Murphy Oil today announced its financial and operating results for the fourth quarter ended December 31, 2021, including net income attributable to Murphy of $168 million, or $1.08 net income per diluted share. Adjusted net income, which excludes discontinued operations and other one-off items, was $62 million, or $0.40 net income per diluted share.
Unless otherwise noted, the financial and operating highlights and metrics discussed in this commentary exclude noncontrolling interest.
Highlights for the fourth quarter include:
- Produced 150 thousand barrels of oil equivalent per day with 53 percent oil volumes
- Generated $338 million of adjusted earnings before interest, tax, depreciation, amortization and exploration or $24 per barrel of oil equivalent sold
- Completed 2021 long-term debt reduction plan with the redemption of an additional $150 million of 6.875 percent senior notes due 2024
Highlights for full year 2021 include:
- Produced 158 thousand barrels of oil equivalent per day with 87 thousand barrels of oil per day, which was 6 percent higher than the original oil volume guidance
- Maintained capital discipline with full year accrued capital expenditures of $671 million, excluding reimbursed King’s Quay expenditures
- Generated $496 million of free cash flow2, with the majority used to repay long-term debt, fund long-standing dividend and increase the cash balance
- Recognized record-low lease operating expenses of $8.65 per barrel of oil equivalent, a 5 percent reduction from 2020
- Achieved record-low selling and general expenses of $122 million, a 13 percent reduction from 2020
- Closed the transaction for Murphy’s 50 percent interest in the King’s Quay floating production system in March 2021 for proceeds of $268 million, a portion of which was used to fully repay the senior unsecured revolver
- Repaid $530 million of total debt, achieving 17 percent debt reduction since year-end 2020
- Maintained schedule on operated Gulf of Mexico major projects with first oil expected to occur in the second quarter of 2022
- Achieved total reserve replacement of 102 percent with proved reserves of 699 million barrels of oil equivalent
- Accomplished significant environmental milestones with lowest carbon emissions intensity in company history and no recordable spills
- Named one of America’s Most Responsible Companies for 2022 by Newsweek
Subsequent to the fourth quarter:
- Increased quarterly dividend by 20 percent to $0.15 per share
“I am proud of the accomplishments our organization achieved in 2021. We produced more oil than originally planned, with less capital, while also lowering our total debt by 17 percent. We had our best year on record for protecting the environment. Also, we have been able to maintain the schedule on our major Gulf of Mexico projects despite the continued headwinds of a pandemic and significant hurricane,” said Roger W. Jenkins, President and Chief Executive Officer. “With a great year of execution in 2021 and significant incremental cash flow coming this year, we can now increase our long-standing dividend while simultaneously continuing our debt reduction strategy.”
FOURTH QUARTER 2021 RESULTS
The company recorded net income, attributable to Murphy, of $168 million, or $1.08 net income per diluted share, for the fourth quarter 2021. This includes a realized after-tax loss of $113 million and an unrealized after-tax gain on crude oil derivative contracts of $92 million. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $62 million, or $0.40 net income per diluted share for the same period. The adjusted net income from continuing operations adjusts for the following after-tax items: $92 million non-cash mark-to-market gain on derivatives, $33 million non-cash mark-to-market gain on contingent consideration and $24 million impairment of non-core assets. Details for fourth quarter results can be found in the attached schedules.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations attributable to Murphy was $319 million, or $22.88 per barrel of oil equivalent (BOE) sold. Adjusted earnings before interest, tax, depreciation, amortization and exploration expenses (EBITDAX) from continuing operations attributable to Murphy was $338 million, or $24.26 per BOE sold. Details for fourth quarter EBITDA and EBITDAX reconciliations can be found in the attached schedules.
Fourth quarter production was within the guidance range and averaged 150 thousand barrels of oil equivalent per day (MBOEPD) with 53 percent oil and 60 percent liquids. Details for fourth quarter results can be found in the attached schedules.
FULL YEAR 2021 RESULTS
The company recorded a net loss, attributable to Murphy, of $74 million, or a $0.48 net loss per diluted share, for the full year 2021. This includes a realized after-tax loss of $327 million and an unrealized after-tax loss of $89 million on crude oil derivative contracts. The company reported adjusted income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, of $200 million, or $1.29 net income per diluted share. This includes after-tax adjustments of $152 million in impairments, $89 million non-cash mark-to-market loss on derivative instruments and $50 million non-cash mark-to-market loss on contingent consideration. Details for full year 2021 results can be found in the attached schedules.
Production for the full year averaged 158 MBOEPD and consisted of 55 percent oil and 62 percent liquids volumes. Details for 2021 production can be found in the attached tables.
Murphy had approximately $2.1 billion of liquidity as of December 31, 2021, comprised of the $1.6 billion undrawn senior unsecured credit facility and $521 million of cash and cash equivalents, inclusive of noncontrolling interest (NCI).
On December 2, 2021, Murphy redeemed $150 million of its 6.875 percent senior notes due 2024 for a redemption price of 101.719 percent. Total debt of $2.46 billion as of the end of fourth quarter 2021 consists of long-term, fixed-rate notes with a weighted average maturity of 7.5 years and a weighted average coupon of 6.2 percent.
Overall, Murphy achieved its long-term debt reduction goal of $300 million for the second half of 2021, as well as reduced total debt by $530 million, or 17 percent, since year-end 2020.
“I am pleased with our strong operational execution and disciplined spending in 2021, which allowed us to achieve our goal of repaying $300 million in long-term debt while also building our cash position due to higher realized oil prices than originally budgeted. This multi-faceted success has positioned Murphy for ongoing debt reductions and a dividend increase in 2022,” said Jenkins.
YEAR-END 2021 PROVED RESERVES
Murphy’s preliminary year-end 2021 proved reserves were 699 million barrels of oil equivalent (MMBOE), consisting of 39 percent oil and 45 percent liquids. Total proved reserves were up from year-end 2020 with a total reserve replacement of 102 percent.
The company maintained a solid reserve life index of 12 years with 58 percent proved developed reserves.
The onshore business produced approximately 86 MBOEPD, comprised of 39 percent liquids volumes in the fourth quarter.
Eagle Ford Shale – Murphy produced an average 33 MBOEPD with 69 percent oil volumes in the fourth quarter. Four Catarina wells were brought online as planned, with the two Upper Eagle Ford Shale wells and one Austin Chalk well performing in-line with expectations, while the one Lower Eagle Ford Shale well significantly exceeded its type curve.
Tupper Montney – In the fourth quarter, natural gas production averaged 263 million cubic feet per day (MMCFD). No wells were brought online during the quarter.
Kaybob Duvernay – Production averaged 7 MBOEPD with 70 percent liquids volumes during the fourth quarter.
Excluding noncontrolling interest, the offshore business produced 64 MBOEPD for the fourth quarter, comprised of 81 percent oil.
Gulf of Mexico – Production averaged 61 MBOEPD, consisting of 80 percent oil during the quarter. Murphy completed its repairs following Hurricane Ida, with 1.5 MBOEPD remaining offline through the majority of first quarter 2022 as a third-party completes downstream repairs.
Murphy’s major projects continue to advance on schedule, with the Khaleesi, Mormont, Samurai project expected to produce first oil in the second quarter of 2022 through the King’s Quay floating production system. Murphy began completions work on the 7-well program in the fourth quarter, while the King’s Quay floating production system was transported to its final location in the Gulf of Mexico to prepare for first oil.
Canada – Production averaged 3 MBOEPD in the fourth quarter, comprised of 100 percent oil. The non-operated Terra Nova floating, production, storage and offloading (FPSO) vessel was transported to Spain during the quarter to begin drydock work for the asset life extension project.
Gulf of Mexico – Participated in the Gulf of Mexico Federal Lease Sale 257 and was named apparent high bidder on three deepwater blocks.
Brazil – During the quarter, Murphy and its operated partner prepared to spud the Cutthroat-1 well in the Sergipe-Alagoas Basin.
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