Murphy Net Income Reduced $41 Million by 'Unusual Items'

Murphy Oil reported a fourth quarter reduced net income of $206.1 million ($1.07 per diluted share). The net income for 2007 was reportedly reduced by several "unusual items" that lowered the net income by $40.1 million ($0.21 per diluted share).

Net income for the 2006 fourth quarter was $88.4 million ($0.47 per diluted share).

The unusual items in the 2007 period included a $59.5 million non-cash charge, net of taxes, to reduce the carrying value of certain refining and marketing inventories built during 2007 (associated with the Dec. 1 acquisition of the remaining 70% of the Milford Haven, Wales refinery) to first of year prices under the company's last-in first-out accounting method, a $14.5 million after-tax charge to settle work commitments on two properties offshore Eastern Canada, and a $33.9 million income tax benefit in Canada related to an enacted Federal tax rate deduction.

For the year of 2007, net income totaled $766.5 million, $4.01 per diluted share, compared to $644.7 million, $3.41 per diluted share, for 2006.

The net income improvement in the fourth quarter of 2007 compared to the same period of 2006 was caused by much higher earnings for the company's exploration and production operations mostly attributable to both higher oil and natural gas sales prices and production levels. The E&P improvement was partially offset by unfavorable refining and marketing results and higher net costs of corporate activities.

"Murphy has recently completed several important transactions," said Murphy President and CEO Claiborne P/ Deming. "First, we acquired the remaining 70% interest in the Milford Haven, Wales refinery on Dec. 1, which provided a significant boost to the size and strength of our refining operations. Additionally, we acquired over 41,700 acres in British Columbia in an area known as Tupper. This acreage adds mass to our existing natural gas-bearing holdings in the area, and we are actively developing the first phase of Tupper, with first production scheduled in the last quarter of this year.

"In the OCS lease sale in October, we obtained 26 blocks in the De Soto Canyon and Lloyd Ridge areas, which will become a focal point in future Gulf of Mexico exploration plans. Also in November, we announced the acquisition of acreage in the Browse Basin offshore Northwestern Australia, which builds nicely on our presence in Southeast Asia. During the quarter we drilled a natural gas discovery at Biris in Block H Malaysia. This discovery adds to the resource base in that area and moves us closer to a critical commercial development. We have also completed the sale of all our Berkana Energy shares with a gain of about $45 million to be recorded in the first quarter 2008."

Deming continued, "Crude oil prices have eased a bit in January and we have experienced very tight refining margins into the new year. We anticipate total worldwide production in the first quarter 2008 of 125,000 barrels of oil equivalent per day, and sales volumes during the quarter should average 142,000 barrels of oil equivalent per day. We currently expect earnings in the first quarter to be in the range of $1.80 to $2.00 per diluted share, including the gain on sale of Berkana. Total exploration expenses are expected to range between $70 million and $80 million during the quarter."


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