==============================================================================
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, 1996
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,
1996 was 44,863,112.
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<PAGE>
PART I - FINANCIAL INFORMATION
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
-------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 59,993 62,284
Accounts receivable, less allowance for
doubtful accounts of $6,110 in 1996 and
$5,863 in 1995 281,123 234,816
Inventories
Crude oil and raw materials 63,010 70,567
Finished products 43,315 64,996
Materials and supplies 42,121 40,239
Prepaid expenses 34,378 29,703
Deferred income taxes 19,317 17,514
--------- ---------
Total current assets 543,257 520,119
Investments and noncurrent receivables 33,074 31,735
Property, plant, and equipment, at cost less
accumulated depreciation, depletion, and
amortization of $2,744,919 in 1996 and
$2,702,485 in 1995 1,549,376 1,487,232
Deferred charges and other assets 72,815 80,027
--------- ---------
$ 2,198,522 2,119,113
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations $ 10,641 10,640
Accounts payable and accrued liabilities 410,148 383,663
Income taxes 25,674 21,307
--------- ---------
Total current liabilities 446,463 415,610
Notes payable and capitalized lease obligations 22,426 22,436
Nonrecourse debt of a subsidiary 175,932 171,499
Deferred income taxes 114,576 105,015
Reserve for dismantlement costs 149,636 144,893
Reserve for major repairs 18,046 11,417
Deferred credits and other liabilities 146,817 147,098
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 508,382 507,758
Retained earnings 666,642 643,699
Currency translation adjustments 4,497 4,568
Unamortized restricted stock awards (1,407) (592)
Treasury stock, 3,912,202 shares of
Common Stock in 1996, 3,942,800 shares
in 1995, at cost (102,263) (103,063)
--------- ---------
Total stockholders' equity 1,124,626 1,101,145
--------- ---------
$ 2,198,522 2,119,113
========= =========
</TABLE>
See Notes to Consolidated Financial Statements, page 4.
The Exhibit Index is on page 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
------------------- -------------------
1996 1995* 1996 1995*
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 499,760 434,621 921,112 827,362
Other operating revenues 17,006 9,422 31,167 20,698
Interest, income from equity
companies, and other
nonoperating revenues 1,606 1,721 3,310 15,088
------- ------- ------- -------
Total revenues 518,372 445,764 955,589 863,148
------- ------- ------- -------
COSTS AND EXPENSES
Crude oil, products, and related
operating expenses 397,221 325,911 713,946 629,224
Exploration expenses, including
undeveloped lease amortization 13,190 6,408 24,861 17,003
Selling and general expenses 15,965 17,171 31,367 34,778
Depreciation, depletion, and
amortization 45,275 57,169 94,111 115,859
Interest expense 3,202 3,764 6,457 7,287
Interest capitalized (2,379) (2,274) (4,546) (4,223)
------- ------- ------- -------
Total costs and expenses 472,474 408,149 866,196 799,928
------- ------- ------- -------
Income before income taxes 45,898 37,615 89,393 63,220
Federal and state income taxes 8,611 9,265 19,654 12,165
Foreign income taxes 9,215 7,787 17,653 14,465
------- ------- ------- -------
NET INCOME $ 28,072 20,563 52,086 36,590
======= ======= ======= =======
Average Common shares
outstanding 44,922,887 44,880,513 44,912,798 44,877,722
Net income per Common share $ .62 .46 1.16 .82
======= ======= ======= =======
Cash dividends per Common share $ .325 .325 .65 .65
======= ======= ======= =======
*Reclassified to conform to 1996 presentation.
</TABLE>
See Notes to Consolidated Financial Statements, page 4.
2
<PAGE>
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1996 1995*
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 52,086 36,590
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion, and amortization 94,111 115,859
Provisions for major repairs 12,588 12,649
Expenditures for major repairs and dismantlement costs (7,391) (10,890)
Exploratory expenditures charged against income 20,040 11,443
Amortization of undeveloped leases 4,821 5,560
Deferred and noncurrent income tax charges (credits) 7,561 (5,720)
Gains from disposition of assets (1,361) (632)
Other - net 1,929 7,986
------- -------
184,384 172,845
Net (increase) decrease in operating working capital
other than cash and cash equivalents 5,423 (432)
Other adjustments related to operating activities 8,981 2,033
------- -------
Net cash provided by operating activities 198,788 174,446
------- -------
INVESTING ACTIVITIES
Capital expenditures requiring cash (181,053) (132,394)
Proceeds from sale of property, plant, and equipment 5,572 1,307
Other - net (993) 339
------- -------
Net cash required by investing activities (176,474) (130,748)
------- -------
FINANCING ACTIVITIES
Decrease in notes payable and capitalized lease
obligations (9) (28,126)
Increase in nonrecourse debt of a subsidiary 4,433 27,710
Dividends paid (29,143) (29,131)
------- -------
Net cash required by financing activities (24,719) (29,547)
------- -------
Effect of exchange rate changes on cash and cash
equivalents 114 795
------- -------
Net increase (decrease) in cash and cash equivalents (2,291) 14,946
Cash and cash equivalents at January 1 62,284 71,144
------- -------
Cash and cash equivalents at June 30 $ 59,993 86,090
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Cash income taxes paid, net of refunds $ 16,148 10,063
======= =======
Interest paid, net of amounts capitalized $ 621 908
======= =======
*Reclassified to conform to 1996 presentation.
</TABLE>
See Notes to Consolidated Financial Statements, page 4.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These notes are an integral part of the financial statements of Murphy Oil
Corporation and Consolidated Subsidiaries (Murphy/the Company) on pages 1
through 3 of this report on Form 10-Q.
NOTE A - INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of the Company presented herein have not
been audited by independent auditors, except for the Consolidated Balance
Sheet at December 31, 1995. In the opinion of the Company's management, the
unaudited financial statements presented herein include all adjustments
(consisting only of normal, recurring accruals) necessary to present fairly
the Company's financial position at June 30, 1996, and the results of
operations and cash flows for the three-month and six-month periods ended June
30, 1996 and 1995, 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
1995 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, 1996 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 remedial
obligations. In addition, the Company is involved in personal injury and
property damage claims, allegedly caused by exposure to or by the release or
disposal of materials manufactured or used in the Company's operations. The
Company 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.
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's reserve for remedial obligations, which is included in "Deferred
Credits and Other Liabilities" in the Consolidated Balance Sheets, contains
certain amounts that are based on anticipated regulatory approval of proposed
remediation of sites formerly used for refinery waste. If regulatory
authorities require more costly alternatives than the proposed processes,
future expenditures could increase by up to an estimated $3 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 five Superfund sites and
has been assigned responsibility by defendants at another Superfund site. The
potential total cost to all parties to perform necessary remedial 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 two percent at all but one of the sites. At that
site, the Company has not determined either its potentially assigned
responsibility percentage or its potential total remedial cost. The Company
has recorded a reserve totaling $.1 million for Superfund sites, and due to
currently available information on one site and the minor percentages involved
on the other sites, the Company does not expect that its related remedial
costs will be material to its financial condition. Additional information may
become known in the future that would alter this assessment, including any
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 environmentally related liabilities and
prior environmental expenditures are either covered by insurance or will be
recovered from other sources. The outcome of potential insurance recoveries
is the subject of ongoing litigation, including the appeal of a judgment
awarded the Company in 1995. Since no assurance can be given that the
judgment will be upheld upon appeal or that recoveries from other sources will
occur, the Company has not recognized a benefit for these potential recoveries
at June 30, 1996.
NOTE C - OTHER CONTINGENCIES
The Company's operations and earnings have been and may be affected by various
other forms of governmental action both in the U.S. and throughout the world.
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, stockholders, 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.
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, 1996, the Company had contingent liabilities of
$25 million on outstanding letters of credit. Contingent liabilities under
certain financial guarantees were $17.7 million at June 30, 1996.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE D - BUSINESS SEGMENTS (UNAUDITED)
<TABLE>
<CAPTION>
Three Mos. Ended Three Mos. Ended
June 30, l996 June 30, l995
- -----------------------------------------------------------------------------
(Millions of dollars) Revenues Income Revenues* Income*
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Petroleum
Exploration and production**
United States....................... $ 58.5 14.5 53.2 5.8
Canada.............................. 40.2 8.4 37.4 7.1
United Kingdom...................... 28.5 1.3 25.3 1.4
Ecuador............................. 8.8 3.1 6.1 .2
Other international................. 2.2 (.3) 2.8 (.8)
- -----------------------------------------------------------------------------
138.2 27.0 124.8 13.7
- -----------------------------------------------------------------------------
Refining, marketing, and transportation
United States ...................... 334.2 (.6) 278.9 6.4
United Kingdom ..................... 70.6 (.6) 64.6 -
Canada.............................. 5.8 1.4 5.5 1.3
- -----------------------------------------------------------------------------
410.6 .2 349.0 7.7
- -----------------------------------------------------------------------------
548.8 27.2 473.8 21.4
Intrasegment transfers elimination (51.7) (49.2)
- -----------------------------------------------------------------------------
Total petroleum .................. 497.1 27.2 424.6 21.4
Farm, timber, and real estate--
United States ........................ 19.7 3.3 19.4 2.6
Corporate and other ................... 1.6 (2.4) 1.7 (3.4)
- -----------------------------------------------------------------------------
$ 518.4 28.1 445.7 20.6
=============================================================================
Six Months Ended Six Months Ended
June 30, l996 June 30, l995
- -----------------------------------------------------------------------------
(Millions of dollars) Revenues Income Revenues* Income*
- -----------------------------------------------------------------------------
Petroleum
Exploration and production**
United States....................... $ 122.2 28.3 101.8 8.3
Canada.............................. 75.6 12.7 69.6 11.7
United Kingdom...................... 61.6 7.3 56.9 3.9
Ecuador............................. 15.4 4.8 13.5 1.9
Other international................. 5.3 (1.7) 7.2 1.0
- -----------------------------------------------------------------------------
280.1 51.4 249.0 26.8
- -----------------------------------------------------------------------------
Refining, marketing, and transportation
United States ...................... 581.2 (3.3) 508.2 (.2)
United Kingdom ..................... 141.6 (.8) 121.8 (2.0)
Canada.............................. 11.0 2.4 11.5 3.1
- -----------------------------------------------------------------------------
733.8 (1.7) 641.5 .9
- -----------------------------------------------------------------------------
1,013.9 49.7 890.5 27.7
Intrasegment transfers elimination (101.4) (83.9)
- -----------------------------------------------------------------------------
Total petroleum .................. 912.5 49.7 806.6 27.7
Farm, timber, and real estate--
United States ........................ 39.8 6.9 41.4 7.3
Corporate and other ................... 3.3 (4.5) 4.1 (5.4)
- -----------------------------------------------------------------------------
Revenues/income before special item ... 955.6 52.1 852.1 29.6
Adjustment of estimates for self-insured
liabilities, net of taxes ............ - - 11.0 7.0
- -----------------------------------------------------------------------------
$ 955.6 52.1 863.1 36.6
=============================================================================
*Reclassified to conform to 1996 presentation.
**Additional details are presented in the tables on page 10.
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Net income for the second quarter of 1996 totaled $28.1 million, $.62 a share,
which compares to second quarter 1995 net income of $20.6 million, $.46 a
share. Net cash from operating activities excluding changes in noncash
working capital items totaled $98.8 million in the current quarter, up eight
percent from a year ago.
Earnings for the second quarter of 1996 were up 36 percent compared to
the second quarter a year ago, and up 17 percent from the first quarter of
1996. The current quarter saw a continuation of the strong performance of the
Company's exploration and production operations, with earnings of $27 million
nearly doubling the $13.7 million earned a year ago. A 46-percent increase in
the average U.S. natural gas sales price and higher crude oil sales prices
worldwide were the primary contributors to the improvement, partially offset
by lower U.S. natural gas production and higher exploration expenses. Margins
in the U.S. and U.K. downstream businesses continued to be under pressure,
and worldwide downstream operations earned $.2 million compared to $7.7
million a year ago. Farm, timber, and real estate operations earned $3.3
million, up 27 percent compared to the second quarter of 1995; the increase
was primarily due to earnings from real estate activities.
Exploration and production operations in the U.S. earned $14.5 million
compared to $5.8 million in the second quarter of 1995. Earnings from
exploration and production also improved in Canada, $8.4 million compared to
$7.1 million a year ago, and in Ecuador, $3.1 million compared to $.2 million.
Earnings for 1996 in the U.K. were $1.3 million compared to $1.4 million,
while the loss from other international operations was $.3 million compared to
$.8 million a year earlier. The Company's crude oil and condensate sales
prices averaged $19.50 a barrel in the U.S. and $20.07 in the U.K., increases
of 12 percent and 14 percent, respectively. In Canada, sales prices averaged
$19.61 a barrel for light oil, $14.93 for heavy oil, and $20.67 for synthetic
oil, up 10 percent, five percent, and 13 percent, respectively. The average
crude oil price in Ecuador rose three percent to $14.96 a barrel. Total crude
oil and gas liquids production averaged 54,925 barrels a day compared to
55,265 in the second quarter of 1995. U.S. production declined nine percent;
U.K. production was basically unchanged. In Canada, light oil production
declined four percent, while heavy oil production increased 11 percent.
Production of synthetic oil in Canada was affected by a planned shutdown of
processing facilities for maintenance and averaged 7,870 barrels a day
compared to 9,457 in the second quarter of 1995. Production from Ecuador
averaged 6,496 barrels a day compared to 4,630 a year ago. Murphy's average
natural gas sales price in the U.S. was $2.36 a thousand cubic feet (MCF) in
the current quarter compared to $1.62 a year ago. The average natural gas
sales price in Canada was essentially unchanged at $1.01 an MCF. Sales prices
averaged $2.57 an MCF in the U.K., up three percent, and $2.91 in Spain, down
three percent. Total natural gas sales averaged 216 million cubic feet a day
compared to 260 million a year ago. Sales of natural gas in the U.S. averaged
158 million cubic feet a day, down from 204 million in the second quarter of
1995. Exploration expenses totaled $13.2 million in the current quarter
compared to $6.4 million a year ago. The tables on page 10 provide additional
details of the results of exploration and production operations for the second
quarter of each year.
Refining, marketing, and transportation operations in the U.S. lost $.6
million compared to earning $6.4 million a year ago. Results for the current
quarter were favorably affected by $2.3 million after tax for improvements in
estimated settlement costs of crude oil swap agreements. U.K. downstream
operations also lost $.6 million in the current quarter compared to breaking
even in the second quarter of 1995. Earnings from purchasing, transporting,
and reselling crude oil in Canada were $1.4 million in the current quarter
compared to $1.3 million a year ago. Refinery crude runs were 164,905 barrels
a day compared to 155,858 in the second quarter of 1995. Refined product
sales were 178,251 barrels a day, up from 162,454 a year ago.
Earnings from timber operations were basically unchanged from the second
quarter of 1995. The volume of sawtimber harvested declined from 10.1 million
board feet to 7.8 million in the current quarter,
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
RESULTS OF OPERATIONS (CONTD.)
and the average sales price was down 14 percent. Finished lumber prices were
up four percent, but sales volumes declined four percent. Twenty-six lots
were sold at the Chenal Valley development in western Little Rock during the
second quarter of 1996 compared to 12 a year ago.
Corporate functions reflected a loss of $2.4 million in the current quarter
compared to $3.4 million in the second quarter of 1995, with the improvement
primarily relating to lower interest costs.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
For the first six months of 1996, net income totaled $52.1 million, $1.16 a
share, compared to income before special items of $29.6 million, $.66 a share,
for the first half of 1995. Income for the six months ended June 30, 1995
totaled $36.6 million, $.82 a share, and included a special benefit of $7
million, $.16 a share, from an adjustment of amounts previously reserved
relating to matters for which the Company is self-insured.
The increase of 76 percent in year-to-date income before special items was
primarily due to higher earnings from exploration and production operations,
which nearly doubled because of higher crude oil prices and higher natural gas
prices. Lower natural gas volumes and higher exploration expenses provided
partial offsets. Financial results from downstream operations and farm,
timber, and real estate activities were slightly lower.
Earnings from exploration and production for the six months ended June 30,
1996 were $51.4 million, up $24.6 million from 1995. Earnings from U.S.
operations were especially strong, rising from $8.3 million for the first half
of 1995 to $28.3 million. Other areas reflecting increased earnings were the
U.K., up $3.4 million to $7.3 million; Ecuador, up $2.9 million to $4.8
million; and Canada, up $1 million to $12.7 million. Other international
operations lost $1.7 million in the first six months of 1996 compared to
earning $1 million in 1995; the decrease was primarily due to lower earnings
in Spain. The Company's crude oil and condensate sales prices averaged $18.80
a barrel in the U.S. and $19.87 in the U.K., increases of 11 percent and 15
percent, respectively. In Canada, sales prices averaged $18.58 a barrel for
light oil and $19.57 for synthetic oil, up nine percent and 10 percent,
respectively; heavy oil prices decreased from $13.38 a barrel to $13.18. The
average crude oil price in Ecuador was $14.67 a barrel, up five percent.
Natural gas sales prices for the first half of 1996 averaged $2.61 an MCF in
the U.S., up 67 percent; $1.04 in Canada, up two percent; $2.59 in the U.K.,
up five percent; and $2.82 in Spain, down three percent. Crude oil and gas
liquids production for the first six months of 1996 averaged 54,917 barrels a
day compared to 55,715 during the same period in 1995. Ecuadoran crude oil
production was up 15 percent to 5,774 barrels a day, and Canadian heavy oil
production increased 11 percent to 9,083. In other areas, crude oil and gas
liquids production averaged 13,269 barrels a day in the U.S., down 703; 4,845
for Canadian light oil, down 360; 8,234 for Canadian synthetic crude, down
329; and 13,712 in the U.K., down 849. Crude oil production in other
international operations was down 236 barrels a day from 1995. Total natural
gas sales averaged 232 million cubic feet a day in 1996 compared to 273
million in 1995. Sales of natural gas in the U.S. averaged 162 million cubic
feet a day, down 21 percent. In other areas, natural gas volumes increased 10
percent each in Canada and the U.K. but were down 25 percent in Spain.
Exploration expenses totaled $24.9 million in the six months ended June 30,
1996 compared to $17 million a year ago. The tables on page 10 provide
additional details of the results of exploration and production operations for
the first half of each year.
Refining, marketing, and transportation operations lost $1.7 million in the
first six months of 1996 compared to earning $.9 million for the same period
last year; the unfavorable change was primarily because competitive market
conditions did not allow higher crude oil costs to be completely passed on to
customers through higher product prices. Downstream operations in the U.S.
and the U.K. each recorded losses in both years; the loss in the U.S.
increased from $.2 million in 1995 to $3.3 million, while the loss in the U.K.
decreased from $2 million in 1995 to $.8 million. Earnings from purchasing,
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
RESULTS OF OPERATIONS (CONTD.)
transporting, and reselling crude oil in Canada were $2.4 million in the
current year compared to $3.1 million a year ago. Refinery crude runs were
152,311 barrels a day compared to 153,170 a year ago. Petroleum product sales
were 163,293 barrels a day, up from 158,019 in 1995.
Although sales at the Chenal Valley development in western Little Rock
increased from 25 lots in the first six months of 1995 to 75 in 1996, earnings
from farm, timber, and real estate operations were down from $7.3 million in
1995 to $6.9 million in 1996. The volume of sawtimber harvested declined
five percent from 1995, and the average sawtimber price was down 21 percent.
Lumber sales volumes declined three percent from last year, and the average
lumber price was down five percent.
Financial results from corporate functions reflected a loss of $4.5 million in
the first half of 1996 compared to $5.4 million a year ago. The improvement
was primarily caused by lower interest costs.
FINANCIAL CONDITION
Cash provided by operating activities was $198.8 million for the first six
months of 1996 compared to $174.4 million for the same period in 1995. The
1995 amount included a benefit of $7 million for adjustment of estimates for
self-insured liabilities. Changes in operating working capital other than
cash and cash equivalents provided cash of $5.4 million for the first six
months of 1996 but required cash of $.4 million for the 1995 period. Cash
provided by operating activities was reduced by expenditures for refinery
turnarounds and abandonment of oil and gas properties totaling $7.4 million in
the current year and $10.9 million in 1995. Predominant uses of cash in both
years were for capital expenditures (which, including amounts expensed, are
summarized in the following table) and payment of dividends.
<TABLE>
<CAPTION>
-------------------------------------------------------
Six Months
Ended June 30,
(Millions of dollars) 1996 1995
-------------------------------------------------------
<S> <C> <C>
Exploration and production. . . . . . . $159.5 101.9
Refining, marketing, and transportation 16.7 25.9
Farm, timber, and real estate . . . . . 4.4 3.7
Corporate and other . . . . . . . . . . .5 .9
----- -----
$181.1 132.4
===== =====
</TABLE>
Working capital at June 30, 1996 was $96.8 million, down $7.7 million from
December 31, 1995. 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 $100.5 million below current costs at
June 30, 1996.
At June 30, 1996, nonrecourse debt of a subsidiary was $175.9 million; the
increase of $4.4 million during the first six months of 1996 was attributable
to financing a portion of development costs for the period that related to the
Hibernia oil field, offshore Newfoundland. Notes payable and capitalized
lease obligations were unchanged. A summary of capital employed follows.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
June 30, 1996 December 31, 1995
--------------------------------------------------------------------------
(Millions of dollars) Amount % Amount %
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes payable and capitalized lease
obligations.......................... $ 22.4 2 22.4 2
Nonrecourse debt of a subsidiary ..... 175.9 13 171.5 13
Stockholders' equity.................. 1,124.6 85 1,101.1 85
------- --- ------- ---
$1,322.9 100 1,295.0 100
======= === ======= ===
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
OIL AND GAS OPERATING RESULTS (UNAUDITED)
- -----------------------------------------------------------------------------
United Synthetic
United King- Ecua- Oil -
(Millions of dollars) States Canada dom dor Other Canada Total
- -----------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30, 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oil and gas sales and
operating revenues $ 58.5 25.4 28.5 8.8 2.2 14.8 138.2
Production costs 12.4 7.0 7.9 3.0 .4 9.1 39.8
Depreciation, depletion,
and amortization 15.2 6.0 9.8 2.4 1.2 1.3 35.9
Exploration expenses
Dry hole costs 3.2 .1 3.7 - - - 7.0
Geological and geophysical
costs .9 .3 .9 - (.2) - 1.9
Other costs .7 .2 .5 - .6 - 2.0
- -----------------------------------------------------------------------------
4.8 .6 5.1 - .4 - 10.9
Undeveloped lease
amortization 1.6 .7 - - - - 2.3
- -----------------------------------------------------------------------------
Total exploration
expenses 6.4 1.3 5.1 - .4 - 13.2
- -----------------------------------------------------------------------------
Selling and general expenses 3.4 1.3 .7 - .4 - 5.8
Income tax provisions 6.6 4.2 3.7 .3 .1 1.6 16.5
- -----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 14.5 5.6 1.3 3.1 (.3) 2.8 27.0
=============================================================================
THREE MONTHS ENDED
JUNE 30, 1995*
- -----------------------------------------------------------------------------
Oil and gas sales and
operating revenues $ 53.2 21.7 25.3 6.1 2.8 15.7 124.8
Production costs 12.7 6.4 9.1 2.9 .1 10.2 41.4
Depreciation, depletion,
and amortization 24.3 5.3 10.9 2.6 1.8 1.2 46.1
Exploration expenses
Dry hole costs - - (.1) - - - (.1)
Geological and geophysical
costs 1.0 .3 .2 - .6 - 2.1
Other costs .8 .1 .3 - .5 - 1.7
- -----------------------------------------------------------------------------
1.8 .4 .4 - 1.1 - 3.7
Undeveloped lease
amortization 1.7 .7 - - .3 - 2.7
- -----------------------------------------------------------------------------
Total exploration
expenses 3.5 1.1 .4 - 1.4 - 6.4
- -----------------------------------------------------------------------------
Selling and general expenses 3.6 1.2 .9 .1 .2 .1 6.1
Income tax provisions 3.3 3.2 2.6 .3 .1 1.6 11.1
- -----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 5.8 4.5 1.4 .2 (.8) 2.6 13.7
=============================================================================
SIX MONTHS ENDED JUNE
30, 1996
- -----------------------------------------------------------------------------
Oil and gas sales and
operating revenues $122.2 46.3 61.6 15.4 5.3 29.3 280.1
Production costs 25.8 14.1 16.6 5.7 .6 19.1 81.9
Depreciation, depletion,
and amortization 32.0 12.0 21.0 4.3 3.1 2.7 75.1
Exploration expenses
Dry hole costs 5.2 .7 3.7 - - - 9.6
Geological and
geophysical costs 3.4 1.3 1.1 - .6 - 6.4
Other costs 1.4 .3 .8 - 1.6 - 4.1
- -----------------------------------------------------------------------------
10.0 2.3 5.6 - 2.2 - 20.1
Undeveloped lease
amortization 3.4 1.4 - - - - 4.8
- -----------------------------------------------------------------------------
Total exploration
expenses 13.4 3.7 5.6 - 2.2 - 24.9
- -----------------------------------------------------------------------------
Selling and general expenses 6.6 2.6 1.5 .1 .6 - 11.4
Income tax provisions 16.1 5.9 9.6 .5 .5 2.8 35.4
- -----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 28.3 8.0 7.3 4.8 (1.7) 4.7 51.4
=============================================================================
SIX MONTHS ENDED
JUNE 30, 1995*
- -----------------------------------------------------------------------------
Oil and gas sales and
operating revenues $101.8 42.0 56.9 13.5 7.2 27.6 249.0
Production costs 26.7 12.2 17.5 5.5 .5 18.4 80.8
Depreciation, depletion,
and amortization 48.2 10.5 25.3 5.6 2.0 2.2 93.8
Exploration expenses
Dry hole costs .8 1.2 .6 - - - 2.6
Geological and
geophysical costs 2.3 1.4 .4 - 1.1 - 5.2
Other costs 1.4 .3 .7 - 1.2 - 3.6
- -----------------------------------------------------------------------------
4.5 2.9 1.7 - 2.3 - 11.4
Undeveloped lease
amortization 3.5 1.4 - - .7 - 5.6
- -----------------------------------------------------------------------------
Total exploration
expenses 8.0 4.3 1.7 - 3.0 - 17.0
- -----------------------------------------------------------------------------
Selling and general expenses 7.1 2.5 1.8 .1 .6 .1 12.2
Income tax provisions 3.5 5.1 6.7 .4 .1 2.6 18.4
- -----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 8.3 7.4 3.9 1.9 1.0 4.3 26.8
=============================================================================
*Reclassified to conform to 1996 presentation.
</TABLE>
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) A wholly owned subsidiary, Murphy Oil USA, Inc., in connection with
its ownership and operation of two oil refineries in the U.S., is a
defendant in two 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.
(b) 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
by the rules and regulations of the U.S. Securities and Exchange
Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of security holders on May 8, 1996, 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 36,295,722 1,270,508
George S. Dembroski 36,288,676 1,277,554
Claiborne P. Deming 36,292,081 1,274,149
H. Rodes Hart 36,294,294 1,271,936
Vester T. Hughes Jr. 36,295,341 1,270,889
C. H. Murphy Jr. 36,293,120 1,273,110
Michael W. Murphy 36,296,196 1,270,034
R. Madison Murphy 36,296,196 1,270,034
William C. Nolan Jr. 36,295,541 1,270,689
Caroline G. Theus 36,296,727 1,269,503
Lorne C. Webster 36,295,066 1,271,164
</TABLE>
In addition, the earlier appointment of KPMG Peat Marwick LLP by the
Board of Directors as independent auditors for 1996 was ratified with
37,524,036 shares voted in favor, 27,219 shares voted in opposition,
and 14,975 shares not voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Exhibit Index on page 12 of this Form 10-Q report lists the
exhibits that are hereby filed or incorporated by reference.
(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 6, 1996
(Date)
11
<PAGE>
EXHIBIT INDEX
Ex. Page Number or
No. Incorporation by Reference to
- ---- ---------------------------------
3.1 Certificate of Incorporation of Exhibit 3.1, Page Ex. 3.1-0, of
Murphy Oil Corporation as of Murphy's Annual Report on Form
September 25, 1986 10-K for the year ended December
31, 1991
3.2 Bylaws of Murphy Oil Corporation Exhibit 3.3, Page Ex.3.3-1, of
at October 4, 1995 Murphy's Annual Report on Form
10-K for the year ended
December 31, 1995
4 Instruments Defining the Rights of Security Holders.
Murphy Oil Corporation is party to several long-term debt
instruments, none of which authorizes securities that
exceed 10 percent of the total assets of Murphy Oil
Corporation and its subsidiaries on a consolidated basis.
Pursuant to Regulation S-K, item 601(b), paragraph
4(iii)(A), Murphy agrees to furnish a copy of each such
instrument to the Securities and Exchange Commission
upon request.
4.1 Rights Agreement dated as of Exhibit 4.1, Page Ex. 4.1-0, of
December 6, 1989 between Murphy Oil Murphy's Annual Report on Form
Corporation and Harris Trust Company 10-K for the year ended
of New York, as Rights Agent December 31, 1994
10.1 1982 Management Incentive Plan Exhibit 10.2, Page Ex. 10.2-0, of
Murphy's Annual Report on Form
10-K for the year ended
December 31, 1991
10.2 1987 Management Incentive Plan Exhibit 10.2, Page Ex. 10.2-0, of
(adopted May 13, 1987, amended Murphy's Annual Report on Form
February 7, 1990 retroactive to 10-K for the year ended
February 3, 1988) December 31, 1994
10.3 1992 Stock Incentive Plan Exhibit 10.3, Page Ex. 10.3-0, of
Murphy's Annual Report on Form
10-K for the year ended December
31, 1992
27.1 Financial Data Schedule for the six (Electronic filing only)
months ended June 30, 1996
27.2 Restated Financial Data Schedule (Electronic filing only)
for the six months ended
June 30, 1995
Exhibits other than those listed above have been omitted since they either are
not required or are not applicable.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996, AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996, OF
MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 59,993
<SECURITIES> 0
<RECEIVABLES> 287,233
<ALLOWANCES> 6,110
<INVENTORY> 148,446
<CURRENT-ASSETS> 543,257
<PP&E> 4,294,295
<DEPRECIATION> 2,744,919
<TOTAL-ASSETS> 2,198,522
<CURRENT-LIABILITIES> 446,463
<BONDS> 198,358
<COMMON> 48,775
0
0
<OTHER-SE> 1,075,851
<TOTAL-LIABILITY-AND-EQUITY> 2,198,522
<SALES> 921,112
<TOTAL-REVENUES> 955,589
<CGS> 808,057
<TOTAL-COSTS> 808,057
<OTHER-EXPENSES> 24,861
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,911
<INCOME-PRETAX> 89,393
<INCOME-TAX> 37,307
<INCOME-CONTINUING> 52,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,086
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995,
AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED OF
MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AS RESTATED JUNE 30, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 86,090
<SECURITIES> 0
<RECEIVABLES> 190,385
<ALLOWANCES> 5,653
<INVENTORY> 181,274
<CURRENT-ASSETS> 506,980
<PP&E> 4,120,433<F1>
<DEPRECIATION> 2,434,219<F1>
<TOTAL-ASSETS> 2,315,519
<CURRENT-LIABILITIES> 412,008
<BONDS> 172,036
<COMMON> 48,775
0
0
<OTHER-SE> 1,241,664
<TOTAL-LIABILITY-AND-EQUITY> 2,315,519
<SALES> 827,362
<TOTAL-REVENUES> 863,148<F1>
<CGS> 745,083<F1>
<TOTAL-COSTS> 745,083<F1>
<OTHER-EXPENSES> 17,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,064
<INCOME-PRETAX> 63,220
<INCOME-TAX> 26,630
<INCOME-CONTINUING> 36,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,590
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
<FN>
<F1>AMOUNTS HAVE BEEN RESTATED TO CONFORM TO 1996 PRESENTATION.
</FN>
</TABLE>
