ConocoPhillips, Murphy Oil Cut Spending, Take Write-Downs as Low Prices Boost Marathon Petroleum

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The dramatic plunge in commodity prices that has pummeled the global Oil & Gas Industry for more than a year continued to hit ConocoPhillips Company (NYSE:COP) (Houston, Texas) and Murphy Oil Corporation (NYSE:MUR) (El Dorado, Arkansas) in third-quarter 2015, with the latter citing a reduction of more than 50% in Brent and West Texas Intermediate oil prices from third-quarter 2014 as a driving factor. Both companies also reported steep write-downs, an indication that some of the companies' properties have lost significant value. Industrial Info is tracking $89.52 billion in active projects involving ConocoPhillips and $1.85 billion involving Murphy Oil.

Among the highest-valued U.S. projects for ConocoPhillips is the $5.5 billion construction of the first train at the Freeport LNG Production Plant in Quintana, Texas. The train will have a natural gas inlet capacity of 650 million standard cubic feet per day and a liquefied natural gas (LNG) production capacity of 4.4 million tons per year, sourced from the Eagle Ford shale. Chicago Bridge & Iron Company, Zachry Industrial and Chiyoda International Corporation are performing engineering, procurement and construction (EPC) services.

Among the Murphy projects tracked by Industrial Info is the planned, $600 million construction of a bitumen oil production plant in Peace River, Alberta. The company plans to build a production field with 84 dual-horizontal well pairs, and include a central processing facility with a capacity of 12,450 barrels per day of bitumen. The project, still in the permitting phase, is currently expected to begin construction in fourth-quarter 2016.

ConocoPhillips and Murphy Oil reported net losses of $1.07 billion and $1.6 billion, respectively, compared with third-quarter 2014 net incomes of $2.7 billion and $245.71 million. Total revenues for ConocoPhillips stood at $7.51 billion, a 41.88% decrease from the same period last year, while those for Murphy Oil stood at $714.95 million, a 50.11% decrease. Both companies saw upbeat production numbers during the quarter: ConocoPhillips reported 1.55 million barrels of oil equivalent per day from continuing operations, an increase of 81,000 barrels from third-quarter 2014, largely due to new projects; Murphy reported 207,600 barrels of oil equivalent per day, about 20,000 barrels below the same period last year, but still ahead of its 200,000-barrel guidance. In the contiguous U.S., ConocoPhillips benefited from stronger drilling performances and growth in liquids-rich unconventional plays, including a 10% production increase in the Eagle Ford and Bakken shales, while Murphy saw better-than-expected numbers in the Eagle Ford Shale.

Outside the contiguous U.S., ConocoPhillips saw a solid increase in Canadian production, citing strong well performances in Western Canada and the oil sands, and benefited from lower downtime in Canada and Alaska; Murphy reported record average daily gross production at the Sarawak natural gas field, offshore Malaysia.

ConocoPhillips reported $2.17 billion in capital expenditures and investments for the quarter, compared with $4.59 billion in third-quarter 2014; Murphy reported $526.4 million in capital expenditures, compared with $977.3 million in the same period last year.

In addition, both companies faced numerous special items during third-quarter 2015: Conoco Phillips cited after-tax impacts of $246 million from the termination of a rig contract in the Gulf of Mexico, $195 million in non-cash impairments in the U.S., Asia-Pacific and Middle Eastern segments, $156 million in restructuring costs and $56 million of pension settlement expenses; Murphy cited $1.54 billion in after-tax, non-cash impairment of oil and natural gas properties, due to low market prices for future production.

"We are exercising flexibility in our capital program, dramatically lowering our cost structure and divesting assets that do not compete for funding in our portfolio," said Ryan Lance, chairman and chief executive officer of ConocoPhillips, in a statement accompanying the company's quarterly earnings release. "These steps will make us more flexible and resilient for the future. We remain committed to a compelling dividend, affordable growth and strong financial performance."

While Murphy is maintaining its capital-expenditure guidance for full-year 2015 at $2.3 billion (of which $1.7 billion was spent through September), the much larger ConocoPhillips is cutting full-year capital expenditures to $10.2 billion, from initial guidance of $11.5 billion, citing market factors and discretionary actions to lower costs. Both companies are slightly increasing their full-year production guidances: Murphy to 205,000 to 209,000 barrels of oil equivalent per day, ConocoPhillips to 1.58 million to 1.63 million barrels of oil equivalent per day.

Murphy expects to see first production at its Dalmatian South No. 2 and non-operated Kodiak projects in the Gulf of Mexico in early 2016.

Marathon Upbeat on Margins, Pending Acquisition
Meanwhile, leading petroleum refiner Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) managed to overcome a dip in revenues to post stellar profits for third-quarter 2015, as lower commodity prices boosted demand for refined products. Executives said that a favorable refining environment allowed them to smoothly move refined products and feedstocks throughout the company's system. Industrial Info is tracking $3.09 billion in active projects involving Marathon Petroleum.

Among the projects tracked by Industrial Info is $165 million in debottlenecking and upgrades at a refinery in Robinson, Illinois. Marathon Petroleum plans to debottleneck the facility's 210,000-barrel-per-day crude unit and 65,000-barrel-per-day vacuum unit to shift its feedstock completely to light domestic crude; as a result, light crude capacity will increase by 30,000 barrels per day. Jacobs Engineering Group Incorporated (NYSE:JEC) (Houston) is among the contractors. Construction is expected to wrap up in first-quarter 2016.

Net income for Marathon Petroleum was reported to be $948 million, a 41.07% increase from third-quarter 2014, while revenues stood at $18.76 billion, a 26.38% decrease. Gains were let by the Refining & Marketing segment, where income grew more than 50% to $1.46 billion; the company cited higher crack spreads, favorable acquisition prices and solid product price realizations. Marathon Petroleum also benefited from a strong performance by Speedway, its retail subsidiary, and higher pipeline transportation revenues in its Pipeline Transportation segment.

Marathon Petroleum's capital expenditures for the quarter were reported to be $585 million, compared with $3.28 billion in third-quarter 2014; however, third-quarter 2014's expenditures include $2.68 billion for the acquisition of Hess Corporation's (NYSE:HES) (New York, New York) retail operations and related assets, attributed to the Speedway segment.

During the quarter, Marathon Petroleum also recorded a $144 million write-down from its decision to cancel its proposed ROUX project at a refinery in Garyville, Louisiana, nearly nine months after announcing it would defer the final investment decision to evaluate market conditions.

"While we still believe the ROUX is an excellent project to enhance Marathon Petroleum's platform, we constantly evaluate market conditions, and at this time we have decided to cancel the project," said Gary Heminger, the president and chief executive officer of Marathon Petroleum, in a statement accompanying the company's quarterly earnings release. "We will look to deploy this capital on projects providing superior return prospects."

In the fourth quarter, executives expect Marathon Petroleum's sponsored master limited partnership, MPLX LP, to complete its $15.8 billion agreement with MarkWest Energy Partners LP (NYSE:MWE) (Denver, Colorado), which will create one of the Petroleum Refining Industry's largest master limited partnerships. MPLX LP was created in 2012 to own and operate pipelines and other fuel-transportation assets. According to The Wall Street Journal, the new entity will combine Marathon's oil-pipeline network with MarkWest's business separating natural gas into fuels such as propane and ethane.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.