Murphy Oil Corporation (NYSE: MUR) today reported financial and operating results for the quarter ended September 30, 2019, including net income attributable to Murphy of $1.1 billion, or $6.76 per diluted share. Adjusted net income, which excludes discontinued operations and other one-off items, was $57 million, or $0.36 per diluted share. 

As previously announced, Murphy closed the Malaysia asset divestiture in the third quarter for $2.0 billion in cash proceeds. These assets were reported as “discontinued operations” and classified as “held for sale” for financial reporting purposes beginning with the first quarter 2019. Unless otherwise noted, the financial and operating highlights and metrics discussed in this commentary exclude discontinued operations and noncontrolling interest.(1)

Operating highlights for the third quarter: 

• Produced 192 thousand barrels of oil equivalent per day (MBOEPD), which includes 113 thousand barrels of oil per day (MBOPD) – Murphy’s highest oil volumes since first quarter 2015, excluding Syncrude and heavy oil 
• Increased Eagle Ford Shale production by 15 percent from second quarter 2019 to 51 MBOEPD, with oil volumes increasing 22 percent during the same period 
• Reduced lease operating expenses to $7.68 per barrel of oil equivalent (BOE), driven by improvements in the Eagle Ford Shale and the Gulf of Mexico
• Sanctioned St. Malo waterflood project in the Gulf of Mexico, which is expected to contribute an estimated ultimate recovery of 30 to 35 million barrels of oil equivalent (MMBOE) contingent resources net to Murphy 
• Expanded exploration acreage in Brazil with a farm-in to three blocks in Potiguar Basin and successful bid on three additional blocks in Sergipe-Alagoas Basin, bringing the total in Brazil to 12 blocks 

Financial highlights for the third quarter: 

• Generated adjusted EBITDA of $438 million in the quarter, the highest level since fourth quarter 2014 
• Delivered cash flow in excess of property additions and dry hole costs of $134 million
• Repaid borrowings of $1.4 billion under the $1.6 billion senior unsecured revolving credit facility and $500 million senior unsecured term loan with proceeds from the Malaysia asset divestiture 
• Continued the $500 million share repurchase program, which was completed in the fourth quarter, leading to a total share count reduction since April 2019 of 20.7 million shares, or approximately 12 percent of outstanding shares, to 152.9 million shares as of October 2019
• Entered into additional crude oil commodity hedge contracts, resulting in 35 MBOPD hedged for fourth quarter 2019 at an average price of $60.51 per BOE, and subsequent to the third quarter, 45 MBOPD hedged for 2020 at an average price of $56.42 per BOE 

REGIONAL OPERATIONS SUMMARY 

North American Onshore 

The North American onshore business produced approximately 109 MBOEPD in the third quarter. 

Eagle Ford Shale – Production for the quarter averaged approximately 51 MBOEPD, comprised of 80 percent oil. Murphy drilled and completed 10 Tilden wells and 15 Catarina wells during the quarter. The Tilden wells were in the Lower Eagle Ford Shale and had average gross 30-day (IP30) rates of 1,300 BOEPD. The Catarina wells were brought online late in the quarter with production continuing to ramp up. 

Tupper Montney – Natural gas production for the quarter averaged 269 million cubic feet per day (MMCFD). No further activity is planned for the remainder of the year. 

Kaybob Duvernay – During the quarter, production averaged approximately 11 MBOEPD, comprised of 69 percent liquids. Murphy recommenced drilling in the third quarter to satisfy lease maintenance requirements, with 16 wells expected to be completed and brought online in 2020. 

Global Offshore  

The offshore business produced 83 MBOEPD for the third quarter, comprised of 79 percent oil. This excludes production from discontinued operations and noncontrolling interest. Gulf of Mexico production in the quarter averaged 78 MBOEPD, consisting of 77 percent oil. 

Canada offshore production averaged 4 MBOEPD, comprised of 100 percent oil. 

Gulf of Mexico – In the third quarter, Murphy successfully completed the Nearly Headless Nick well (Mississippi Canyon 387), which will be tied back to the Delta House facility, and completed a workover on a Medusa well, with first oil expected in the fourth quarter from both wells. The company also tied-in the new Dalmatian #2 well (Desoto Canyon 4), which began flowing late in the quarter, as well as the non-operated Lucius #3 well (Keathley Canyon 875). 

As previously announced, Murphy and its partners sanctioned the St. Malo waterflood project in the resource-rich Wilcox formation in the deepwater Gulf of Mexico. This project is expected to increase total estimated ultimate recovery by 30 to 35 MMBOE contingent resources net to Murphy. 

Fourth quarter activity includes the previously announced workover project at the Chinook #5 well (Walker Ridge 425) and the launch of a three-well rig campaign at Front Runner. 

Southeast Asia – Brunei production was approximately 350 BOEPD for the quarter. Beginning in the third quarter, these assets are classified as “held for sale” for financial reporting purposes. 

EXPLORATION 

Gulf of Mexico Exploration – In the third quarter, Murphy successfully bid on Green Canyon 522 block, which provides additional exploration upside given its location near the newly acquired Khaleesi/Mormont field development. 

Brazil Exploration – During the quarter, Murphy successfully bid on three additional blocks in the Sergipe-Alagoas Basin (blocks 505, 575 and 637), increasing total gross acreage in the basin to 1.7 million acres across nine total blocks. The company holds a 20 percent WI, with ExxonMobil’s Brazilian subsidiary at 50 percent as operator and Enauta Energia S.A. holding the remaining 30 percent WI. 

Murphy also farmed into a 30 percent WI in three blocks spanning approximately 774 thousand total gross acres in the Potiguar Basin (POT-W-857, POT-W-863 and POT-W-865) with Wintershall Dea as operator with 70 percent WI. This expands the company’s focus in Brazil with ownership in a second proven oil basin in close proximity to the Pitu oil discovery. 

2019 PRODUCTION AND CAPITAL EXPENDITURE GUIDANCE 

For the fourth quarter, Murphy estimates total production of 198 to 206 MBOEPD, comprised of 69 percent liquids. Full year production is expected to be in the range of 174 to 178 MBOEPD, excluding noncontrolling interest. 

Murphy confirms its previously announced 2019 capital program of $1.35 to $1.45 billion. 

(1) Includes noncontrolling interest of MP GOM of 12,100 BOPD liquids and 5,100 MCFD gas. 

Link to Murphy US Gulf of Mexico country profile