Q3 2024 Murphy Oil Corp Earnings Call
and the other one.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation 3rd Quarter 2024 Earnings Conference Call and Webcast. If at any time during this call you need assistance, please press star zero for the operator. I would now like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.
Kelly Whitley: Good morning everyone and thank you for joining us on our third quarter earnings call today. With me are Roger Jenkins, Chief Executive Officer, Eric Hambly, President and Chief Operating Officer, and Tom Mireles, Executive Vice President and Chief Financial Officer.
Please refer to the informational slides we've placed on the investor relations section of our website as you follow along with our webcast today. Throughout today's call, production numbers, reserves and financial amounts are adjusted to exclude our non-controlling interest in the Gulf of Mexico.
Slide two.
Kelly Whitley: Please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors may exist.
Kelly Whitley: that cause us the results to differ. For further discussion of risk factors, see Murphy's 2023 annual report on Form 10-K on file with the FCC. Murphy takes no duty to publicly update or revise any forward-looking statements.
Kelly Whitley: I will now turn the call over to Roger Jenkins. Roger. Thank you, Kelly. Good morning, everyone, and thank you for listening in on our call today.
Roger Jenkins: As we turn to slide three, I'd like to reiterate our corporate priorities of deliver, execute, explore, and return.
Roger Jenkins: In the third quarter, we focused on executing our operations, advancing our exploration program, and progressing shareholder returns. Murphy produced 185,000 barrels of oil equivalent per day during the third quarter. We progressed our Gulf of Mexico well program and brought online Eagleford Shale Wells as planned.
Roger Jenkins: I'm pleased to announce that early in the fourth quarter, we initiated construction of the Loc De Vang production platform for our field development project in Vietnam.
Roger Jenkins: Also, in the third quarter, we began drilling the Ha Su Vang, or HSV, exploration well, which initiated our two-well exploration program in Vietnam.
Roger Jenkins: I'm pleased at the progress we've made at returning funds to shareholders in Murphy 3.0 while maintaining a leading balance sheet.
Roger Jenkins: During the third quarter, we repurchased $194 million of stock, or 5.4 million shares.
Roger Jenkins: Year-to-date, Murphy has repurchased $300 million of stock or 8 million shares at an average price of $37.46 a share. Overall, we've reduced our share count by 16% since the year-end of 2018.
Roger Jenkins: On slide 4, last quarter we announced the removal of Murphy 3.0 of our disclosed capital allocation framework. As a result, we now target allocating a minimum, emphasis on minimum, of 50% of our adjusted free cash flow to shareholder returns, primarily through buybacks.
Roger Jenkins: I highlight that this is a minimum return threshold which allows us to buy more stock in times of price dislocation such as the past quarter and certainly now.
Roger Jenkins: Most significantly, year-to-date, we've returned 110% of our adjusted free cash flow to shareholders as buybacks. A reminder, adjusted free cash flow for Murphy is after our extensive dividend that we pay.
Roger Jenkins: As prescribed in our framework, the remaining adjusted free cash flow will be allocated to our balance sheet as we are committed to our $1.0 billion long-term debt goal.
Roger Jenkins: I'm proud of what our team has accomplished in recent years with our balance sheet improvements, in particular since launching the cap allocation framework two years ago. Since that time, we've repurchased $450 million of shares and increased our dividend by 70%.
Roger Jenkins: As of November 5th, we have approximately $650 million remaining under our approved $1.1 billion total share repurchase authorization.
On slide five.
Roger Jenkins: Murphy produced an average of 185,000 barrels equivalent in the third quarter with 88,000 barrels of oil. As usual, we realized the premium to WTI with the realized oil price of nearly $76 per barrel.
Roger Jenkins: While I realize NGL price was nearly $22, and natural gas was $1.47 per thousand cubic feet helped by price diversification and fixed price forward sale contracts in Canada.
Roger Jenkins: As a result, Murphy generated over $700 million of revenue in the quarter, excluding our non-controlling interest.
Roger Jenkins: I'm not going to turn the call over to our CFO , Tom Morales for an update on financial results, Tom. Thank you, Roger. Good morning, everyone. Slide six.
Tom Morales: Murphy reported net income of $139 million in the third quarter or 93 cents per diluted share and adjusted net income of $111 million.
Tom Morales: for $0.74 per diluted share. Overall, we generated $397 million of adjusted EBITDA during the quarter, with $211 million of accrued CAPEX, excluding non-controlling interest.
Roger Jenkins: As a result of the free cash flow generated during the quarter, we were able to repurchase nearly $200 million of stock at an average price of just over $36 per share.
Roger Jenkins: Year-to-date, we have repurchased $300 million of stock and reduced $50 million of long-term debt.
Slide seven.
Roger Jenkins: Murphy's priority to de-lever in recent years has led us to achieve a strengthened balance sheet that has positioned us to withstand commodity price volatility.
Roger Jenkins: I am pleased with the very successful capital markets transaction that Murphy executed early in the fourth quarter with extending our debt maturity profile through the issuance of senior notes due 2032 and the partial tender of notes due 2027, 2028, and 2029.
Roger Jenkins: We plan to call the remaining 79 million dollars of senior notes in the fourth quarter so that the transactions are debt neutral
Roger Jenkins: Additionally, we entered into a new five-year $1.2 billion senior unsecured credit facility this quarter. This represents a 50% increase from our previous facility, highlighting the strength of our credit, and provides Murphy with an additional $400 million of liquidity.
Slide 8
Roger Jenkins: We have a robust sustainability report that details Murphy's ongoing environmental stewardship, strong governance oversight, and positive impacts on our community. Murphy remains focused on being a responsible company, and we look forward to achieving our mission's goals.
Speaker Change: With that, I will turn it over to Eric Hambly, our President and Chief Operating Officer, to discuss our operational updates.
Eric Hambly: Thank you, Tom. Slide 10. In the Eagleford Shale, Mercki produced an average 32,000 barrels of oil equivalent per day in the third quarter, with 72% oil and 86% liquids volumes.
Eric Hambly: We continued to execute our well delivery program during the quarter and brought online five Tilden wells, as well as three gross non-operated Carnes wells and nine gross non-operated Tilden wells.
Speaker Change: Our program will continue in the fourth quarter with four planned to come online in Catarina, as well as drilling eight Carnes wells to hold as ducts in advance of 2025 completions.
Speaker Change: Historically, Murphy has not maintained a high duck inventory at year-end. However, we are shifting to a more consistent rig schedule onshore, so we will be well positioned to increase our Eagleford shale production in early 2025.
Speaker Change: I'm excited to see continued positive results from our optimized completion design, particularly achieving the lowest cost per completed lateral foot in Murphy history.
with a 34% decrease since 2023.
Speaker Change: Our year-to-date 2024 program has also seen an 18% increase in completed lateral length and a 16% increase in pumping hours per day compared to 2023.
Slide 11.
Speaker Change: Murphy produced an average 429 million net cubic feet per day in the third quarter from our Tupper Monti asset, which exceeded guidance by approximately 11 million cubic feet per day as our wells continued to outperform expectations.
Speaker Change: We maintain a portfolio of fixed-price forward sales contracts to mitigate ACO price risk, and in the third quarter, this accounted for nearly half of volume sold.
Speaker Change: Murphy also sold significant volumes at diverse price points including Malin, Ventura, Emerson, Chicago, and Dawn. As a result of this price diversification strategy, we achieved a realized price of $1.35 per thousand cubic feet compared to an AECO average of $0.50 per thousand cubic feet.
Speaker Change: with 79% oil in the third quarter. We brought online the operated Mormont No. 3 well.
Speaker Change: and Spud Mormont No. 4 as planned in the quarter, and I'm excited at the initial results from drilling this new well. Additionally, I'm pleased with the results of our two new wells at Calise and Mormont, which are each producing over 15,000 barrels of oil per day on a gross basis.
Speaker Change: I'm also pleased to announce that our operating partner initiated water injection at the St. Malo Water Flood Project during the quarter.
Speaker Change: Recently, we started our first Murphy-operated ocean bottom node seismic survey across the Calise, Mormont, and Samurai fields and the nearby prospects.
Speaker Change: This improved technology will provide us with enhanced imaging across our development and exploration opportunities.
Speaker Change: In offshore Canada, where we produce an average 8,000 barrels of oil equivalent per day with 100% oil in the third quarter, non-operated Terranova production was impacted by additional downtime.
Speaker Change: As we previously announced, we brought online all planned workovers during the third quarter for $34 million total workover expenses.
Speaker Change: For the fourth quarter, we forecast $40 million of work order expenses at the operated Samurai No. 3 and Marmalard No. 3 wells. We recently developed a mechanical issue at the operated Samurai No. 3 well and have planned a rig workover to return the well to production before year-end.
Slide 13.
Speaker Change: In Vietnam, we've been progressing our field development plan for Locke de Vang. We achieved a significant milestone early in the fourth quarter as we initiated platform construction.
Speaker Change: Roger and I recently visited the shipyard and we were very impressed with the project team and the construction yard. We expect to award our remaining major contracts for the project by year end and I look forward to beginning drilling our development wells in 2025.
Speaker Change: Overall, Murphy remains on schedule for achieving first oil in late 2026.
Speaker Change: Slide 15. During the quarter, we drilled the operated Sebastian No. 1 exploration well. Non-commercial hydrocarbons were present and we plugged and abandoned the well.
Speaker Change: As we close out the year, we're progressing plans with partners for our 2025 Gulf of Mexico Exploration Program, with multiple opportunities across our 58 exploration blocks.
Slide 16.
Speaker Change: I'm excited that we initiated our Vietnam Exploration Program as we spud the Hai-Su-Vang 1X Exploration Well in Block 15-2-17 in the 3rd quarter. After drilling this well, the rig will move to drill the Loc De Hong 1X Exploration Well in Block 15-105 in the 4th quarter.
Speaker Change: We forecast $30 million in total net drilling costs for the two wells. These opportunities provide the potential to create a sizable and meaningful business in Vietnam, and I look forward to seeing the results.
Slide 17.
Speaker Change: Murphy continues to progress seismic reprocessing for our position in Cote d'Ivoire, and we expect to receive the final data before the end of the year. We have several interesting opportunities across exploration play types and are pleased with the identified prospects, as well as recent nearby discoveries announced by other operators.
Speaker Change: We will continue our evaluation of the data as it becomes available, and will likely begin planning for an exploration program in late 2025 or 2026. Additionally, we remain on track for submitting a field development plan for the undeveloped pond discovery by year-end 2025.
Slide 19
Speaker Change: For the fourth quarter, we forecast production of 181 1⁄2 to 189 1⁄2 thousand barrels of oil equivalent per day, with 51% oil volumes and 56% liquid volumes.
Speaker Change: This range includes 1,500 barrels of oil equivalent per day of planned onshore downtime and 1,000 barrels of oil equivalent per day of planned downtime for maintenance at non-operated Terranova. Our fourth quarter forecast also includes planned accrued CAPEX of $203 million.
Speaker Change: For full year 2024, we are tightening our guidance range to 180 to 182,000 barrels of oil equivalent per day with 50% oil volumes and 55% liquids volumes.
Speaker Change: As previously disclosed, production has been impacted by continued downtime at Terranova. We are maintaining our accrued CapEx range of $920 million to $1.02 billion, excluding NCI. Slide 20.
Speaker Change: We share our multi-year plan each January. As we progress our budget for 2025, we are also evaluating our commodity price assumptions, spending, and production plans, and we will provide a full update with our fourth quarter results in January. However, many aspects will remain constant.
Speaker Change: As we look toward the future, Murphy remains committed to our $1 billion long-term debt target. We'll achieve this while reinvesting approximately 50% of cash flow in high-returning offshoot projects.
Speaker Change: as well as Deep Onshore Inventory that together supports future oil-weighted growth for many years. We have exciting catalysts ahead with reaching first oil in Vietnam in 2026 and drilling high-impact exploration wells across the Gulf of Mexico, Vietnam, and Côte d'Ivoire.
Speaker Change: We also plan to continue rewarding our loyal shareholders with ongoing share repurchases and potential dividend increases while achieving metrics that are consistent with an investment grade rating. And with that, I will turn it back to Roger.
Thank you, Eric.
Roger Jenkins: As we get on slide 21, I'd like to reiterate that we had another solid quarter of results with our onshore assets performing well and exceeding guidance.
and continued execution of our Gulf of Mexico program.
Roger Jenkins: We were able to deliver shareholder returns through buybacks as prescribed in our capital allocation framework. We also enhanced our balance sheet and liquidity through executing capital market transactions.
Roger Jenkins: early in the fourth quarter. Moreover, we're advancing our Vietnam development and exploration plans, and we look forward to expanding our portfolio with high-impact exploration opportunities.
Speaker Change: Well, this is my last call today. I estimate this is my 48th call starting in August of 2012 as COO.
I think I missed one along the way.
Roger Jenkins: I'd like to thank all our analysts that covered us all these years. I'd also like to personally thank Kelly Whitley.
Roger Jenkins: for leading our IR efforts over the last nine years. Kelly, it does seem a lot longer, I must say. And she's one of the best there is, and our great IR team of Megan and Beth. I'd like to thank our dedicated employees for all their support. I'd also like to thank our shareholders.
Speaker Change: for their support of my 11-year plus career as CEO. I wish Eric all the best along with Tom. We have an excellent executive team and a great plan and I look forward to watch Murphy excel. Thank you all and go Tigers. Big game this weekend.
Thank you.
and the other one.
Speaker Change: Thank you, Roger. Ladies and gentlemen, we will now begin the question and answer session. Should you have any questions, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the cube, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys.
Just a moment for your first question.
Speaker Change: Your first question comes from Neil Dingman with Truist Security. Please go ahead.
Good morning.
Speaker Change: Good morning, guys. And first, Roger, I want to congratulate you on the retirement, Eric, on employment. Roger, it's been done.
Speaker Change: Really appreciate all your help along the way. But again, congratulations.
Speaker Change: Today is on your 25 operations. Really, what I'd say specifically, can you speak to next year's plan? You know, there's a lot of volatility out there depending on what oil prices do, and I'm just wondering, depending on a high or low oil price environment, you know, would the offshore spend be the toggle, or how different would the 25 plan be under a
$60 versus $80 oil.
Eric Hambly: Neil, this is Eric. I'll jump in and answer the question.
Eric Hambly: The way we think about our program, we've communicated in the past that our aspiration for our company from 24 through 26
is to have oil-weighted, low CAGR growth.
Speaker Change: while spending approximately 1.1 billion dollars of CapEx on average annual basis.
Speaker Change: We remain committed to that plan. If you look to 2025, I would anticipate production in 2025 to be similar to slightly higher than 2024 and with significantly higher oil production as we expect Eagleford Shale production to be quite a bit higher based on the timing of new well delivery.
Speaker Change: In terms of CapEx allocation in a low-price scenario, that's something that we'll be evaluating, obviously, as we head into finalizing our budget, and we'll look forward to updating you on that in our call in January.
Eric Hambly: I love the optionality. Thanks, Eric. And then just second question on Vietnam. I'm just wondering...
Speaker Change: for my edification, just wanted you to remind me of the cost and...
Speaker Change: potential upside of these Vietnam wells versus maybe like a typical shallow Gulf of Mexico well. And I'm just wondering, have you all spoken about plans in Vietnam beyond these first two exploration wells?
Speaker Change: Great question, Neil. We're really excited about our Vietnam progress here. We made a really nice discovery that we're developing in the Locte Vaughn field, which is 100 million barrel.
project there on an equivalent basis, Gross.
Speaker Change: And once we got moving on that development, we identified that we had a great opportunity in Vietnam with a long exploration running room on the two blocks that we have in the Koolong Basin.
So we got to drilling.
Speaker Change: starting late in the third quarter on the first of two prospects, the Hai-Tzu Bang prospect.
Speaker Change: is targeting a mean of 170 million barrel oil equivalent to an upward of over 400 million barrels, which is a really nice, sizable prospect.
Speaker Change: If you compare that to the 100 million barrel Lockton-Vong field, obviously it's something that we're really excited about. It has the potential to be really material.
Speaker Change: After we drill the Hai Siu Vong well, we'll move to the Locke de Hong.
that targets a 65 million barrel mean.
Speaker Change: to 135 million barrel upside type of opportunity. So, these two together have the potential to really allow us to develop a really meaningful material business in Vietnam.
Speaker Change: which might be able to produce toward the end of the decade in the 30,000 to 50,000 barrel a day range. So really happy with the progress there, really excited about how we're executing so far and been able to talk about results likely early next year.
Speaker Change: Just a bit more color on that, Neil. I think it's really unique for a company to have a
Speaker Change: go to development while having a big exploration project next door. Infrastructure Advantage is a copy of what we did.
Speaker Change: in Malaysia in shallow water where we had a very significant business. Both Tom and Eric ran that business before. We're doing the same thing in Cote d'Ivoire, big exploration, highly sought after with a possible development at Pond. So we got exploration on both ends of the world.
Speaker Change: with the possible development on one and the development on the other. Very unique, very changeable for our company and really good sets of business that was put together here by our team. Yeah, just last comment from me, Neil, in terms of follow-on. With success with these blocks, not only are we excited to develop them, but...
Speaker Change: We have quite a large inventory of remaining prospects on both blocks.
Speaker Change: Obviously some of the prospects would be impacted by the results from these wells, but even with prospects that have no dependency from what geology do we find, we have quite a few other opportunities that we'll be evaluating in future years.
Thank you both.
Speaker Change: Thank you. Your next question comes from Carlos Escalante with Wolf Research. Please go ahead.
Speaker Change: Good morning, guys. Good morning. First of all, Roger, congratulations. Eric, congratulations on the role as well. Roger, I think Alabama might win this weekend. So, hey, this is Paul, your retirement party.
Speaker Change: Oh wow. I thought you were way too smart for that, honestly.
Oh, boy. All right, I'll get there.
Given that, there's inevitable volatility on share prices and
Speaker Change: given that strategy. So how do you see your options for consolidation moving forward in order to mitigate some of what's going on and what's happened over the course of the quarter? Obviously, this is short-sighted, but
Speaker Change: just would like to get your perspective on how you see the space now and entering into 2025, especially as the balance of the year and the geopolitical and political context is falling into its place.
and the other one.
Speaker Change: I'll let Eric answer most of that but really you know Murphy with our balance sheet and our setup and our international experience.
Speaker Change: We're prepared to move and do whatever is necessary for the highest return, really have budgeting focused on really free cash flow maximization.
Speaker Change: so we can execute our capital allocation framework. Political ins and outs will be positives or negatives on either side. We never really focused on that. We just focused on executing our business. And one thing about Murphy's, we have
Speaker Change: You know, we never caught up with one kind of vendor, one kind of pipe, and one kind of regulator. We work in Canada, we work in the Gulf, we work in West Africa, we work in Vietnam.
Speaker Change: and elsewhere. And we have the ability to work anywhere in the world. We have an executive team that's worked and lived internationally. So we're really a different kind of animal as to regulatory outcomes of singular elections.
Speaker Change: regulatory for us involving Gulf Mexico, probably be advantageous to offshore leasing.
Speaker Change: Corporate taxes and different things, but all those things have to come to bear and we're just moving forward, Eric, if you'd like to add to that.
Eric Hambly: Yeah, just a couple of points I'd like to make. We have in the past referenced the fact that within our existing portfolio of investment opportunities we have an ability to grow and then maintain our offshore scale from what the investment opportunities we have in our discovered fields.
Eric Hambly: and the fields that are producing now, we have a deep bench of investment opportunities with very low break-evens.
Eric Hambly: most of them below $35 a barrel. In our onshore, we have an extensive shale oil inventory of locations, 1,200 locations in Eagleford, nearly 500 locations in the Cape Bob DuVernay, that allow us for many decades to be able to invest there and maintain the oiliness and the scale of our business.
for multiple decades without ever making another discovery.
Eric Hambly: without making an acquisition. So we feel we're very well positioned to execute a nice
single-category growth, oil-weighted, high-returning cash-to-shareholders.
type of business for the next several decades.
Eric Hambly: I think that's fairly unique. It's also fairly unique that for a company that can do all that we also have material exploration opportunities that we're progressing in the near term. We're really excited about the Vietnam opportunities and we're getting very excited about our Cote d'Ivoire potential exploration program kicking off in late 2025. So we feel really well positioned with our portfolio, both our investments to make and the exploration that we're doing.
Eric Hambly: and happy with kind of how we're heading forward. You did ask a question about consolidation and I wasn't quite sure how you framed that and maybe you could re-ask that I can help answer that question for you.
Sure. Well, I guess my question was more on.
Speaker Change: the opportunities that you have both onshore and offshore, or the optionality that you have onshore and offshore provide you with the ability to...
Speaker Change: create consolidation opportunities in both spaces. So how do you see that and how do you think of that in terms of mitigating the current risk in terms of share price volatility? And that was my point about...
Speaker Change: There's only a handful of exploration plays and it seems like over the past quarter they were hit harder for that same reason. So wondering how you think about expanding that inorganically as opposed to what you've been doing, which is exploration-led.
Okay, yeah, thanks for the clarifying.
Speaker Change: I guess let me frame that and Roger feel free to jump in.
Speaker Change: We are really happy with the exploration portfolio that we have. We do...
Speaker Change: consistently evaluate opportunities for M&A across the space, primarily in the offshore where we think we have a competitive advantage.
Speaker Change: We have proven over the last decade to be a very active
Speaker Change: with successful M&A, made really nice divestiture in Malaysia in 2019, made great acquisitions in 2018 and 2019 in the Gulf of Mexico, built a very nice deepwater Gulf of Mexico position.
Speaker Change: partly through Successful Exploration and partly through M&A and we look at all those opportunities to maintain and grow our business.
We're very
Speaker Change: and a portfolio of exploration blocks, which we've been exploiting and happy to do that. I don't imagine we're very likely to spend a lot of money to enter into a block that someone just made a discovery on to beef up our portfolio like some people have been doing in Namibia. We chase low-cost entry, underexplored basins.
Speaker Change: have the potential to deliver large prospects with relatively low well cost. That's kind of what our focus is, a little more of an organic bent, but we're always watching to see what we can find that may be advantaged to us from an inorganic perspective.
Speaker Change: Sure, sure. Okay, thank you. And then just a quick follow-up, which was my second question. On Terranova, it has had plenty of downtime, and you quote this quarter-round additional downtime that has impacted production. Now, there has been some chatter about, you know,
Speaker Change: the operating party potentially disposing of it. So I wonder if this would be an asset that you would ever consider on operating. Obviously, I know you don't speculate on rumors, but what are your thoughts and how do you see it falling into your greater portfolio in terms of priority?
Speaker Change: Yeah, so we're at 18% working interstellar in Terranova. We've been extremely disappointed with the performance of the asset from a runtime perspective.
Speaker Change: a few contrasts of how we do in our operated assets. For example, in Kings Key, we produced that asset with a 98% uptime.
Terranova has been averaging about a 55% uptime.
We expected that they would do 75 to 80 percent.
Speaker Change: So our historical guidance has reflected that we thought they could achieve a 75-80% uptime.
They've actually been doing about 55.
Speaker Change: frustrating and disappointing. We are working with our partner group to try to help improve operations where we can. As a non-operated 18% owner it's very challenging to do that but we're doing what we can.
Our fourth order of guidance reflects...
Speaker Change: a lower production level than we might have historically thought about because of the ongoing downtime and that they're experiencing.
Speaker Change: In terms of future change in operatorship, that's really something that...
Speaker Change: The operator would have to think about, we're extremely unlikely to make any type of effort to operate at 18% working interest.
just really not something that will happen and there's no...
Speaker Change: language in the operating agreement where that would come to bear. So we will sort of watch and see and try to help and if the operator has a strategic alternative for the asset we'll monitor that as well.
Gotcha. Thank you guys. Congrats again.
Speaker Change: Thank you. Your next question comes from Leo Mirani at Roth Capital. Please go ahead.
Hey, good morning here.
Speaker Change: Just wanted to follow up a little bit about some of the comments you all made here.
Speaker Change: I guess it looks like that you're drilling in your onshore areas in the Eagle Ford in the fourth quarter.
Speaker Change: I think you're also drilling maybe some Montney and Dubrunay wells. I've heard you're riding the call.
Speaker Change: You're expecting Eagle Ford production to start growing early next year. A little bit different sort of plan than you've kind of had in the past. Sounds like you're getting a bit of a head start there. Do you see a similar, you know, trajectory? Do you expect to start growing Montney early next year as well as, you know, Duvernay as well from some of the fourth quarter drilling and just get after the onshore in general a little bit earlier in the year to smooth it out?
Thanks Leo, that's a great question.
Speaker Change: What we've been trying to do with our Eagle for Business this year is to have a more consistent drilling profile, which will allow us to have earlier average online timing of new wells in 2025. We intend to maintain that type of profile going forward. So with a relatively similar level of CAPEX.
Speaker Change: We expect to be able to deliver a little bit higher annual average with bringing in wells slightly sooner. We are drilling wells in the fourth quarter in our Carnes area and those will come online relatively early in 2025. I think once we establish that, you'll see that we were able to maintain slightly higher average production. So,
Speaker Change: Eagle Herd production may grow 3,000 or 4,000 barrels a day on an annual average basis.
in 25 compared to 2024.
Speaker Change: for Onshore Canada and specifically in our Tupper Asset. We expect to get to work drilling the first pad.
Speaker Change: in the last month of the year. That's been sort of normal for us over the last few years. We have a very limited program required in that Tupper Asset.
Speaker Change: to keep our plant capacity full and so I expect when we finalize our budget we'll have a limited number of wells that will be done drilling early in 2025 and completing soon after and that's pretty consistent with how we've operated the asset for the past few years.
Speaker Change: And at least in the near term, we plan to keep Tupper right at plant capacity with the delivery of our new well program and throughout the rest of the year have a little bit of decline, so we're not always at plant capacity, but we'll be touching it with the delivery of our new wells.
Speaker Change: hope that helped frame what we're trying to do with our onshore assets for you.
Speaker Change: Now that's helpful, um, you know for sure and I just wanted to touch a little bit on on work over Expenses looks like they're going to be up a little bit in in 4q You know versus 3q and I think you detailed some of that in your
Speaker Change: prepared comments for the, I guess, the well that kind of went down. You're gonna have to get out there and remediate a little bit. But just in general, I mean, it seems like your work over costs have kind of been running maybe a little bit higher, you know, this year, you know, versus last.
Speaker Change: You know, what's your expectation on that? I mean, do you think that that can start to drop a fair bit as we get into 2025? Or perhaps, you know, just some of the wells, you know, they tend to get a little bit older from time to time and kind of require a little bit more, you know, TLC. Can you just provide a little bit more perspective around that?
Speaker Change: Thanks, Leo. What I would say is this year our workover expense was quite a bit higher than we've seen or would we normally expect on a typical year. In the third quarter we were able to complete
Speaker Change: the workovers that we anticipated at the time, primarily toward the early part of the third quarter, so our workover expense was a little bit lower. As we're heading into the fourth quarter, we're planning to work on the Samurai No. 3 well, which is up 50% working interest, so a little higher ownership than sort of our average offshore opportunity.
and then also the Marmalade well will start this.
Speaker Change: quarter and then finish it up next quarter. And after that, I don't anticipate any workovers of significance.
It's not something that we...
Speaker Change: build into our plans unless we're aware of a specific well opportunity to return a well to production. It's not routine in our business to have this type of thing happen. It's quite unusual and unfortunately 2024 has been a bit of an outlier for us and we're happy to see the end of it approaching soon.
Okay, thanks.
Speaker Change: Thank you. Your next question comes from Greta Drefk at Goldman Sachs. Please go ahead.
Greta Drefk: Hi, good morning and thank you for taking my question. I was wondering if you could talk a bit more about the role you expect the Canadian onshore position to play in your portfolio over time, and then more broadly your view on the benefits of asset diversification. Thank you.
Speaker Change: I'll let Eric answer that question, but first I have to frame that. We've been in Canada for probably almost 70 years. We're a very known operator there. We have a very unique position in the mountain. We've built from scratch through leasing. We've never issued equity or anything to acquire all of the long-term onshore assets that we have, tough or no different.
We feel at a macro level that...
Eric Hambly: with our relationships to all the partners of LNG Canada that were uniquely represented there.
Speaker Change: and we see that LNG coming off the West Coast is going to be a key. We see that expanding.
Speaker Change: from a macro perspective, a differentiated situation as to our forward sales. We're also very happy about the limited forward sales we've done so far, which shows there's a market for higher gas out there.
Speaker Change: And we see a lot of action in the DuVernay Shale today.
Speaker Change: A lot of M&A, a big significant sale by Chevron. These assets are very valuable, very sought after over the long haul, and it gives us that peek into LNG globally coming off the west coast of Canada one day with a large position. But both Eric and Tom and I lived and worked in Malaysia.
Speaker Change: We're the only player there with international experience that are known by all the partners of LNG Canada uniquely well and a visit to Southeast Asia recently where
Speaker Change: We get all the meetings there, so we're different up there, and I believe that should frame it for you, unless you need more detail from Eric, which you'd be glad to provide. Yeah, thanks, Roger. I'll just make a couple more observations.
Speaker Change: What we've done with our Tupper Money asset over the last five or six years is really turn it into one of the most capital efficient.
North America
Speaker Change: dry gas assets in terms of our ability to develop resource at a low cost. We've done a tremendous job with our well cost.
and our well performance, we have some of the leading.
Speaker Change: wells in Western Canada from an IP30 perspective, so we're controlling what we can, which is the capital efficiency of our opportunities there.
Speaker Change: and unfortunately the current Inco price is quite low, which we think will improve over time if you look long term.
Speaker Change: We believe natural gas in Western Canada and LNG will continue to be a really pivotal part of energy future. And we were well positioned on that from a geography perspective, as Roger pointed out, and also a cost perspective. It will be the go-to gas because we have the most capital efficiency.
Speaker Change: One other comment I'll make around our Canada portfolio is in our K-Bob DuVernay, which we entered in 2016
Speaker Change: We have proven that we have quite a nice asset there with nearly 500 locations to invest in. It's a very oily position in the KBOB. We've really have a well-performing, top industry performing on an oil rate basis wells in KBOB, and it'll allow us
Speaker Change: to invest there when, ultimately, our Eagle Ford locations start to move past their top tier. We'll be able to pivot our investment into the KBOB, and that'll allow us, with the assets in our portfolio now, to maintain a high oil weighting, high cash flow generating,
shale business for multiple decades.
Speaker Change: That's very helpful, thank you so much. And I just have a quick follow-up on the outlook for incremental efficiencies from here, kind of recognizing the progress thus far that you've highlighted just so far on the call and then on the Eagleford, for example, on slide 10. What are the additional untapped levers that you think can further drive efficiencies over time? Thank you.
Speaker Change: That's a great question. So one of the things I wanted to highlight and one of the reasons why we prepared the slide like we did for our earnings call was you commonly have fluctuation in service costs, which of course we're anticipating a little bit of a reduction in pressure pumping and rig costs next year compared to this year for our Eagle for Business.
Speaker Change: But that's really not what's driving our performance here. Our performance is driven by the fact that we're able to improve consistently our operations, how we set up on location, how we pump our fracs.
Speaker Change: how we design and drill our wells, and how we optimize our completions in real time. That's allowing us...
Speaker Change: to get more efficient from a pumping hours perspective so we bring online wells slightly cheaper and sooner, which is critical, and also recognizing the lowest cost.
Speaker Change: or lateral foot we've achieved in our Eagle for Business in the history of the play, which I think is a great accomplishment by my team and I'm extremely proud of that. We consistently look for more opportunities. It's hard for me to...
Speaker Change: to know exactly what the next thing my team will come up with in terms of improving efficiency. But we've demonstrated a strong track record of continuing to improve operations for many years, and I anticipate they'll keep looking for the same.
Very helpful. Thank you.
Thank you.
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star 1.
Speaker Change: Your next question comes from Paul Chang with Scotiabank. Please go ahead.
Paul Chang: Hey good morning guys. Roger just want to say congratulations for the retirement and thank you for all the help and insight.
Paul Chang: And also, Tori, sometimes I'll not ask very intelligent questions, so we appreciate it. And Eric, congratulations for the promotion and we look forward to working with you.
Thank you.
Speaker Change: Oh, they were good questions. I just didn't like them all, but they were not unintelligent questions that I recall. Top one.
Thank you. Two questions. I think the first one may be either to one of you gentlemen.
Thank you.
Third quarter and year-to-date your buyback certainly has been great and significantly above the
Thank you very much.
Speaker Change: How should we look at your buyback rate? Is it going to be closer to the 50% adjusted free cash flow as you stay in your Murphy 3.0? Or that it's going to be significantly above yet closer to what we have seen here today?
That's the first question.
Paul Chang: You know, Paul, it's hard to predict that. Plus, we have a board of directors that we keep informed. We're closely working with our board and our finance committee on our financial outcomes.
Tom and his team, Lester.
and Treasury, there's a lot of detail around.
Paul Chang: you know, where the free cash flow will go, what will happen. I will say that from the debt perspective, I didn't personally feel like we were getting paid for all the debt reduction. I think it's greatly helped the company a lot.
And we also thank, when we have the
Speaker Change: you know, a little bit more than $1 billion right now.
Speaker Change: We had incredible outgo of our bonds. I mean, we were so oversubscribed for our bonds. It was incredible.
Speaker Change: So, and in our new revolving crab facility, a 50% increase.
Speaker Change: and a revolving crepe facility unsecured on a non-investment grade company. So our balance sheet is greatly regarded and when you're in the low 30s like this you got to be thinking more than the minimum 50 percent.
Speaker Change: And, you know, we're so undervalued as to oil price today, long-term low oil price that until the stock gets up into the
Speaker Change: 40s, you got to be thinking, you know, more than the 50 on the other way, but Eric and Tom will work that and manage that, and so will our board and our finance committee, and we of course want to pay down a little bit of debt at the end of the year as for our agreement on these notes, but got to be thinking more than more than 50.
Speaker Change: if the equity stays at this level, quite honestly, Paul. Yeah, because, I mean, you can actually ping out more than 100%, so is that a reasonable level that we could assume over the next... I don't think...
Speaker Change: I don't think Tom likes going more than 100. He likes to keep some cash available, but they are dislocation situations where we would.
Speaker Change: put on balance sheet if we start hanging around these low 30s because it's just too undervalued. But let's get ahead of it. We have a lot of different risk factors in the business. One was clicked off this week.
still have unrest in the Middle East.
Speaker Change: what will happen with the feds. There's several things we have to monitor and evaluate, as Eric says.
Speaker Change: but can't go over 100 forever, Paul. So, but we got to be looking at the 50 plus right now, but we shall see, as you know, but we're focused on shareholders here. You know, one of the things I'm really proud of my career is.
Speaker Change: A lot of money paid for dividends, a long history of paying dividends, looking to, with our board approval, hopefully to increase our dividend next year, continue to buy back stock.
Speaker Change: and execute and work forward with big potential in both Cote d'Ivoire and Vietnam. And we've got a lot of things heading our way. There'll be little quarterly things here and there, but over the long haul, looking really good shape as to rewarding shareholders here at Murphy Oil.
Speaker Change: Thank you. The same question, I think, is for Eric. Eric, I mean, this year, the government of Mexico has far higher than usual work over. At the beginning of the year, we already know it.
is the case.
Eric: but look like it's even heavier than what we would have expected.
Speaker Change: like for example fourth quarter the two well going to be in work over previously I don't think it's on the schedule
maybe adjust in your process. Thank you.
Speaker Change: Great question. It is purely unlucky and I really wish my luck was better because it's been a challenging year for us.
with lost revenue and additional work over expenses.
as I mentioned earlier on responses to the calls.
Speaker Change: not common that we have this type of thing happen with a well or wells and it's been a challenging year with a bit of not very lucky and as you pointed out at the beginning of the year we didn't have these
Speaker Change: fourth quarter workovers on our horizon. So yeah, happy to see the back of it in early 2025 when we finish these two workovers.
All right, we're good. Thank you.
Thank you, Paul. Appreciate it.
Speaker Change: Your next question comes from Tim Resvin with KeyBank. Please go ahead.
Speaker Change: Morning Tim. Good morning folks. Good morning. Thanks for taking my questions and congratulations folks on the retirement and promotion
Speaker Change: I was hoping to dig back into the Eagle Ford a little bit. I'm trying to understand.
your comments about a more consistent onshore rig schedule. Does that imply a full-time rig year-round? I know you've been intermittent in the past, so what is kind of more consistent means? We're just trying to understand this.
Speaker Change: This is just, you know, accelerated tills in 2025 or a real sort of structural change in how you view developing the asset.
Speaker Change: Thank you. Yeah, Tim, thanks for that. It gives me an opportunity to clarify.
in 2021 through 2023.
Speaker Change: We typically ran a two-rig program for the first half of the year.
Speaker Change: So we drilled almost all of our wells in the first half of the year and then delivered them. We pivoted in 2024 to have one rig running consistently all year long and anticipate doing that going forward. It should smooth out our well delivery cadence a little bit. We'll be a little less peaky throughout the year. Hopefully we'll make people like you a little happier with our consistency.
Thank you.
Okay, okay. I appreciate the clarification.
and Tim Tackett in general.
yeah you
Speaker Change: Yeah, and then as a follow-up, just, you know, touching back on the
Speaker Change: the LNG Canada, you know, the macro story up there. What, you know, the comments on that plant, you know, coming online on schedule have been generally positive. So, you know, what would you need to see from LNG Canada? And when would you need to see that?
Speaker Change: just start really thinking hard about it, expanding your plan in the Montany and growing production there. Thank you.
Speaker Change: I'll let Eric answer that because I won't I won't be here for that. Yeah, okay, well it gives me a chance to frame it a little bit. So the first phase of development for LNG Canada, the gas as we understand it that'll feed that has been provided from predominantly from people who own an interest in the plant, so they're sourcing their own gas.
The opportunity that we see
Speaker Change: is more likely to participate in a Phase 2, which we think is likely probably get approved sometime in the next three or four years.
Speaker Change: and that would be another approximately 2 BCF a day of take away of gas out of Western Canada.
Speaker Change: just the fact that that second phase moves forward would be, I think, quite good for the overall eco-market. We also, as Roger was attempting to highlight, we have
likely an opportunity to work with.
Speaker Change: these people that we know and operate with in Asia who may decide that some of the gas for phase two could come from our asset Tupper Montney instead of gas they would develop themselves.
Speaker Change: And so that's an opportunity that we will monitor, we'll consider.
Speaker Change: If a type of deal that we think would be accretive is available, then we may pursue it as part of a diversification strategy. So going back and looking at our overall money diversification, we've done fixed forward sales, we've done diverse sales into the U.S. markets. We would then consider some of our gas being sold in LNG Canada as part of a diversification strategy.
Speaker Change: LNG prices globally can swing around quite a bit. They're not immune to price fluctuations, so we wouldn't want to dedicate all of our gas to an LNG, especially one LNG plant. So it's part of the overall strategy there. That's kind of how we think about it, and just a little more color on
Speaker Change: longer term, if we decided to expand the plant capacity beyond its current
Speaker Change: 500 million cubic feet per day, it would be an approximately three-year process from an engineering and permitting approval perspective in construction, it's about a three-year process. So if we were to do that, we would definitely signal well in advance we would be doing that, you would know about it for several years before we were able to materially deliver more gas from our asset.
Thank you very much.
Okay, I appreciate that.
The high-level detail. Thank you.
Your next question comes from Arun Jayaram. Please go ahead.
Speaker Change: Yeah, good morning gentlemen. Roger, I wanted to wish you the best as you head off into the sunset. Hopefully you'll be at Tiger Stadium this weekend as well. I'll be there with a hundred and four thousand other friends.
Speaker Change: Good luck this weekend. I will also be in Austin for playing the Gators, but anyway I probably shouldn't talk too much about college football here. Although I could spend a lot of time talking about it.
Speaker Change: Yep. Well, anyways, best to you and Eric. Good luck filling Roger's large shoes.
as you take over as CEO early next year.
Speaker Change: Quick question, Roger, on the regulatory environment in the Gulf of Mexico. Obviously, the market was a little bit worried around...
the BiOp and, you know, that...
Speaker Change: process and I think that's been punted a little bit but just maybe you or Eric could comment on your thoughts on
procurement perspective.
Speaker Change: I'll just take a quick stab at obviously we've had a lot we've had change in
Speaker Change: in the Gulf of Mexico regulatory in two phases, one post-McCondo, a lot of
Speaker Change: BOP regulatory, a lot of different change in well design, a lot more interaction. One thing people may not realize, the Gulf of Mexico has been heavily regulated my entire 40 plus year career, a lot of information, a lot of monitoring, a lot of inspection.
Speaker Change: So the federal government through the Department of Interior has monitored Gulf Mexico federal leases in an incredible detailed way for my entire career. Macondo kicked it on up a notch and then this administration we have in office today did an all-out effort to eliminate and try to stop lease sales.
Speaker Change: in the Gulf of Mexico, also more scrutiny around awarding the blocks.
Speaker Change: I anticipate that to change and change extremely quickly, this time because of a Republican Senate that will allow the changes in department tier that's needed to help the industry thrive again.
Speaker Change: I always personally thought the buy-up is a big old joke thing, it's another example of nothing-at-all, never-you-mind thing, too-big-to-fail thing.
Speaker Change: It's extended into May, which is positive, but then we'll have to redo, while I'm from fisheries, we'll have to redo this. I anticipate this to move forward without any issue in any way. I have no concern about it as a shareholder of Murphy in any way.
Speaker Change: and those type things will calm down with the new administration and we look forward to moving forward with that because it probably helps us.
Speaker Change: a good bit in the U.S. Department of Interior-regulated Gulf of Mexico with this administration change.
Speaker Change: So, if Eric wants to add some color to how to set it up for you, it's a buyout, not a thing, Eric. You can disagree. I totally agree. We have been communicating consistently.
that
Speaker Change: We did not expect us to have an issue from this or really an issue at all. We were very happy to see the recent ruling which pushed out the biologic opinion.
Speaker Change: the data which should be vacated into May, as Roger pointed out. We expected that, but I wanted to make another point, which is, even if that had not happened, or if there's some delay in that being in place in May, or some type of related issue to the biological being in question,
Speaker Change: We do not believe it will impact our operations. Our current operations and production are not impacted by this at all. We also
Speaker Change: the way we view the permitting process and understand how the biological opinion works.
Speaker Change: industry agencies would still be able to approve permits for our proposed operations. It might just take a little bit longer. The biological opinion allows for Bessie
Speaker Change: without the BiOp in place, they would still be able to approve permits and allow our operations to proceed. It might just take a little longer because they would have to review every permit that's applied for on the basis of how it impacted endangered species.
Speaker Change: So, they may not like it, but they can do that, and that's how we expect that. And just reiterating, we don't expect any issue in the near term or next year on our current operations at all.
Great, thanks for that. My follow-up...
Speaker Change: Roger and Eric, I moonlight as J.P. Morgan's oil field service analyst as well. Unfortunately I don't get paid by the hour. We see that, we love reading that.
Speaker Change: Unfortunately, Roger, I don't get paid by the hour. But one thing I did note is I follow Techneap FMC.
Speaker Change: And interestingly, they put the Murphy-Payne project on their subsea opportunity list.
Speaker Change: And so I just wanted to get, you know, if you could maybe describe.
Speaker Change: Maybe where that project's at, I assume that Doug and his team wouldn't put that on the list unless they thought that there's a, you know, a good chance that this would occur. So I thought that was kind of an interesting data point from the FMC slide deck.
Speaker Change: Thank you, Rune. I know Doug extremely well. We're the same age. We've been working together for over 40 years. I really appreciate him doing that. I'll have to...
Speaker Change: text him about that, a great guy by the way. I'll let Eric, he's really close to Pawn and we're working on it obviously as per our required field development plan, but I'll let him.
Speaker Change: move forward on that. Yeah, thanks. We are making rapid progress on our preparation of a field development plan for that pond discovered resource.
Speaker Change: The commitment we have under our block is to submit a field development plan by the end of 2025. We're on track to do that by the end of 2024. So as we've been progressing our evaluation there, we're doing several things. In parallel, addressing the subsurface to make sure we understand the resource completely.
Speaker Change: going out and doing engineering studies around how we would develop the field with an FPSO and subsea infrastructure that Technique FMC highlighted.
and also negotiating with various Ivorian parties.
Speaker Change: around the price that we would sell gas or the structure around how we would sell gas in the country. All of which are critical for the project moving forward.
Speaker Change: We've been aggressive at moving this forward because we think it's an opportunity that would be very material and nice for us.
Speaker Change: and also the country of Cote d'Ivoire really needs the gas to feed the power plants that they have with a declining domestic gas supply. We think PON has an opportunity to provide that and really help the country and be a mutually beneficial project for us.
Speaker Change: service providers, and also the Ivorians. So we're moving all that.
Speaker Change: We have not awarded any contracts to do for fabrication or installation of any facilities, we have not sanctioned the project.
Speaker Change: but there are a limited number of subsea providers and as you can imagine we're in conversation with with a limited number of providers that would do that type of work and so it's not unreasonable to think if we did move the project forward with a future sanction date that they might be in play.
Speaker Change: Got it, got it. And just maybe a follow-up on that, Eric. Would that project be...
Speaker Change: included in your medium-term CapEx guide of 1.1 billion or would that be kind of a project that would be discreet and on top of that?
Speaker Change: It's not included in our $1.1 billion three-year average CapEx. There should be something on top of that. I would highlight that I would not anticipate material.
Speaker Change: spend in that three-year period related to PON. There'd be minimal spend related to engineering and some long-lead commitments if we were to sanction the project, say, as early as next year. Okay, great. Thanks a lot, gentlemen. Again, Roger, best to you.
Thanks, everyone. Appreciate it.
Speaker Change: There are no further questions from our phone lines. I would now like to turn the call back over to Roger Jenkins for any closing remarks.
Roger Jenkins: No closing remarks. A great call today and appreciate everyone calling in. A lot of good questions today and next call will be in late January and Eric will be sitting in this chair. I wish him all the best and we'll move on from there. We appreciate it. Thank y'all. Thank you.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you disconnect your lines.