Strong Initial Performance From New Gulf of Mexico Production and Onshore Wells, Balance Sheet Strengthening with Debt Reduction Announcement and Increasing Shareholder Returns

Murphy Oil today announced its financial and operating results for the first quarter ended March 31, 2022, including a net loss attributable to Murphy of $113 million, or $0.73 net loss per diluted share. Adjusted net income, which excludes discontinued operations and other one-off items, was $113 million, or $0.73 net income per diluted share.

Highlights for the first quarter include:

• Produced 141 thousand barrels of oil equivalent per day, with 60 percent liquids volumes, due to strong operational performance across oil-weighted assets
• Generated $409 million of adjusted earnings before interest, tax, depreciation, amortization and exploration, or $32.54 per barrel of oil equivalent sold
• Raised 2022 debt reduction goal to a range of $600 million to $650 million from $300 million as a continuation of the delevering strategy, assuming an $85 per barrel West Texas Intermediate oil price
• Received a Moody’s corporate family rating upgrade to Ba2 from Ba3 with a stable outlook, and received an S&P outlook revision to positive from stable while affirmed at an issuer credit rating of BB – both actions progressing goal to achieve investment grade rating

Subsequent to quarter-end:

• Achieved first oil at the Murphy-operated King’s Quay floating production system, with two of seven planned wells currently flowing from the Khaleesi, Mormont, Samurai field development project in the Gulf of Mexico
• Declared 17 percent increase of quarterly dividend to $0.175 per share, payable on June 1 and representing a 40 percent increase from fourth quarter 2021
• Announced the redemption of $200 million of 6.875 percent senior notes due 2024, progressing 2022 debt reduction goal

“The Murphy-operated King’s Quay floating production system (FPS) has been performing above expectations since it began receiving volumes in early April. I am pleased at the team’s achievements in bringing the project to fruition safely, and with strong current production rates from the first two wells in the Khaleesi, Mormont, Samurai field development project, I am looking forward to flowing the next well imminently as we progress with additional completions,” said Roger W. Jenkins, President and Chief Executive Officer. “Achieving production from this significant project on schedule and within budget was a key priority within our overall strategy of delever, execute, explore. Through precise execution, the cash flow that will be generated from this development enables us to achieve our debt reduction goals in 2022 and 2023 while simultaneously reviewing our dividend.”

FIRST QUARTER 2022 RESULTS

The company recorded a net loss attributable to Murphy of $113 million, or $0.73 net loss per diluted share, for the first quarter 2022. This includes both a realized after-tax loss on crude oil derivative contracts of $104 million and an unrealized after-tax mark-to-market loss on crude oil derivative contracts of $149 million. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $113 million, or $0.73 adjusted net income per diluted share for the same period. The adjusted net income from continuing operations adjusts for the following after-tax items: $149 million non-cash mark-to-market loss on derivative instruments and $77 million non-cash mark-to-market loss on contingent consideration. Details for first 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 $361 million, or $28.75 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 $409 million, or $32.54 per BOE sold. Details for first quarter EBITDA and EBITDAX reconciliations can be found in the attached schedules.

First quarter production was at the high end of the guidance range due to strong well performance in oil-weighted assets, and averaged 141 thousand barrels of oil equivalent per day (MBOEPD) with 53 percent oil and 60 percent liquids. Details for first quarter production results can be found in the attached schedules.

First quarter accrued capital expenditures (CAPEX) of $301 million were $31 million above guidance due primarily to the following factors:

• inflationary impacts on hydraulic fracing services and oil country tubular goods (OCTG),
• operational scope changes due to higher completions intensity in the Eagle Ford Shale,
• altered development plans in Tupper Montney based on well permits to include longer lateral wells, and
• additional rig standby costs due to delayed permits for non-operated Brazil exploration drilling.

FINANCIAL POSITION

Murphy had approximately $2.1 billion of liquidity as of March 31, 2022, comprised of the $1.6 billion undrawn senior unsecured credit facility and $481 million of cash and cash equivalents, inclusive of noncontrolling interest (NCI). Of note, cash was expended in the first quarter for a total of $55 million in contingent payments per the terms of two Gulf of Mexico acquisitions closed in 2018 and 2019.

Total debt of $2.47 billion as of the end of first quarter 2022 consists of long-term, fixed-rate notes with a weighted average maturity of 7.2 years and a weighted average coupon of 6.2 percent.

Subsequent to quarter end, Murphy announced the redemption of $200 million of 6.875 percent senior notes due 2024 as of June 2, 2022, thereby achieving the first step toward the company’s 2022 debt reduction goal of $600 to $650 million.

“With our team’s outstanding execution in the Gulf of Mexico and continued progression of our onshore well delivery plans in 2022, our future cash flow levels are increasing, thereby allowing us to increase our debt reduction goals as we capitalize on higher oil prices. We intend to reduce debt by $600 million to $650 million this year, with optionality for up to $1 billion of debt reduction in 20232,” said Jenkins. “Importantly, we have raised our quarterly dividend significantly in the past six months, and at the discretion of our Board of Directors, will look to continue quarterly reviews targeting historical payout levels, while significantly delevering our balance sheet with the remaining free cash flow.”

2022 CAPITAL EXPENDITURE AND PRODUCTION GUIDANCE

Murphy is revising its 2022 CAPEX guidance, with a 7 percent increase in the midpoint and an adjusted range of $900 million to $950 million, primarily due to ongoing inflation impacts onshore, scope changes to improve productivity and additional costs attributable to the delay in non-operated Brazil exploration drilling. The full year 2022 production guidance range remains unchanged at 164 to 172 MBOEPD, with higher oil volumes leading to a production mix of approximately 53 percent oil and 58 percent total liquids volumes.

Second quarter 2022 production is estimated to be in the range of 156 to 164 MBOEPD with 54 percent oil volumes, and is impacted by planned operated downtime of 4.9 MBOEPD onshore and 0.6 MBOEPD offshore, and non-operated downtime of 3.4 MBOEPD offshore. Both production and CAPEX guidance ranges exclude Gulf of Mexico NCI.

“While we were unable to maintain our original capital plan for 2022, we are recognizing positive impacts from the additional capital spending. We elected to alter development plans for our Tupper Montney asset, which allowed us to maintain our 2022 well delivery plans by drilling longer laterals that will ultimately lead to higher well recoveries. We also enhanced our completions method in Karnes, which has led to early indications of strong production results. Lastly, following the discovery of additional pay zones in the Samurai field in the Gulf of Mexico, we have increased capital for further evaluation and completions in the planned development zones,” said Jenkins.

OPERATIONS SUMMARY

Onshore
The onshore business produced approximately 78 MBOEPD, comprised of 39 percent liquids volumes in the first quarter.

Eagle Ford Shale – First quarter production averaged 30 MBOEPD with 68 percent oil volumes and 85 percent liquids volumes. As planned, nine gross non-operated wells were brought online, with five wells in Karnes and four wells in Tilden. While no operated wells were brought online during the quarter, Murphy initiated a well workover program on certain shut-in wells, targeting projects forecast to achieve payout within six months based on current prices with minimal impact to operating expenses. Additionally, Murphy adjusted its completions methodology in Karnes based on real-time frac data, resulting in additional well costs from higher frac intensities during the quarter.

Tupper Montney – In the first quarter, natural gas production averaged 242 million cubic feet per day (MMCFD). The company’s drilling and completions program progressed on schedule during the quarter, with all permits in place to execute its adjusted 2022 online well plans.

Kaybob Duvernay – During the first quarter, production averaged 7 MBOEPD with 70 percent liquids volumes. Murphy brought online three operated wells in the Two Creeks area as planned. Oil volumes are performing slightly above the type curve with an average gross 30-day (IP30) rate of approximately 800 BOEPD and 95 percent liquids volumes.

Offshore
The offshore business produced 63 MBOEPD for the first quarter, comprised of 81 percent oil and excluding noncontrolling interest.

Gulf of Mexico – Production averaged 59 MBOEPD, consisting of 80 percent oil during the quarter.

As previously announced, Murphy achieved first oil from the Khaleesi, Mormont, Samurai field development project in early April, with production flowing into the Murphy-operated King’s Quay floating production system. Two wells are currently achieving a total gross production rate of approximately 30 MBOEPD with 89 percent oil. Completions work continues, with five wells remaining in the seven-well program.

While drilling a planned Samurai well during the first quarter, Murphy found additional pay in the upper zone. Due to the additional pay, the company has increased its capital for further logging and completions in the planned development zones.

Canada – Production averaged 3 MBOEPD in the first quarter, comprised of 100 percent oil. Drydock work continues in Spain on the non-operated Terra Nova floating, production, storage and offloading vessel as part of the asset life extension project. Murphy anticipates a return to production at year-end 2022.

EXPLORATION

Mexico –During the quarter, Murphy received approval of the first additional exploration period for its exploration program in Block 5 offshore Mexico. This agreement includes one exploration well commitment, which the company will meet with drilling the planned Tulum-1EXP well in the second half of 2022.

Brazil – As previously announced, Murphy and its operated partner concluded drilling the Cutthroat-1 exploration well in block SEAL-M-428 in the Sergipe-Alagoas Basin. The presence of hydrocarbons was not found. The operator plugged and abandoned the well and the partner group is evaluating the results.

KeyFacts Energy: Murphy Oil US country profile

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