Q3 2023 Murphy Oil Corp Earnings Call

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With the Terra Nova asset life extension project anticipated to return to production by year end and the St. Malo Waterflood project working toward first water injection in 2024.

Slide 14, we.

We have had two mechanical issues occur at separate operated fields in the Gulf of Mexico. This year. The Dalmatian number two well had a problem earlier this year with the subsurface safety valve, while the niedermeyer number one well encountered mechanical issues in the third quarter, we have workovers planned for both wells next year and anticipate the wells will resume production.

Mid 2024. Additionally, the non operated Lucius number nine well Workover is scheduled for the fourth quarter 2023, with the well forecast to return to production in first quarter of 2020 for the previously disclosed non operated Kodiak number three well stimulation in zone edition is scheduled for mid two.

24, and with that I will turn it back to Roger.

Thank you Eric on Slide 15, we are pleased to announce today that our board.

Sanction the <unk> field development, but 15 105 in Vietnam with first oil forecast in 2026. This will be developed in phases through 2029 to ensure capital efficiency targeting 100 million barrels of oil equivalent and an estimated gross recoverable resource basis.

Overall, we forecast that they will achieve gross production of 30% to 40000 barrels equivalent per day or 10 to.

15000 barrels equivalent net to Murphy the field is 96% oil weighted.

And is currently receiving a premium to Brent oil pricing in that region.

On slide 16 during the quarter Murphy reviewing commerciality infill development concepts for the pond discovery in block C 100, <unk> III, which is appraised with multiple wells by previous operator as part of the agreement on this what we committed to submitting a viable field development plan at the end of 2025.

I'll move on to slide 18, and talk about Vietnam.

Forward to additional upside possibilities that near field exploration provides us with two planned wells in Vietnam next year.

Hong exploration well is located in block 15, 105, just to the southwest.

<unk> field development project, the well will target a means to upward gross resource potential of 65 to 135 million barrels of oil equivalent.

<unk> field.

On slide 19, we're excited to have commenced initial work during the third quarter on our newest country inch entry Cote d'ivoire <unk>.

Initiating seismic reprocessing across four of the five blocks overall, we look forward to advancing the exploration opportunities in this country slide.

Slide 20, and our long term Gulf of Mexico business in the near term, we move in a rig back on location to resume drilling in the Murphy operated dose. So number one exploration well on that water valley $1 38, this well targets in Maine to upper gross resource potential of 155 to 320 million barrels of oil equivalent.

So we talk about our guidance plans and capital on slide 22 for the fourth quarter. We forecast production of 181, five to 189 5000 barrels of oil equivalent per day with 51% oil. This range includes 2000 barrels of oil equivalent per day of planned downtime primarily onshore or.

<unk> is impacted by our front end weighted capital program that maximizes free cash flow.

Part of our capital allocation framework. Additionally, our production guidance today includes the loss of production very well in the <unk> field, which is producing 4000 barrels of oil equivalent per day prior to being shut in late in the third quarter.

For full year 2023, we're raising our production guidance range to 185 to 187000 barrels of oil equivalent per day, which represents a 3000 barrel of oil equivalent per day increase in our mid point. This range is compromised of 53% oil and 59% liquids lastly, we are maintaining our crude capex.

Guidance range of 952 1 million to 102 5 billion, excluding $49 million of acquisition acquisition related costs.

On slide 23.

As first announced on August 22, Murphy has a multi tier capital allocation framework that allows for additional share.

Share returns beyond the quarterly base dividend, while advancing toward our long term debt target of $1 billion.

This framework is supported by a $525 million remaining on our authorized share repurchase programs essentially first announced the capital allocation framework and pleased that we've returned an additional $15 million annually to shareholders through quarterly dividend increases of $2 75 per share annualized and.

And purchased $75 million of our own stock as well as paid down nearly $750 million of debt I look forward to continuing our progress and mercury to <unk> and further rewarding our long term shareholders in the quarters to come.

Slide 24 since closing our multiyear plan back in January we've had a tremendously positive events. This year through the approval and sanction of the <unk> field development plan in Vietnam, as well as our new country entry and Coke var, including a possible field development there as.

As we work through our annual capital planning process. We're also reviewing our longer term strategy to incorporate these events and we will share updates as we normally do in a report in January however, I can say today that our underlying strategy of maintaining capital discipline and slight production growth. So that we make progress on <unk>.

Allocation framework with Delevering and increasing shareholder returns through buybacks remains fully intact.

As we close our call today I'd like to highlight on slide 25 that we're uniquely positioned company with our capital discipline and how old process to past couple of years.

We're well on our way to establishing a prestige balance sheet was approximately $1 4 billion in debt reduction since year end 2020.

Murphy is significant amount of well location support decades of activity in North America onshore and multiple fully delineated basins offshore we are competitively advantaged company, we're adding new development and exploration opportunities internationally are continuing to allocate capital to our longstanding Gulf of Mexico business.

I'd like to thank our incredible employees for the great work this quarter and we're looking forward to another successful quarter to end up the year with that we'll end our comments today and take your questions I appreciate it.

Thank you and ladies and gentlemen, you will now begin the question and answer session should you have a question. Please press the star followed by the number one I know your telephone keypad.

Anthony Tong from acknowledging your request and Youre questions will be followed in the order. They are received should you wish to declines in the calling process. Please press the star followed by the number Q.

Speaker phone please pick the handsets.

Any key one moment. Please for your first question.

Hey, good morning, Roger.

More embargo for Mexico.

Good to see and I hope to see at <unk> This year.

It looks like your Gulf of Mexico volumes kind of helped drive part of that <unk> beaten outperformed your guidance I was just wondering if you could talk about maybe your future exploration prospects that you have in the in the field maybe after those so well and maybe if you also plan to participate in future lease sales as well.

Oh. Thank you for that question really appreciate that about our golf business, a real solid part of our company, where we've been in this business since the 19 fifties.

We of course will be active in all of these sales going forward.

We're in the middle of that right now.

We are participating primarily next year in.

And two very significant wells in Vietnam, now that we have our Vietnam field development plan approved at the LTV field.

And these are very large prospects and very nice and lower risk and lower cost wells, while participating in we haven't have our budget finalized, but we're likely highly likely participate in a non op well with one of our partners in the Gulf and reviewing another opportunity on some of our prospects at this time, so we can be active.

In exploration active in lease sales, but also we bring to the table a long level of experience working internationally Murphy's a solid after a company to work internationally, because we move faster, we it's very critical to us where we enter a country and we bring a competitive advantage in countries want Murphy and we have two real nice.

Physicians now internationally in so doing really well and well positioned in the Gulf and internationally right now which is a.

A differentiator for Murphy oil Corporation and thank you for that question.

Okay. That's great look forward to the updates and then just the second part I wanted to make sure I understood the Murphy too.

Payout.

So that 25% and that's all I got thanks, I'm going to let the MLR CFO Tom walk you through that if you don't mind.

Sure. Thanks, Robbie Thanks Bart.

Yes, we're really excited about actually moving into this phase of our framework.

And the way we think about it there is a there is a timing part of this and there is an execution strategy part of this and on the timing side.

We arent trying to be precise on a quarter to quarter basis basis. It is more of a of an annual basis and that gives us a little bit of flexibility to see.

If we see any disconnect between our share price and our intrinsic value.

While we.

Generally stay to the framework you may see some differences there and it's really we focus on this as being an annual an annual.

Target for us.

But one more thing that we got to get this debt down and really focusing in on that $500 million goal and where we are they feel real good about that.

Just to close out this year, but trying to be down the line on the Formula are best we can.

Go on from there.

That makes perfect sense, thanks, guys.

Thank you.

Your next question comes from the line of Leo Mariani from Iraq, and Kim Your line is open.

Good morning, Leo How're you doing.

Hey, good morning.

Question on fourth quarter.

Capex here.

Wanted to see if you can kind of help us out in terms of what the ballpark number should be there in four Q and you also talk about this $49 million of acquisition.

And a related cost you've had of late has those kind of already hit in.

In terms of the balance sheet in the numbers here are those kind of on the come here into <unk>.

What was that last part of your question again, the first was Capex. It broke up just a second one more time I'm sorry, yes.

Those have been behind US primarily we do have some seismic work that is covered in exploration expense in cote d'ivoire, and pretty much that's over here.

So you have the Capex Eric.

Capex for the fourth quarter ought to come in under $200 million.

It maintains our guidance. So we don't have that number right handy with us, but it adds up to mid point of our guidance and were good shape on all of that our Capex is lower.

And we're really good shape on free cash flow for the fourth quarter, yes.

Restating I mean, we're comfortable with the range of Capex that we had expressed obviously, we give a range because we have uncertainty of outcome was primarily in our non operated business, where we have major projects ongoing with fields. We don't operate there is a bit of uncertainty and that's why we gave the capex range, but again, we feel really good about our full year Capex range.

Okay and can you provide a little more color in terms of the activity in the fourth quarter, because I know that it was a handful of kind of non op Eagle Ford wells, but it sounds like that's de Minimis spending theres nothing really.

Sure so what what kind of comprises the bulk of those expenditures here in <unk>.

Eric handle that for Ya Li Yes, as you pointed out our onshore business. We are essentially done with our program. There we have a little bit of activity from non operated Eagle Ford that doesn't drive our capex too much. If you have a little bit of facility spending we're doing a number of projects to get ready for our drilling activity in the Eagle Ford and in the Montney in 2024.

That's kind of normal for our business in offshore we have quite a bit of activity picking up here in the fourth quarter with two rigs working in the St. Malo non operated project and our resumption of drilling <unk> as well as our ongoing development work that we highlighted at the <unk> number three well.

Okay, hopefully that's helpful guys.

Yes, no I appreciate that and just on that the share buyback. Obviously you kicked it off this quarter. It was just kind of great to see you maybe just kind of talk a little about how you're sort of balancing that.

Debt reduction as.

As we go forward here.

I'll, let Tom go through that but.

It's a formula Leo trying to stay to the formula for the rest of the year 70, 525 split don't see coming off that was a little more bias toward getting the debt down at year end.

How we're working it.

Any further color I think that I think Roger covered it we have a stated goal of debt reduction this year and it fits with our <unk>.

But we again.

Just to be clear, though we do anticipate stock repurchases in the fourth quarter.

Okay, great along with their production.

I appreciate it.

Thank you.

Thank you and once again, if you would like to ask a question. Please press star followed by the number one I guess all from Keybanc.

Your next question comes from the line of Charles Meade from Johnson Rice. Your line is open.

Good morning, Roger to you and the whole Murphy team there.

Good morning, Charles good here from.

Roger you touched on on Vietnam, just briefly earlier in your Q&A and I want to.

See if I could get you to talk a little bit more about that can you characterize these these two these two exploration prospects for us.

My understanding is that that's going to be your first activity.

Over there so could you could you characterize what those prospects are like I think you said the relatively low risk, but can you put some numbers to that.

And then also clarify for us.

That 10 to 15000.

BOE a day net to you guys in I think it is already 46% does that include any risked exploration success for these two prospects or is that just the.

Is that just locked of Angola.

No that is 100% just from the project nothing to do with exploration in any number any forecast anything with Murphy oil <unk>.

Appreciate that question to Vietnam.

Sleeping giant for US we had it held back for a while also held back by them. It's come to life with this approval of the of the field development plan, meaning they are ready to put their money in with us here petrovietnam.

Had these nice prospects one of the prospects Caesar draped fractured sands.

That has some level of structure to it also nearby as a room or some very good success by one of our partners in Vietnam that recently drilled a very nice well targeting the same zone is a very large prospect can change our world there and make this a very.

30, 40, 50000 barrel a day business for us long term and we can have some exploration success as to the risk component.

Not low risk, but it's lower risk and big sub salt $100 million wells in the Gulf of Mexico, when you're talking about wells have the cost with lower risk and also in Vietnam, which most people are not familiar this is the basin of Vietnam.

Multiple platforms pipelines infrastructure F. BSO is msos everywhere here. This would look like a segment of South Louisiana 30 years ago.

A lot of production here in shallow water. So it is not like we are now ranked.

<unk> Wildcat country here.

So that kind of frames, what we're doing in Vietnam.

Unless you had a follow on to that Charles.

No. That's it that's great detail. Thank you Roger and then my second question is.

It's kind of.

About your Mercury two and really.

It's obviously the achievement to get to Murphy to point out but for me it looks like a rolling stop in the sense that.

But you guys are going to be in.

3.0 territory.

By the time, you report <unk> 'twenty three if not if not on a on an absolute basis, certainly on a net debt basis.

And you guys.

Just had a board meeting you guys must must see the same thing and so I'm curious if you.

If you would.

To what extent that you guys have discussed that with your board and if there is.

As you roll forward.

24, you guys are going to be.

Okay.

It's possible that you could exit the year with a zero net debt position without giving effect to any share repurchases. So has that is.

Is that can you characterize the conversations that youre, having at the board level and if theres any.

<unk> on what you guys are thinking about for 2004.

No. Obviously, we are discussing as we have a finance committee for our board will review our modeling in great detail around the middle of our budget and putting things into our new plan, but like I said in my comments overall strategy over time, there would be very similar returns.

We can get to the three porno next year, depending on oil price as you know.

Then we will go to 50 50, I would say, we just keep it down the fairway honoring the framework get to the Mercury three point out <unk> 15, and we have.

Worlds are or strong opening up there we can go to more returns and it could be more opportunities come our way.

Very very well positioned.

We're also we're still in the old business, we're not orderly depleting our assets, we picked up to incredible assets here to do with our offshore competitive advantage on execution that countries that want us there because of that because it's important to us and if we move quickly.

So we have opportunities in front of us, we're doing extremely well and with higher oil prices above 85, or so we can move to the street pointed out as you said very quickly.

Want to probably at least execute one quarter of each of the numbers before we change.

Where it is I haven't heard that comment rolling stock.

Sorry is that way Charles I appreciate you calling that.

Great line for me this morning.

Alright, well, thank you for the added detail router.

Thank you and good to hear from.

Thank you and there are no further questions at this time I would like to turn it back to Roger Jenkins for closing remarks.

Thank you everyone for attending our call today. We appreciate we had a really good quarter one of the best in a long time and we're looking forward to another one and we will talk to you in late January I. Appreciate it. Thank you.

Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.