EL DORADO, Ark. -- Murphy Oil Corp. reported that net income in second-quarter 2007 was $250.3 million ($1.32 per diluted share) compared to net income of $216.2 million ($1.14 per diluted share) in second-quarter 2006. Net income in second-quarter 2007 included after-tax costs of $24 million (13 cents per diluted share) from the closure of 55 retail gas stations in the United States and Canada.
Both periods included non-cash income tax benefits related to enacted Canadian income tax rate reductions, and these amounted to $4.8 million (3 cents per diluted [image-nocss] share) in the 2007 period and $37.5 million (20 cents per diluted share) in the 2006 period.
For the first six months of 2007, net income totaled $360.9 million ($1.90 per diluted share) compared to net income of $332.2 million ($1.76 per diluted share) for the same period in 2006. The higher six-month income in 2007 compared to 2006 was primarily caused by strong earnings in the 2007 period for the North American refining and marketing segment, while results in the 2006 period reflected losses in this segment as the Meraux refinery was not operating for a portion of the quarter following Hurricane Katrina and was incurring repair costs that exceeded available insurance recoveries.
The company's income from exploration and production (E&P) operations was $149.3 million in second-quarter 2007 compared to $245.1 million in the same quarter of 2006.
Refining and marketing (R&M) operations generated income of $124.2 million in second-quarter 2007 compared to a loss of $11.1 million in the same quarter of 2006. North American refining and marketing margins were strong in second-quarter 2007, and the Meraux refinery operated throughout the just completed quarter. The Meraux refinery was down for repairs following Hurricane Katrina for a portion of the 2006 second quarter prior to restarting in May 2006 and the prior-year quarter included $26.5 million of unrecoverable Hurricane Katrina-related repair costs at this refinery.
The company's E&P business earned $238.1 million in the first six months of 2007 compared to $407 million in the same period of 2006.
R&M operations had earnings of $159.9 million in the first six months of 2007, compared to a loss of $46.7 million in the same 2006 period. The 2007 period included stronger results in the North American R&M business compared to a year ago. Meraux expensed $39.5 million of repair costs in 2006 which were not expected to be recoverable from insurance.
Claiborne P. Deming, president and CEO, said, "Strong operating results in the just completed quarter were achieved due to simultaneously high oil prices and healthy worldwide refining margins. Although oil prices have strengthened more in the early days of the third quarter, refining margins have softened considerably.
He added, In downstream operations, we have announced an agreement with Wal-Mart to purchase the real estate underlying most of our present U.S. retail gasoline locations, and these site acquisitions are expected to occur in tranches [structured financing deals] through mid-2008.
In early May, Murphy Oil Corp. said that its wholly owned subsidiary Murphy Oil USA Inc. entered into an agreement with Wal-Mart Stores Inc. and subsidiaries to purchase parcels of property that the company currently leases from Wal-Mart for its Murphy USA stations. In conjunction with the agreement, the company said at the time that it planned to close up to 47 locations and incur after-tax impairment and restoration costs of approximately $18 million in second-quarter 2007 that was not included in previously issued earnings guidance.
The purchase of these parcels reflects our commitment to sustaining the longevity of these very productive assets, Deming said at the time. We look forward to continuing our association with Wal-Mart as we expand our station base in the future while adhering to our strategy of offering high quality, competitively priced gasoline to our customers.
Murphy USA's retail presence currently covers 21 states primarily in the Southeast and upper Midwest. It operates more than 1,000 stations in Wal-Mart parking lots. Separately, Murphy Oil USA also operates about 170 SPUR stations.
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