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Murphy Oil’s Profitability Metrics: Analyzing 4Q16 Estimates

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Operating income estimates

For 4Q16, Wall Street analysts expect Murphy Oil to report higher operating income on a YoY (year-over-year) basis. Wall Street analysts expect Murphy Oil to report operating income of approximately -$34 million in 4Q16 from approximately -$698 million in 4Q15. Steep YoY reductions in operating expenses due to lower production expenses, G&A (general and administrative) expenses, and DD&A (depreciation, depletion, and amortization) expenses are expected to positively impact Murphy Oil’s operating income in 4Q16.

Sequentially, Murphy Oil’s 4Q16 operating income expectations are lower compared to operating income of ~$11 million in 3Q16.

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Net income estimates

For 4Q16, excluding any one-time items, Wall Street analysts expect Murphy Oil to report higher net income on a YoY and sequential basis. Wall Street analysts expect Murphy Oil to report net income of approximately -$23 million, or -$0.14 a share, in 4Q16—compared to approximately -$131 million during 3Q15. Sequentially, Murphy Oil’s estimated 4Q16 net income is higher than approximately -$32 million in 3Q16.

3Q16 recap

In 3Q16, Murphy Oil reported sequentially higher net income compared to approximately -$62 million in 2Q16. A steep increase in crude oil and natural gas prices in 3Q16 combined with lower production expenses helped Murphy Oil report sequentially higher net income in 3Q16.

Murphy Oil’s peers Marathon Oil (MRO), Diamondback Energy (FANG), and EOG Resources (EOG) reported net income of approximately -$97 million (-$0.23 per share), approximately -$2.2 million (-$0.03 per share), and approximately -$190 million (-$0.35 per share), respectively, in 3Q16.

Overall, Murphy Oil reported much lower and negative EPS in 2015 and the first nine months of 2016 compared to previous years. The main reason was a steep fall in realized crude oil (USO) and natural gas (UNG) prices. In 1Q15, Murphy Oil saw its EPS turn negative for the first time since 2011.

Fiscal 2016 estimates

For fiscal 2016, excluding any one-time items, Wall Street analysts expect Murphy Oil to report net income of approximately -$256 million, or -$1.35 a share, from approximately -$537 million, or -$3.08 a share, in 2015.

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