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Murphy Oil Corp. First Quarter 2021 Results

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   |    Tuesday,May 11,2021

Murphy Oil Corp. reported its Q1 2021 results.

Murphy reported a net loss attributable to Murphy of $287 million, or $1.87 net loss per diluted share. Excluding total after-tax charges of $297 million, comprised primarily of $128 million of non-cash asset impairments on the non-operated Terra Nova asset, $121 million unrealized non-cash mark-to-market losses on crude oil derivative contracts and $29 million cost of early redemption of debt, adjusted net income was $10 million, or $0.06 net income per diluted share.

Highlights for the first quarter include:

• Issued $550 million of 6.375 percent senior notes due 2028, and used proceeds and cash to redeem $576 million of senior notes due 2022
• Monetized the King's Quay floating production system and fully repaid borrowings under the $1.6 billion senior unsecured credit facility
• Achieved total debt reduction of $233 million, or 8 percent, for the quarter from year-end 2020
• Produced 155 thousand barrels of oil equivalent per day, above the midpoint of guidance, with 88 thousand barrels of oil per day
• Acquired additional working interests in the non-operated Lucius field for $20 million, with expected payout in approximately one year
• Announced changes to the compensation program, including establishing a free cash flow metric and adding a greenhouse gas emissions reduction metric to the company's Annual Incentive Plan

Subsequent to the first quarter, commenced drilling:

• The first well in the Khaleesi, Mormont, Samurai drilling program in the Gulf of Mexico, remaining on track for first oil in mid-2022
• The non-operated Silverback exploration well in the Gulf of Mexico, which will test a play-opening trend near existing Murphy-operated assets

CEO Roger Jenkins said: "Murphy is off to a great start for the year, completing strategic financial transactions that delevered our balance sheet and extended our maturity profile. I am especially proud of our operational accomplishments across all of our assets, with a significant beat on oil production despite the severe winter storm in February. We remain in full execution mode on all of our Gulf of Mexico projects. Further, I am proud to see our exploration opportunities progress, with wells starting now in the Gulf of Mexico and later this year in Brazil."

Q1 Financials

The company recorded a net loss, attributable to Murphy, of $287 million, or $1.87 net loss per diluted share, for the first quarter 2021. This includes a realized after-tax loss on crude oil derivative contracts of $48 million. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $10 million, or $0.06 net income per diluted share for the same period.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations attributable to Murphy was $255 million, or $18.65 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 $267 million, or $19.51 per BOE sold.

First quarter production averaged 155 thousand barrels of oil equivalent per day (MBOEPD) with 57 percent oil and 63 percent liquids. Details for first quarter results can be found in the attached schedules.

During the first quarter, Murphy issued $550 million of 6.375 percent senior notes due 2028. Proceeds, along with cash on hand, were used to redeem $259 million of senior notes due June 2022 and $317 million of senior notes due December 2022, totaling $576 million.

Overall, Murphy has reduced its total debt by $233 million, or 8 percent, from year-end 2020. Total debt of $2.756 billion consists of long-term, fixed-rate notes with a weighted average maturity of 7.7 years and a weighted average coupon of 6.3 percent.

Murphy had approximately $1.8 billion of liquidity, comprised of the $1.6 billion senior unsecured credit facility and approximately $231 million of cash and cash equivalents, at the end of the first quarter.

"As announced in March, we sold our 50 percent interest in the King's Quay floating production system for $268 million in proceeds, which were used to fully repay borrowings on our credit facility. This transaction, in conjunction with our senior notes offering and redemption earlier in the month, allowed us to realize a meaningful debt reduction during the first quarter, completing the first step in our delevering goal and setting a path for further reductions later this year with current commodity prices," stated Jenkins.

Ops Summary

Onshore

The onshore business produced approximately 80 MBOEPD in the first quarter.

Eagle Ford Shale - Production averaged 30 MBOEPD with 74 percent oil volumes during the quarter. Murphy brought online 16 operated wells in Karnes and achieved an average gross 30-day (IP30) rate of approximately 1,400 BOEPD, with the two best wells achieving approximately 2,000 BOEPD IP30 rates in the Lower Eagle Ford Shale. Most significantly, a three-well pad targeting the Austin Chalk zone has meaningfully outperformed Murphy's expectations, with production averaging approximately 1,400 BOEPD IP30 rate.

Murphy also had 12 non-operated Karnes wells and four non-operated Tilden wells come online during the quarter.

Tupper Montney - In the first quarter, natural gas production averaged 234 million cubic feet per day (MMCFPD). The company brought online four wells as planned.

Kaybob Duvernay - First quarter production averaged 9 MBOEPD with 74 percent liquids volumes. No activity is scheduled to occur in 2021.

The offshore business produced 76 MBOEPD for the first quarter, comprised of 79 percent oil. This excludes production from noncontrolling interest and an asset held for sale.

Gulf of Mexico - During the quarter, production averaged 71 MBOEPD, consisting of 78 percent oil. Murphy completed certain operated and non-operated subsea equipment repairs as previously disclosed, and all wells were brought back online. Additionally, the non-operated Lucius 918 #3 and Lucius 919 #9 wells in Keathley Canyon came online during the quarter, and the non-operated Kodiak #3 well (Mississippi Canyon 727) was completed, with first oil achieved in the second quarter 2021.

Murphy increased its working interest in the Lucius field to 12.7 percent from 9.2 percent for $20 million, providing incremental production of approximately 1.1 MBOEPD for the quarter with an expected payback time of approximately one year. Major projects continued to progress, with the drilling program launching at Khaleesi, Mormont, Samurai in early second quarter. In addition, the first producer well for the St. Malo waterflood was brought online during the first quarter, and drilling began on the final well of the four-well campaign in early second quarter.

Canada - Production averaged 5 MBOEPD in the first quarter, comprised of 100 percent oil. Operations at the Terra Nova field have remained offline since December 2019. During first quarter 2021, Murphy recorded a non-cash after-tax impairment charge of $128 million on the asset due to the current status of operating and production plans. Partners continue to evaluate options that could support a long-term production plan.

Gulf of Mexico - Subsequent to quarter-end, Murphy and its operating partner spud the Silverback exploration well (Mississippi Canyon 35).

"In late April, our partner spud the Silverback well in the Gulf of Mexico. This well will test an attractive new play-opening trend and, if successful, could provide additional high-potential opportunities to our large adjacent acreage position," stated Jenkins.

Capital & Production Guidance

Murphy maintains its 2021 capital expenditures (CAPEX) guidance of $675 to $725 million and is tightening full year 2021 production to the range of 157 to 165 MBOEPD. Full year production is forecast to be comprised of approximately 54 percent oil and 60 percent total liquids volumes. Production for second quarter 2021 is estimated to be in the range of 160 to 168 MBOEPD. Both production and CAPEX guidance ranges exclude Gulf of Mexico noncontrolling interest (NCI).

Accrual CAPEX, based on midpoint of guidance range and excluding NCI

* Excludes King's Quay CAPEX of $17 million, includes $20 million Lucius working interest acquisition

"We remain on track for executing our 2021 program within our original stated capital guidance," stated Jenkins. "I am pleased with the success we have achieved in the first quarter, especially with capital efficiencies and production, along with our offshore projects moving forward according to plan. This allows us to focus on generating free cash flow to continue delevering and return cash to shareholders through our longstanding dividend."

2024 Development Plan

Category	2023	2024 Est. Initial	Updated 2024 Guidance	%Difference (2023 vs 2024)
Total Capital Expenditure($mm)

Production Daily Equivalent(boe/d)
Production Oil(bbls/d)

 Click here for More Planned 2024 Activity