MURPHY OIL CORP /DE - 10-Q Quarterly Report

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 March 31, 2004

¨	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)

(870) 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. þ Yes ¨ No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). þ Yes ¨ No

Number of shares of Common Stock, $1.00 par value, outstanding at March 31, 2004 was 91,975,758.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Thousands of dollars)


	(Unaudited) March 31, 2004			December 31, 2003
ASSETS
Current assets
Cash and cash equivalents	$	297,386		252,425
Accounts receivable, less allowance for doubtful accounts of $11,027 in 2004 and $10,735 in 2003		509,564		450,201
Inventories, at lower of cost or market
Crude oil and blend stocks		49,030		46,626
Finished products		133,740		157,078
Materials and supplies		64,544		66,806
Prepaid expenses		37,558		44,779
Deferred income taxes		21,099		20,940

Total current assets		1,112,921		1,038,855
Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $2,915,084 in 2004 and $3,472,133 in 2003		3,146,860		3,530,800
Goodwill, net		46,426		64,873
Deferred charges and other assets		69,576		78,119
Assets held for sale		457,792		—

Total assets	$	4,833,575		4,712,647

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	66,018		67,224
Accounts payable and accrued liabilities		773,239		659,609
Income taxes		76,164		83,493

Total current liabilities		915,421		810,326
Notes payable		1,000,344		1,061,410
Nonrecourse debt of a subsidiary		22,559		28,897
Deferred income taxes		393,693		421,700
Asset retirement obligations		196,063		252,397
Accrued major repair costs		23,851		20,513
Deferred credits and other liabilities		170,452		166,521
Liabilities associated with assets held for sale		84,644		—
Stockholders’ equity
Cumulative Preferred Stock, par $100, authorized 400,000 shares, none issued		—		—
Common Stock, par $1.00, authorized 200,000,000 shares, issued 94,613,379 shares		94,613		94,613
Capital in excess of par value		508,529		504,809
Retained earnings		1,437,755		1,357,910
Accumulated other comprehensive income		59,658		65,246
Unamortized restricted stock awards		(5,237	)	—
Treasury stock, 2,637,621 shares of Common Stock in 2004 and 2,742,781 shares in 2003, at cost		(68,770	)	(71,695	)

Total stockholders’ equity		2,026,548		1,950,883

Total liabilities and stockholders’ equity	$	4,833,575		4,712,647

See Notes to Consolidated Financial Statements, page 5.

The Exhibit Index is on page 22.

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Thousands of dollars, except per share amounts)


	Three Months Ended March 31,
	2004			2003*
REVENUES
Sales and other operating revenues	$	1,616,566		1,257,170
Gain on sale of assets		29,207		24
Interest and other income		2,299		975

Total revenues		1,648,072		1,258,169

COSTS AND EXPENSES
Crude oil, natural gas and product purchases		1,167,265		904,693
Operating expenses		168,410		142,896
Exploration expenses, including undeveloped lease amortization		49,149		15,399
Selling and general expenses		30,681		28,933
Depreciation, depletion and amortization		80,196		57,176
Accretion on discounted liabilities		2,507		2,471
Interest expense		14,288		13,961
Interest capitalized		(4,252	)	(9,536	)

Total costs and expenses		1,508,244		1,155,993

Income from continuing operations before income taxes		139,828		102,176
Income tax expense		59,132		19,319

Income from continuing operations		80,696		82,857
Discontinued operations, net of tax		17,543		11,248
Cumulative effect of change in accounting principle, net of tax		—		(6,993	)

NET INCOME	$	98,239		87,112

INCOME (LOSS) PER COMMON SHARE – BASIC
Income from continuing operations	$	.88		.91
Discontinued operations		.19		.12
Cumulative effect of change in accounting principle		—		(.08	)

NET INCOME – BASIC	$	1.07		.95

INCOME (LOSS) PER COMMON SHARE – DILUTED
Income from continuing operations	$	.86		.90
Discontinued operations		.19		.12
Cumulative effect of change in accounting principle		—		(.08	)

NET INCOME – DILUTED	$	1.05		.94

Average common shares outstanding – basic		91,925,678		91,738,379
Average common shares outstanding – diluted		93,173,199		92,349,666

*	Reclassified to conform to 2004 presentation.

See Notes to Consolidated Financial Statements, page 5.

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(Thousands of dollars)


	Three Months Ended March 31,
	2004			2003
Net income	$	98,239		87,112
Other comprehensive income (loss), net of tax
Cash flow hedges
Net derivative gains (losses)		2,388		(19,687	)
Reclassification adjustments		(3,108	)	18,449

Total cash flow hedges		(720	)	(1,238	)
Net gain (loss) from foreign currency translation		(4,868	)	52,647
Minimum pension liability adjustment		—		(707	)

COMPREHENSIVE INCOME	$	92,651		137,814

See Notes to Consolidated Financial Statements, page 5.

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Thousands of dollars)


	Three Months Ended March 31,
	2004			2003
OPERATING ACTIVITIES
Income from continuing operations	$	80,696		82,857
Adjustments to reconcile income from continuing operations to net cash provided by operating activities
Depreciation, depletion and amortization		80,196		57,176
Provisions for major repairs		7,612		6,410
Expenditures for major repairs and asset retirement obligations		(6,358	)	(3,694	)
Dry holes		42,104		2,936
Amortization of undeveloped leases		3,907		3,342
Accretion on discounted liabilities		2,507		2,471
Deferred and noncurrent income tax charges (benefits)		8,787		(17,001	)
Pretax gains from disposition of assets		(29,207	)	(24	)
Net decrease in operating working capital other than cash and cash equivalents		75,243		34,509
Other		205		(5,905	)

Net cash provided by continuing operations		265,692		163,077
Net cash provided by discontinued operations		40,183		49,469

Net cash provided by operating activities		305,875		212,546

INVESTING ACTIVITIES
Property additions and dry holes		(195,516	)	(158,100	)
Proceeds from sales of assets		37,140		8,006
Other – net		(893	)	30
Investing activities of discontinued operations		(15,837	)	(25,181	)

Net cash required by investing activities		(175,106	)	(175,245	)

FINANCING ACTIVITIES
Increase (decrease) in notes payable		(60,534	)	42,024
Decrease in nonrecourse debt of a subsidiary		(7,879	)	(9,056	)
Proceeds from exercise of stock options and employee stock purchase plans		926		943
Cash dividends paid		(18,394	)	(18,353	)
Other		—		(72	)

Net cash provided by (used in) financing activities		(85,881	)	15,486

Effect of exchange rate changes on cash and cash equivalents		73		(855	)

Net increase in cash and cash equivalents		44,961		51,932
Cash and cash equivalents at January 1		252,425		164,957

Cash and cash equivalents at March 31	$	297,386		216,889

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Cash income taxes paid	$	58,779		33,993
Interest capitalized in excess of amounts paid		(471	)	(6,357	)

See Notes to Consolidated Financial Statements, page 5.

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 4 of this Form 10-Q report.

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, 2003. In the opinion of Murphy’s management, the unaudited financial statements presented herein include all accruals necessary to present fairly the Company’s financial position at March 31, 2004, and the results of operations and cash flows for the three-month periods ended March 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States.

Financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Company’s 2003 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report. Financial results for the three months ended March 31, 2004 are not necessarily indicative of future results.

Note B – Discontinued Operations

The Company’s Canadian subsidiaries began marketing most of their Western Canadian conventional oil and gas assets (sale properties) in February 2004, and in early April entered into two binding agreements to sell these assets for total proceeds of C$830 million. Sale of assets under one agreement occurred on April 22, 2004. Closing of the other transaction is expected in May and will be subject to due diligence provisions and normal regulatory approvals. The Company expects to utilize the proceeds of the sales to fund operations in Malaysia and other areas and/or to repay debt under revolving credit agreements. The sale properties produce about 20,000 barrels of oil equivalent per day and have total reserves of approximately 46 million barrels equivalent from heavy oil, light oil, and natural gas properties. The operating results from the sale properties have been reported as discontinued operations beginning in the first quarter of 2004. Operating results for the quarter ended March 31, 2003 have been reclassified to conform to this presentation. At March 31, 2004, the major assets (liabilities) associated with the sale properties were as follows:


(Thousands of dollars)	March 31, 2004
Property, plant and equipment, net of accumulated depreciation, depletion and amortization	$	433,609
Goodwill, net		17,716
Other assets		6,467

Assets held for sale	$	457,792

Deferred income taxes	$	(32,570	)
Asset retirement obligations		(52,074	)

Liabilities associated with assets held for sale	$	(84,644	)

Revenues from the sale properties in the first quarter of 2004 and 2003 were $52.7 million and $64.1 million, respectively. Comparable pretax earnings from the sale properties were $28.9 million in the first quarter of 2004 and $23.1 mill