Oil Companies & Earnings, Up & Down (MUR, HES, COP)

Murphy Oil Corp. (NYSE:MUR), like other oil companies has been hit hard by declining oil prices. Yesterday, the company posted EPS of $0.83 for the quarter, down from $1.07 EPS a year earlier. Analysts had been expecting EPS of $0.78.

Murphy’s revenue for the quarter totaled $4.43 billion, way offexpectations of $5.79 billion. Low crude oil prices hit the companyhard. Worldwide, Murphy’s average liquids price/barrel was $47.75,compared with $76.11 a year ago.

Refining and marketing margins recorded $140.5 million in net incomefor the quarter, way up from a loss of -$27.4 million last year. Wherelow crude prices hit the company’s E&P earnings, they helped raiserefining and, especially, marketing margins. Murphy attributed thehigher earnings to "strong U.S. retail marketing margins early in thequarter." In other words, while crude prices dropped, Murphy was ableto charge more for refined products. That’s a good deal.

Earlier in the day, Hess Corporation (NYSE:HES) said itexpects a net loss of $74 million, way down from $510 million. Revenuefigures were not reported. The share price dropped significantly on thenews, but picked back up later in the day and closed higher. The sharesopened lower this morning, and are continuing to decline.

Since both reports are preliminary, neither Murphy nor Hess referred topotential impairment charges related to asset valuation. It’s almostcertain that both companies will follow ConocoPhillips Corp.(NYSE:COP), which reported an impairment charge yesterday of $34billion. The day of reckoning for Murphy and Hess still seems to beahead.

Paul Ausick
January 29, 2009