Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Murphy Oil Corp (NYSE:MUR) achieved 1 million work hours with no lost time injuries on a major project, highlighting strong safety performance. The company successfully drilled its longest laterals in company history in the Eagle Ford Shale and Tupper Montney, indicating operational advancements. Murphy Oil Corp (NYSE:MUR) returned $147 million to shareholders in the first quarter through share repurchases and dividends, demonstrating a commitment to shareholder returns. The acquisition of the Pioneer floating production storage and offloading vessel is expected to reduce annual net operating expenses by approximately $50 million, achieving a two-year payback. Murphy Oil Corp (NYSE:MUR) made a significant oil discovery in Vietnam, enhancing the value of its growing Vietnam business and supporting future development plans.

Negative Points

Murphy Oil Corp (NYSE:MUR) experienced approximately 6,000 barrels of oil equivalent per day of production impacts due to non-operated unplanned downtime and other challenges. The company faced production curtailments in non-operated offshore Canada due to temporary logistics challenges and winter storm activity. Murphy Oil Corp (NYSE:MUR) had to draw on its revolving credit facility, primarily driven by share repurchases and capital weighting, raising concerns about financial flexibility. The recent oil discovery in Vietnam was smaller than pre-drill expectations, encountering oil in only one pay sand instead of multiple. Murphy Oil Corp (NYSE:MUR) faces potential challenges in maintaining production levels if oil prices fall below $55 per barrel, which could lead to reduced capital spending.

Q & A Highlights

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Q: How does Murphy Oil plan to adjust its capital allocation in a lower oil price environment, specifically if prices settle in the mid-50s per barrel? A: Eric Hamley, President and CEO, explained that while they currently maintain their 2025 capital plan, they are prepared to reduce spending if oil prices fall below $55 per barrel. Potential cuts include delaying drilling in the Eagle Ford Shale and Tupper Montney, and reducing offshore development activities. However, they are unlikely to halt development in Vietnam due to its significant value potential. If 2026 prices remain low, they may reduce capital expenditure by 20-40% from the current $1.1 to $1.3 billion range.

Q: How does the recent oil discovery in Vietnam impact the Loch Devong development plan? A: Eric Hamley noted that the discovery, located a few miles from the Loch Devong development, will likely involve setting a wellhead platform at the new site and processing production through the Loch Devong A platform. This approach is expected to be capital efficient and could accelerate the timeline for bringing the discovery online, potentially before the end of the decade.

Story Continues

Q: Can you provide an update on the Khaleesi #2 and Marmalade #3 workovers and their impact on operational expenses? A: Chris Larino, Senior VP of Operations, stated that the Khaleesi #2 workover involves fixing a failed safety valve, while Marmalade #3 requires a sidetrack and new completion. Both are progressing well, with Khaleesi #2 expected to complete in Q2 and Marmalade #3 in Q3. Operational expenses are expected to normalize to $10-$12 per BOE in the second half of the year.

Q: How does Murphy Oil's OCTG exposure affect costs for the remainder of the year and into 2026? A: Tom Morales, CFO, indicated that while there is some pressure on tubular goods, overall costs for onshore wells are expected to remain flat compared to the previous year. Rig rates for Eagle Ford are lower in 2025, and offshore costs are decreasing, particularly for drill ships and diesel.

Q: What are the expectations for Murphy Oil's production profile for the remainder of the year, and what are the key drivers? A: Eric Hamley expressed confidence in achieving the full-year production guidance, citing the successful performance of onshore wells in the Eagle Ford and Tupper Montney. Additional wells are expected to come online in Q3, leading to increased production, with a slight decline anticipated in Q4.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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