[StBernard] Murphy costs after oil spill: $125 million

[Westley Annis]

Murphy costs after oil spill: $125 million
BY EDWARD KLUMP

Posted on Thursday, April 27, 2006

URL: http://www.nwanews.com/adg/Business/153010/


Murphy Oil Corp. has spent about $ 125 million on such things as
settlements, cleanup and testing related to an oil spill at a Louisiana
refinery, the company's chief executive officer said Wednesday. 

Claiborne Deming, Murphy's president, said the amount is covered by
insurance and that about half has been received so far. The total is
separate from refinery repair costs, which the company said are expected to
come to about $ 200 million, including about $ 50 million that's not
recoverable from insurance. 

The company has said the startup of the Meraux, La., refinery, was pushed
back from April to the first week of May because of equipment problems.
Deming said he's hoping for a smooth return to operation at the refinery,
but that it will not be a simple task. 

"If it was a flawless startup, then we'd all be wonderfully, pleasantly
surprised," he said. 

The facility can process 125, 000 barrels of oil a day, and the startup
could take several weeks, according to the company. 

Murphy's Meraux refinery spilled about 1 million gallons of oil in the wake
of Hurricane Katrina, which struck the Gulf Coast on Aug. 29. Some of that
oil leaked into the surrounding neighborhood and spawned a class-action
lawsuit that is pending in federal court in Louisiana. The plaintiffs argue
in court filings that Murphy was negligent, but the company has denied that.


Deming said Wednesday that Murphy has settled with about 2, 400 residences
over the oil spill, which amounts to about two-thirds of an area the company
says was affected. The area certified by a federal judge in Louisiana
includes about 6, 000 residences, Deming said. It's not clear whether
businesses are part of those totals. 

Residents that settle with Murphy are receiving about $ 27, 000 to $ 28, 000
on average, Deming said. Places outside Murphy's core area must be tested to
see if they contain the company's oil to be eligible for a settlement, he
added. The company has said it believes the pending spill litigation won't
have a material impact on its finances. 

Deming's Wednesday comments came during a conference call held a day after
Murphy reported first-quarter net income of $ 113. 87 million, or 60 cents a
share. That was virtually unchanged from the year-ago period and well below
the average earnings estimate of 73 cents a share from 15 analysts,
according to Thomson Financial. 

An unsuccessful well off the coast of Malaysia and the company's refining
and marketing performance factored in the company's inability to meet the
analysts' estimate, Mindy West, a Murphy spokesman, said after the earnings
release. 

Jennifer Rowland, a senior oil analyst with JPMorgan in New York, said in a
report after Murphy's latest earnings release that the performance
illustrates problems at the company, which she referred to by its ticker
symbol. 

"[Murphy ] has had a string of negative announcements, stemming not only
from hurricane damage, but also from operational issues in Canada and the
Gulf of Mexico, as well as disappointing exploration results," the report
said. 

Rowland also said "we do not think [Murphy ] is out of the woods yet
operationally, and still recommend avoiding the stock, at least until the
Meraux restart is behind us," noting that the process could take weeks.
Rowland does not own Murphy shares and has an "underweight" rating on them,
but her firm does have investment banking business with Murphy, according to
JPMorgan. 

Gene Gillespie, a senior energy analyst with Howard Weil in New Orleans,
said he thinks Murphy will continue to struggle in the second quarter. But
he said the second half of this year looks more positive. 

Further down the road, he said, Murphy's major Kikeh complex off the
Malaysian coast is expected to begin producing oil in the second half of
2007. Gillespie said he has a "buy" rating on Murphy stock and does not own
any Murphy shares. He said he's not aware of any investment banking business
between his firm and Murphy. 

Shares of Murphy on the New York Stock Exchange were down $ 2. 40, or 4. 6
percent, Wednesday to close at $ 49. 70. 

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