Murphy's income from continuing exploration and production operations was $101.2 million in the first quarter of 2004 compared to $75.7 million in the same quarter of 2003. Higher realized sales prices for crude oil, higher oil and natural gas sales volumes from continuing operations, and a $15.4 million after-tax gain on disposal of several minor oil and gas properties were the primary reasons for improved earnings. Exploration expenses increased from $15.4 million in the 2003 period to $49.1 million in 2004 primarily due to higher dry hole costs of $39.1 million in the United States and Malaysia. The Company's worldwide crude oil and condensate sales prices averaged $30.95 per barrel for the current quarter compared to $27.90 per barrel in the first quarter of 2003. Total crude oil and gas liquids production from continuing operations was 95,128 barrels per day in the first quarter of 2004 compared to 67,813 barrels per day in the 2003 quarter. The 40% increase in crude oil production in the 2004 period was mostly attributable to production from the Medusa and Habanero fields in the deepwater Gulf of Mexico and the West Patricia field in shallow-water Malaysia, all of which came on stream in mid to late 2003. North American natural gas sales prices averaged $5.88 per thousand cubic feet (MCF) in the most recent quarter compared to $5.95 per MCF in the same quarter of 2003. Natural gas sales volumes from continuing operations increased from 116 million cubic feet per day in the first quarter of 2003 to 124 million cubic feet per day in the just completed quarter, primarily due to production from the Medusa and Habanero fields. In the first quarter of 2003, the Company's hedging program reduced the average worldwide crude oil sales price and North American natural gas sales price by $3.16 per barrel and $.49 per MCF, respectively.
The Company's refining and marketing operations incurred a loss of $6.4 million in the 2004 quarter compared to a loss of $3.5 million in the 2003 quarter. The Company's North American operations lost $10.5 million in the first quarter of 2004 and $6.4 million in the 2003 period. The larger loss was primarily due to poorer performance at the Meraux refinery, which is operating at less than optimum capacity during integration of a new unit and the rebuilding of the ROSE unit after the mid-year 2003 fire. Refining and marketing operations in the U.K. earned $4.1 million in the first quarter of 2004, up from a $2.9 million profit in the same quarter of 2003, with improved earnings based on better operating margins during the latest quarter.
Corporate functions reflected a loss of $14.1 million in the 2004 quarter compared to income of $10.7 million in the first quarter 2003. The 2003 period included a $20.1 million gain from resolution of prior-year U.S. tax matters. The 2004 period included lower interest capitalization because of start-up of the Medusa and Habanero fields and completion of the Meraux refinery expansion.
Claiborne P. Deming, President and Chief Executive Officer, commented, "Based on stronger oil and gas prices in 2004, Murphy Oil's first quarter consolidated earnings were the best since the second quarter of 2001. High oil prices experienced in the just completed quarter are predicted to weaken in the second quarter, but have thus far held strong based on high demand and an effective curtailment of production by OPEC. Natural gas prices will likely remain high in tandem with oil prices. Production from continuing operations is expected to average 117,000 barrels of oil equivalent per day in the second quarter. Anticipated operating performance improvements at the Meraux refinery should lead to better financial results in the Company's downstream business in the second quarter of 2004. Additionally, the start of the summer driving season in the U.S. should lead to stronger results in our retail gasoline business. We currently expect earnings from continuing operations in the second quarter to be between $.90 and $1.20 per share. Results could vary based on commodity prices, drilling results and timing of oil sales."
MURPHY OIL CORPORATION CONSOLIDATED FINANCIAL DATA SUMMARY (Unaudited) FIRST QUARTER 2004 2003 ---- ---- Revenues $1,648,072,000 $1,258,169,000 Net income $ 98,239,000 (1) $ 87,112,000 (2) Net income per Common share Basic $1.07 (1) $ .95 (2) Diluted $1.05 (1) $ .94 (2) Average shares outstanding Basic 91,925,678 91,738,379 Diluted 93,173,199 92,349,666 (1) Includes income of $17,543,000 ($.19 per share) for results of discontinued operations. (2) Includes a charge of $6,993,000 ($.08 per share) for the cumulative effect of a change in accounting principle, and income of $11,248,000 ($.12 per share) for results of discontinued operations.
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