basis was in farm, timber, and real estate operations,
which were up a total of $5.2 million, or 69 percent, due to
higher volumes and prices for both timber and lumber. Earnings
from refining, marketing, and transportation increased 52
percent, as the effect of higher average unit margins in the U.S.
more than offset lower unit margins and higher marketing costs in
Western Europe and lower earnings from crude oil trading
activities in Canada. Exploration and production income was up
19 percent, as the effects of new sources of crude oil and gas
liquids production, higher natural gas prices, and lower
exploration expenses were only partially offset by lower crude
oil prices. Results from corporate activities were unfavorable
due primarily to lower income from interest and miscellaneous
revenues.
Earnings from exploration and production for the first six months
of 1994 were $23.3 million compared to $19.6 million a year
earlier. U.S. operations earned $14.6 million, down from $17.7
million in the first half of 1993, and international operations
earned $8.7 million compared to $1.9 million a year ago. Total
crude oil and gas liquids production averaged 47,893 barrels a
day compared to 33,498 in the first six months of 1993.
Production of synthetic oil from Murphy's interest in the
Canadian Syncrude project, acquired in late 1993, averaged 8,701
barrels a day in the first half of 1994. U.K. crude production
of 12,936 barrels a day in 1994 more than doubled that of the
first six months of 1993; the increase was due to production from
the "T" Block, which started up in late 1993, and the
acquisition of an additional interest in the Ninian field
effective January 1, 1994. Crude production decreased 670
barrels a day in the U.S., 447 for other oil produced in Canada,
and 287 in other international areas. The Company's crude oil
and gas liquids sales prices averaged $14.34 a barrel in the U.S.
and $15.00 in the U.K., decreases of 19 percent and 17 percent,
respectively. In Canada, sales prices averaged $12.89 a barrel
for light oil and $9.16 for heavy oil, down 16 percent and 13
percent, respectively. The sales price for Canadian synthetic
oil averaged $14.77 a barrel in the first half of 1994. Murphy's
average natural gas sales price in the U.S. was $2.13 an MCF in
the first six months of 1994 compared to $2.02 a year ago, an
increase of five percent. Natural gas sales prices averaged
$1.55 an MCF in Canada and $2.39 in the U.K., increases of 36
percent and six percent,
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
RESULTS OF OPERATIONS (CONTD.)
respectively. In Spain, the price averaged $2.40 an MCF, a
decrease of 11 percent from a year ago. Total natural gas sales
increased one percent to 274,202 MCF a day, with a three-percent
increase in U.S. sales nearly offset by slightly lower sales in
Canada and the U.K. Exploration expenses totaled $20.1 million,
down $4 million from the first half of 1993. Supporting tables
on page 11 provide additional details of the results of
exploration and production operations for the first six months of
each year.
Refining, marketing, and transportation operations earned $14.3
million in the first six months of 1994 compared to $9.4 million
a year earlier. U.S. operations improved from $.4 million in the
first six months of 1993 to $9.5 million as lower crude costs
strengthened margins on most products. Operations in Western
Europe earned $1.2 million, down from $3.7 million a year ago;
the average unit margin declined 36 percent and marketing costs
increased while sales volume was up 46 percent. Profits from
purchasing, transporting, and reselling crude oil in Canada were
$3.6 million in the first half of 1994 compared to $5.3 million
in 1993, with the decline due mostly to lower crude trading
margins. Refinery crude runs were 146,637 barrels a day compared
to 133,252 in the first six months of 1993. Refined product
sales were 160,285 barrels a day, up from 145,548 a year ago.
Earnings from farm, timber, and real estate operations increased
from $7.5 million in the first six months of 1993 to $12.7
million in the current six months. Timber operations contributed
$11.3 million, an increase of 92 percent over the prior year.
Harvested sawtimber increased from 19.7 million board feet in the
first six months of 1993 to 34.2 million in the first half of
1994, and the average sales price was up 15 percent. Lumber
prices and sawmill margins were also up. Seventy-five lots were
sold at the Chenal Valley development in western Little Rock
during the first six months of 1994 compared to 95 a year ago.
Corporate functions for the first six months reflected losses of
$5.5 million in 1994 and $1.2 million in 1993. The variance was
primarily due to lower interest income, as the level of funds
available for investment during the first half of 1993 was
reduced later in the year by expenditures to acquire oil and gas
properties.
FINANCIAL CONDITION
Cash provided by operating activities was $163.5 million for the
first six months of 1994 compared to $136.4 million for the same
period in 1993. Net increases in operating working capital other
than cash and cash equivalents reduced cash by $17.4 million in
1994 and $40.1 million in 1993. The 1994 amount also reflected
net recoveries of $13.8 million on an insurance claim to repair
1992 hurricane damage, whereas the 1993 amount was reduced by net
expenditures of $14.9 million to repair the hurricane damage.
Predominant uses of funds in both years were for capital
expenditures (which, including amounts expensed, are summarized
in the following table) and payment of dividends. Capital
expenditures for exploration and production in 1993 included $100
million for the acquisition of an 8.52-percent interest in the
U.K. North Sea "T" Block.
<TABLE>
<CAPTION>
------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------
<S> <C> <C>
Exploration and production. . . . . . $ 147.7 224.3
Refining. . . . . . . . . . . . . . . 34.6 33.6
Marketing . . . . . . . . . . . . . . 6.6 5.4
Transportation. . . . . . . . . . . . 1.1 1.3
Farm, timber, and real estate . . . . 3.7 4.2
Other . . . . . . . . . . . . . . . . 3.1 2.9
----- -----
$ 196.8 271.7
===== =====
</TABLE>
Working capital at June 30, 1994 was $107.6 million, down $22.6
million from December 31, 1993. This level of working capital
does not fully reflect the Company's liquidity position, because
the lower historical costs assigned to inventories under LIFO
accounting were $69.3 million below current costs at June 30,
1994.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
FINANCIAL CONDITION (CONTD.)
At June 30, 1994, nonrecourse debt of a subsidiary was $108.1
million, an increase of $20.6 million during the first six months
of 1994 for additional project financing. Notes payable and
other long-term obligations of $21.8 million remained virtually
unchanged. A summary of capital employed at June 30, 1994 and
December 31, 1993 follows.
<TABLE>
<CAPTION>
------------------------------------------------------------
1994 1993
------------------------------------------------------------
(Millions of dollars) Amount % Amount %
------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes payable and other
long-term obligations........... $ 21.8 2 21.7 2
Nonrecourse debt of a subsidiary. 108.1 8 87.5 6
Stockholders' equity............. 1,242.3 90 1,222.4 92
------- --- ------- ---
$1,372.2 100 1,331.6 100
======= === ======= ===
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
OIL AND GAS OPERATING RESULTS*
- -----------------------------------------------------------------
United Synthetic
(Millions of United King- Sub- Oil-
dollars) States Canada dom Other total Canada Total
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
JUNE 30, 1994
Revenues $ 54.7 19.0 23.6 5.3 102.6 12.2 114.8
Production costs 14.4 5.5 8.1 2.4 30.4 9.0 39.4
Depreciation,
depletion, and
amortization 23.2 5.1 10.7 .6 39.6 1.1 40.7
Exploration expenses
Dry hole costs 1.5 .2 - - 1.7 - 1.7
Geological and
geophysical
costs .7 .6 .7 .3 2.3 - 2.3
Other costs .8 .2 .3 .1 1.4 - 1.4
- -----------------------------------------------------------------
3.0 1.0 1.0 .4 5.4 - 5.4
Undeveloped lease
amortization 2.1 .7 - - 2.8 - 2.8
- -----------------------------------------------------------------
Total
exploration
expenses 5.1 1.7 1.0 .4 8.2 - 8.2
- -----------------------------------------------------------------
Other items, net .6 .9 .9 .3 2.7 .1 2.8
Income tax
provision 4.5 1.7 2.1 - 8.3 .7 9.0
- -----------------------------------------------------------------
Results of operations
(excluding corporate
overhead and
interest) $ 6.9 4.1 .8 1.6 13.4 1.3 14.7
=================================================================
THREE MONTHS ENDED
JUNE 30, 1993
Revenues $ 65.4 18.7 11.3 4.9 100.3 - 100.3
Production costs 14.2 6.4 5.5 2.5 28.6 - 28.6
Depreciation,
depletion, and
amortization 23.5 5.2 3.3 1.2 33.2 - 33.2
Exploration expenses
Dry hole costs 3.7 .2 - 3.6 7.5 - 7.5
Geological and
geophysical
costs .4 .2 - .1 .7 - .7
Other costs .8 .1 .1 .2 1.2 - 1.2
- -----------------------------------------------------------------
4.9 .5 .1 3.9 9.4 - 9.4
Undeveloped lease
amortization 2.3 .6 - - 2.9 - 2.9
- -----------------------------------------------------------------
Total
exploration
expenses 7.2 1.1 .1 3.9 12.3 - 12.3
- -----------------------------------------------------------------
Other items, net 2.9 1.3 .9 .4 5.5 - 5.5
Income tax
provision 6.9 1.8 .8 - 9.5 - 9.5
- -----------------------------------------------------------------
Results of operations
(excluding corporate
overhead and
interest) $ 10.7 2.9 .7 (3.1) 11.2 - 11.2
=================================================================
SIX MONTHS ENDED
JUNE 30, 1994
Revenues $115.4 33.4 44.1 8.2 201.1 23.3 224.4
Production costs 27.6 11.5 15.5 3.5 58.1 19.3 77.4
Depreciation,
depletion, and
amortization 49.2 10.0 19.8 .8 79.8 2.4 82.2
Exploration expenses
Dry hole costs 2.7 1.7 1.9 - 6.3 - 6.3
Geological and
geophysical
costs 3.2 1.3 .7 .4 5.6 - 5.6
Other costs 1.4 .4 .7 .3 2.8 - 2.8
- -----------------------------------------------------------------
7.3 3.4 3.3 .7 14.7 - 14.7
Undeveloped lease
amortization 4.1 1.3 - - 5.4 - 5.4
- -----------------------------------------------------------------
Total
exploration
expenses 11.4 4.7 3.3 .7 20.1 - 20.1
- -----------------------------------------------------------------
Other items, net 2.7 1.9 1.6 .7 6.9 .1 7.0
Income tax
provision 9.9 1.5 2.5 - 13.9 .5 14.4
- -----------------------------------------------------------------
Results of operations
(excluding corporate
overhead and
interest) $ 14.6 3.8 1.4 2.5 22.3 1.0 23.3
=================================================================
SIX MONTHS ENDED
JUNE 30, 1993
Revenues $121.8 35.5 25.7 10.1 193.1 - 193.1
Production costs 27.8 12.3 10.6 5.0 55.7 - 55.7
Depreciation,
depletion, and
amortization 45.6 10.8 7.7 2.7 66.8 - 66.8
Exploration expenses
Dry hole costs 6.6 1.8 - 3.6 12.0 - 12.0
Geological and
geophysical
costs 1.7 1.1 .6 .1 3.5 - 3.5
Other costs 1.0 .3 .4 .5 2.2 - 2.2
- -----------------------------------------------------------------
9.3 3.2 1.0 4.2 17.7 - 17.7
Undeveloped lease
amortization 4.6 1.4 - .4 6.4 - 6.4
- -----------------------------------------------------------------
Total
exploration
expenses 13.9 4.6 1.0 4.6 24.1 - 24.1
- -----------------------------------------------------------------
Other items, net 5.5 2.4 1.9 .7 10.5 - 10.5
Income tax
provision 11.3 2.1 3.0 - 16.4 - 16.4
- -----------------------------------------------------------------
Results of operations
(excluding corporate
overhead and
interest) $ 17.7 3.3 1.5 (2.9) 19.6 - 19.6
=================================================================
</TABLE>
*Excludes unusual or infrequently occurring items.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) The information contained in Note C to the
Consolidated Financial Statements, page 5 of this
report, concerning certain legal proceedings in
which the Company is involved, is incorporated
herein by reference.
(b) One of the Company's subsidiaries, Murphy Oil USA,
Inc., owns and operates two oil refineries in
the U.S. This subsidiary is a defendant in three
governmental actions that (1) seek monetary
sanctions of $100,000 or more, and (2) arise under
enacted provisions that regulate the discharge of
materials into the environment or have the purpose
of protecting the environment. These actions
individually or in the aggregate are not material
to the financial condition of the Company.
(c) The Company and its subsidiaries are engaged in a
number of other legal proceedings, all of which the
Company considers routine and incidental to its
business and none of which is material as defined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of security holders on May 11,
1994, the directors proposed by management were elected
with a tabulation of shares as shown below.
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
B. R. R. Butler 39,682,272 272,727
Claiborne P. Deming 39,682,259 272,740
H. Rodes Hart 39,593,736 361,263
Vester T. Hughes Jr. 39,598,394 356,605
Jack W. McNutt 39,599,339 355,660
C. H. Murphy Jr. 39,682,156 272,843
Michael W. Murphy 39,682,173 272,826
R. Madison Murphy 39,682,373 272,626
William C. Nolan Jr. 39,599,134 355,865
Caroline G. Theus 39,599,160 355,839
Lorne C. Webster 39,682,262 272,737
</TABLE>
In addition, the earlier appointment of KPMG Peat
Marwick by the Board of Directors as independent
auditors for 1994 was ratified with 39,878,637 shares
voted in favor, 24,606 shares voted in opposition, and
51,756 shares not voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) No reports on Form 8-K have been filed for the
quarter covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MURPHY OIL CORPORATION
(Registrant)
By /s/ Ronald W. Herman
----------------------
Ronald W. Herman, Controller
(Chief Accounting Officer and Duly
Authorized Officer)
August 11, 1994
(Date)
12
