Murphy Oil Corporation Call Insights: EBITDA Trailing and Brunei Gas Discovery

Murphy Oil Corporation (NYSE:MUR) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

EBITDA Trailing

Drew Venker – Morgan Stanley: This is actually Drew Venker. Just curious on the U.S. retail, have you received your tax free spend approval from IRS at this point?

Steven A. Cosse – President and CEO: No, we haven’t.

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Drew Venker – Morgan Stanley: Could you provide a trailing 12 month EBITDA number for that portion of the business?

Steven A. Cosse – President and CEO: Trailing 12 months? The first quarter was about $67 million, but I don’t have the trailing – do we have the trailing 12 months? That was EBITDA right, you were asking for?

Drew Venker – Morgan Stanley: That’s right, yes.

Steven A. Cosse – President and CEO: Okay, as I said, the first quarter was a little over $67 million. We’ll try to get Barry, can you get that for me?

Barry Jeffery – Director, IR: Yeah.

Drew Venker – Morgan Stanley: And I guess one while you guys are looking for that, do you have any updated thoughts on potential divestitures beyond this retail spin, I guess maybe in light of gas prices increasing recently?

Steven A. Cosse – President and CEO: You said divestitures? I think the two ethanol plants, we don’t view those as strategic to the retail business going forward and we’ll probably divest those in the short near-term. We have a terminal or two as well that aren’t strategic to the retail and we likely divest those as well.

Drew Venker – Morgan Stanley: Any reconsideration of potential Syncrude sale or your Tupper properties?

Steven A. Cosse – President and CEO: Well, as we said in the late January, our last call, these are two really, really great assets. If we didn’t have them, certainly we’d be out trying to find them. That said, if we would receive a compelling offer and I think we’d know what a compelling offer was if we saw, it but barring that and some other strategic need for the proceeds either in development of other projects, no we really don’t see a process getting started.

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Brunei Gas Discovery

Leo Mariani – RBC Capital Markets: Was hoping you could elaborate a little bit more on this gas discovery you made in Brunei. I know you guys have made kind of series of gas discoveries over there you guys have talked about, eventually getting into LNG projects, and I guess do you think you have scale at this point to do that, and what do you think will be the timing to get production on something like that?

Roger W. Jenkins – EVP and COO: Leo, it’s Roger. Yes. We do have a strategy of exploring for this type of LNG with the right partner groups in this region and in Australia. We have built up a good bit of gas discoveries in Malaysia where we are working with PETRONAS and they are in the (fleet) process of building a floating LNG vessel there. This will be very similar in sizing to that. I want to get specific on what we have let’s say north of 500 BCF on this well. These are three to four structures. They are very similar and look to the Block H we have in Malaysia but they are different age rock. They are Pliocene type age both stratigraphic and structural features very similar to Block H. I would say that this cluster opportunity here is 1.5 TCF to 2 TCF sort of the thing if we can get all this to work with future drilling. It’s a little bit different than Malaysia and in this place there is a shortage of gas in outer years in Brunei. They do have an LNG plant, they will need gas. There is some gas infrastructure there. If we were to put all this together, I think you could see some flow there in 2020 but a long way to go to delineate the other discoveries, get all this organized with gas sales et cetera. But this is an appropriate partner group that are in long-term LNG that we want to be in. It’s a place that does have a need for gas and they are planning it long haul the way we understand it and we are glad to have it.

Leo Mariani – RBC Capital Markets: I guess it sounds like you are pretty close to TD on a well here in Australia, you had some delays there. Any kind of preliminary looks at that, any indications of hydrocarbons at this point?

Roger W. Jenkins – EVP and COO: No. Just we are right on top of the reservoir. The rig’s been really struggling with some maintenance issues there and just rather drill the well and announce it when we get finished at this time…

Leo Mariani – RBC Capital Markets: I guess in terms of Tupper you guys talked about doing some science work, explore a possible liquids rich area. Just wanted to get a sense of kind of where you’re out there and what you might think liquids content to be in part of your acreage?

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Roger W. Jenkins – EVP and COO: Sure. We have it in a corner of Tupper Main. Some of the folks around us have advertised this as well. There is a certain strata of the Montney that has this liquids rich feature. Next week at our Analysts Day, we’ll be going over some maps and talking more specifically about it. This is not an earth-shattering thing. I think it’s a 20 million barrel kind of thing, but it can help add $1 to gas price there and really help the economics, or something like that, really turn to an earnings provider fairly quickly. We’re all going to have to do some work to our plant to catch more of those liquids. It’s not designed for high liquids. We’re talking about 12 barrels 1 million wells making 4 million a day kind of a number.

Leo Mariani – RBC Capital Markets: I guess in terms of Kikeh, I just wanted to clarify what I heard on the call here, did you guys say that you think you start to see some natural declines and they are kicking into the second quarter of ’13? Did I hear that right?

Roger W. Jenkins – EVP and COO: No, if you did, I said it totally wrong, it wasn’t the intent. The project slowed at the same rate this quarter as a year ago and when a field is that old, I think it’s really good. Our barrels are the same from one year to the next. Thanks for clarifying that if I missed stating it Leo. I appreciate it.

Leo Mariani – RBC Capital Markets: Then I guess additionally, I think are you done with your work-over program at this point at Kikeh?

Roger W. Jenkins – EVP and COO: No, we finished. There were some well repairs early in the program and now some additional wells required to develop the field, some of which originally planned. We have that ongoing, both water injection and producers that’s in our budget. It’s been in our plan and we’ll be going on into next year and Kikeh has been rolling along from the high-60s and low 70s for a good while now, are doing pretty well there.

A Closer Look: Murphy Oil Earnings Cheat Sheet>>