Q1 2025 Murphy Oil Corp Earnings Call
We have 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 Noncontrolling interest in the Gulf of America Slide two 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 exist that may cause.
Speaker Change: So our results to differ for further discussion of risk factors see Murphy's 2024 annual report on Form 10-K on file with the SEC Murphy takes no duty to publicly update or revise any forward looking statements I will now turn the call over to Eric Hambly, Eric Thank.
Eric Hambly: Thank you Kelly good morning, everyone and thank you for joining us on our call today.
Eric Hambly: Looking back on the first quarter I'd like to thank our employees for staying with it as we continue executing our plans I believe we've turned the corner with our operations and I'm pleased our recent success.
Eric Hambly: Turning to slide three Murphy remains focused on our operational excellence multi basin portfolio expansion and capital returns to shareholders Murphy drilled our longest laterals in company history in the Eagle Ford Shale and Tupper Montney as we advance our onshore program in the first quarter, keeping our teams safe while we execute on.
Eric Hambly: Our operations is extremely important and I'm excited that early in the second quarter, we achieved 1 million work hours with no lost time injuries on the platform construction for our locked up long or Golden Campbell Field development project.
Eric Hambly: We also announced today further success in building, our Vietnam business and expanding Murphy's multi basin portfolio. During the first quarter, we drilled our second oil discovery in Vietnam at the locked the hull onex or pink camel exploration well.
Eric Hambly: We encountered 106 net feet of oil pay from one reservoir. The company also acquired the pioneer floating production storage and Offloading vessel in the Gulf of America for $104 million net purchase price.
Eric Hambly: Murphy upholds, our commitment of returning cash to our valuable shareholders and in the first quarter shareholder returns totaled $147 million through $100 million of share repurchases and $47 million of dividends.
Eric Hambly: Murphy has an exciting year ahead, and we will execute our plans through the lens of our strategic priorities.
Eric Hambly: Slide four.
Eric Hambly: Murphy has successfully achieved the core objectives of our capital allocation framework since we first announced it nearly three years ago looking.
Eric Hambly: Looking ahead, we will continue to focus on rewarding shareholders for their support and we remain committed to our strong balance sheet and disciplined strategy.
Eric Hambly: Murphy will continue to allocate a minimum of 50% of adjusted free cash flow to shareholder returns primarily through buybacks, we will assess the appropriate shareholder return allocation, including dividend increases under this modified plan and any remaining adjusted free cash flow will be allocated to the balance sheet as we can.
Eric Hambly: To target a long term debt goal of $1 billion.
Eric Hambly: Or if he has a long history of returning cash to shareholders and we look forward to continuing this with $550 million remaining under our share repurchase authorization, including our first quarter 2025 buybacks I'm pleased to share we have repurchased 22% of our total shares outstanding since 2013.
Eric Hambly: <unk>.
Eric Hambly: During the same period Murphy has returned more than $4 billion of cash to shareholders through buybacks and dividends slide five mercury.
Eric Hambly: Murphy produced 157000 barrels of oil equivalent per day in the first quarter was 78500 barrels of oil per day we.
Eric Hambly: We experienced approximately 6000 barrels of oil equivalent per day of production impacts in the quarter due to non operated unplanned downtime in the Gulf of America production curtailments and non operated offshore Canada due to temporary logistics challenges and winter storm activity delaying first production at the <unk>.
Eric Hambly: New more modern number four well and the samurai three well workover.
Eric Hambly: Overall.
Speaker Change: We generated $636 million of revenue for the quarter with an average realized oil price of $72 per barrel natural gas liquids price of nearly $26 per barrel and natural gas price of $2 67 per thousand cubic feet I will now turn the call over to our Chief Financial Officer.
Speaker Change: Sure Tom morale is to share our financial highlights.
Speaker Change: Okay.
Speaker Change: Eric and good morning, everyone.
Speaker Change: Slide six.
Speaker Change: Murphy has made tremendous strides in strengthening our balance sheet over the past four years, which allows us to maintain our capital program and our competitive durable dividend, while investing through the cycle.
Speaker Change: Our financial strategy incorporates diverse marketing plan that enables us to capture natural gas price dislocations, while also realizing premium pricing from our oil weighted portfolio.
Speaker Change: I'm pleased that we have strong liquidity to support our investments with $1.5 billion.
Speaker Change: As of March 31, as well as no near term debt maturities.
Speaker Change: Our disciplined capital spending enables murphy to prioritize adjusted free cash flow for share repurchases potential dividend increases and balance sheet purposes.
Speaker Change: Overall Murphy maintains flexibility as we advance our strategic priorities.
Speaker Change: Slide seven.
Speaker Change: In the first quarter Mercury acquired pioneer floating production storage and Offloading vessel for $104 million net purchase price as well as executed a new five year operating agreement.
Speaker Change: This transaction creates tremendous value for Murphy and reduces our annual net operating expenses by approximately $50 million, thereby achieving a two year payback.
Speaker Change: Additional benefits will be unlocked through further development and exploration in the area.
Speaker Change: We look forward to drilling and bringing online our shadow development well in 2026. In addition to any potential third party tieback opportunities around the F. P. S O.
Speaker Change: With that I will now turn the call over to Chris Laurino Senior Vice President operations. Thank you Tom.
Chris Laurino: Thank you Tom and good morning, everyone Slide nine our Eagle Ford Shale asset produced 25000 barrels of oil equivalent per day in the first quarter with 83% liquids and one gross non operated well came online in cards as a result of our recently enhanced development plan to further improve capital efficiency Murphy drilled the longest Eagle Ford.
Chris Laurino: Scale lateral in company history at 13976 speaking, our Catarina acreage, representing an 8% increase from the previous record. We're also testing two tight turn radius wells to capture additional volumes in the completion process and are excited to see the results later this year.
Chris Laurino: The second quarter 18 operated Karnes wells are now producing and we anticipate three operated cat Arena and three operated Tilden wells to come online later in the quarter as well as 11 gross non op Karnes wells.
Chris Laurino: Slide 10.
Chris Laurino: Murphy produced $340 million.
Chris Laurino: 40 million cubic feet per day from the Tupper Montney in the first quarter and brought on line five wells as plan. The remaining five wells of our 2025 program came online early in the second quarter, which wraps up our well delivery schedule in the area for the year with our enhanced development plan Murphy recently drilled our two longest lateral tupper montney wells and company.
Chris Laurino: History, and more than 13600 feet, each with the longest representing a nearly 4% increase from the previous record.
Chris Laurino: Murphy is always striving to improve our operations and we tried a new completion style with enhanced proppant loading in the Tupper Montney. We're pleased with the early results at least seen more than 30% increase in initial production rates compared to our historical performance I'd also like to highlight that with our new wells now online we have reached our Tupper west plant.
Chris Laurino: City and are currently producing nearly 500 million cubic feet per day from our Tupper Montney asset.
Chris Laurino: Slide 11.
Chris Laurino: Murphy produced 4000 barrels of oil equivalent per day from the K, Bob Duvernay in the first quarter was 71% liquids. We're on track to bring four wells online in the third quarter as well has drilled two wells in the fourth quarter that will be completed in 2026.
Chris Laurino: Slide 12 in the first quarter Murphy's offshore assets produced a combined 71000 barrels of oil equivalent per day with 83% oil.
Chris Laurino: We brought online a new more modern number four well in the Gulf of America during the first quarter and progress the samurai number three workover, which return production early in the second quarter, while our plans were impacted due to winter weather activity. We are advancing work on the remaining two workovers and are on track to wrap up in the third quarter.
Chris Laurino: Slide 13.
Chris Laurino: The Bang or Golden Campbell Field development project in Vietnam is progressing and we're excited to have commenced construction on the floating storage and offloading vessel in the first quarter. The team also reached a significant milestone milestone early in the second quarter as we achieved 1 million work hours with zero lost time injuries on the platform construction Murphy.
Eric Hambly: <unk> recently signed a rig contract and we will begin development drilling later this year ahead of first oil in the fourth quarter of 2026 with ongoing development through 2029 with that I'll turn the call back to Eric.
Eric Hambly: Slide 15, Murphy maintains a focused and meaningful exploration strategy with a near field infrastructure led program in the Gulf of America and high impact growth opportunities targeted internationally, we've made purposeful investments in the data behind our portfolio, allowing us to mature our understanding of the basins.
Eric Hambly: And support future leasehold expansion.
Eric Hambly: Our current international priorities in particular offer a unique combination of development and exploration opportunities in offshore Vietnam and coated wall and we are excited to advance these projects in the coming years.
Eric Hambly: Slide 16.
Eric Hambly: If he plans to drill two operated exploration wells in the Gulf of America in the second half of this year for an estimated net cost of $18 million per well, we're targeting lower risk opportunities near existing infrastructure and highlight that the cello number one and banjo number one prospects are located near the Murphy operated Delta.
Eric Hambly: <unk> floating production system.
Eric Hambly: Slide 17, we're excited to announce that in the first quarter, we drilled an oil discovery at the locked the Hong Onex, Pink camel exploration well in Vietnam the <unk>.
Eric Hambly: Well was drilled to a total depth of 13616 feet and 151 feet of water and accounted 106 feet of net oil pay from one reservoir.
Eric Hambly: Just on these results we estimated preliminary means upward gross resource potential of 30 to 60 million barrels of oil equivalent.
Eric Hambly: We also conducted a flow test and achieved a maximum flow rate of 2500 barrels of oil per day.
Eric Hambly: Additional testing showed high quality oil with an API gravity of 38 degrees. We are continuing to review the results of this discovery and highlight that it enhances the value of Mercury's growing Vietnam business, when coupled with our nearby locked on Golden Camel development and recent highest Duval Goldman Sea Lion does.
Eric Hambly: February <unk>.
Eric Hambly: Slide 18 earlier this year, we announced a significant oil discovery at the highest you Bong Golden Sea Lion exploration, well, where we encountered 370 feet of net oil pay from two reservoirs and achieved a facility constrained flow rate of 10000 barrels of oil per day.
Eric Hambly: I am excited to drill the appraisal well in the third quarter to better understand the resource potential of HIFU molecule.
Eric Hambly: Slide 19, another major component of our exciting exploration portfolio as our upcoming three well program in coated wall beginning in the fourth quarter with the savate well on block Ci five zero to this.
Eric Hambly: This well is targeting a mean to upward gross resource potential of $440 million to 1 billion barrels of oil equivalent and is an opportunity for us to target significant resource potential at a relatively low cost.
Eric Hambly: Followings, Tibet Murphy plans to drill the kobus and Cara call exploration wells in 2026, which will also target potentially sizable resources, while allowing Murphy to test a variety of exploration play types near recent peer discoveries.
Eric Hambly: Slide 21 for the second quarter of 2025, we forecast production of 177 to 185000 barrels of oil equivalent per day, with 48% oil volumes as well as accrued capex of $300 million.
Eric Hambly: While this represents a 15% increase over first quarter production, we brought online at nearly 30 onshore wells in the past two months as well as two key Gulf of America Wells and I am pleased that we are today, producing well over 180000 barrels of oil equivalent per day.
Eric Hambly: We are reaffirming our 2025 accrued capex range of $1 <unk> 5 billion to $1 285 billion.
Eric Hambly: Which includes net acquisition capex of $104 million for the peso at $1 4 million for non operated working interest near the zephyrus field in the Gulf of America.
Eric Hambly: Mercury maintains our full year production range of 174, and a half to 182 and a half thousand barrels of oil equivalent per day with 50% oil volumes due to the first quarter impacts we experienced in the Gulf of America, we anticipate full year production to be toward the lower end of this range.
Eric Hambly: Slide 22.
Eric Hambly: I'd like to highlight that Mercury strategy over the next two years is unchanged as we deliver low single digit production growth from our existing assets as we execute high returning oil weighted offshore projects, while maintaining Eagle Ford shale and Tupper Montney production, we will look to achieve organic growth from Vietnam as well as potential development at par.
Speaker Change: <unk> and <unk>.
Speaker Change: Murphy's team will also continue our plan to drill several meaningful international exploration wells over the next 12 months, which will test perspective unrest resources that equal five times. Our current offshore proved reserves overall, we're committed to returning cash to shareholders through our capital allocation plan.
Speaker Change: And achieving our $1 billion that goal.
Speaker Change: Slide 22.
Speaker Change: Our existing business, coupled with what we plan to accomplish through our growth opportunities creates a long runway of success for Murphy, our multi basin portfolio allows us to achieve our goals of oil weighted growth and excess cash flow generation for shareholder returns.
Speaker Change: We also have multiple exciting high impact international projects ahead, while we continue infrastructure led Gulf of America exploration in our own backyard exploration.
Speaker Change: Exploration will remain a key differentiator and value creator for murky for many years to come and I'm excited for what is ahead with that I will now turn the call over the operator for questions.
Speaker Change: Thank you, ladies and gentlemen, we will now conduct a question and answer session. If you have a question. Please press star followed by one on your Touchtone phone you will hear a one chunk pumped acknowledging Glenn request your questions will be pulled into or dirty I receive.
Speaker Change: We would like to decline from the polling process. Please press the pound key.
Speaker Change: Our first question comes from the line of Ireland <unk> from J P. Morgan Your line is open.
Speaker Change: Yeah, good morning, Eric and team.
Speaker Change: Eric It appears that you're sticking with your capital.
Speaker Change: Allocation for 2025, but my question is for you and Tom How do you think about your game plan in a lower oil price environment call. It if we if we if things settled out call. It in a in a mid fifties kind of environment. How do you think about your program which is.
Speaker Change: <unk> bin.
Speaker Change: Citing call it $1 one to $1 3 billion of Capex as you move some of these development projects through the queue.
Speaker Change: Yeah. Thanks, Arun, obviously, a very logical question, considering where we are today.
Speaker Change: At this time as you can see from our release, we think it's appropriate to maintain our 2025 capital plan. We've made significant progress in Delevering, our balance sheet and in general we want to position ourselves to continue investing in high returning exploration and development projects through near term volatility and.
Speaker Change: The position to capture upside to commodity prices in the future.
Speaker Change: We think it's important that we balance the tradeoffs between investing in our assets returning value to our shareholders and protecting our solid really industry leading balance sheet.
Speaker Change: We will continue to monitor the situation carefully monitor oil price environment and as we've demonstrated in the past we will continue to act with financial discipline. So.
Speaker Change: So while we're not recommending are proposing a change in our 25 capital plan now we're aware and we're watching we have identified opportunities to significantly reduce spending in 2025 and will be more likely to implement those changes if it.
Speaker Change: It looks like oil prices will be below $55, a barrel for the remainder of the year at.
Speaker Change: At $55 a barrel for three of the year, we see average price around $60, a barrel, which is very comfortable for us with our dividend and our capital plan, but if we see lower prices and we think theyre going to be longer than we would be more likely to move on some of the things. We've identified some of the opportunities we've already identified to reduce spending in 2025.
Speaker Change: Include not drilling Eagle Ford shale wells in the third and fourth quarter, which are designed to come online in early 2006, we could delay those.
Speaker Change: We could not complete our four well K, Bob Duvernay pad that we're nearly done drilling.
Speaker Change: We could not begin drilling in the Tupper montney and they came up duvernay in the fourth quarter, which is our plan for the year to kind of get a head start on winter drilling season, we could also dropped our planned development while activity in the Gulf of America and go to a very limited program of activity offshore in our operated business.
Speaker Change: This.
Speaker Change: Those changes that I just ran through would have very limited impact to our 2025 production profile, but they would have a more significant impact to 2026, and so we're going to kind of watch the situation carefully and evaluate again trying to have a balance and try to assess whether oil prices are short lived or longer.
Speaker Change: <unk>.
Speaker Change: Now having said all of that great. There we are not where we are not likely to make some change I'll just highlight.
Speaker Change: We are unlikely to stop our development program in Vietnam and are locked up long development. The Goldman Campbell, we're likely to see that through remember that first oil is expected there in the fourth quarter segment second half of 2026.
Speaker Change: We're also because we see the value creation potential of our Vietnam appraisal of the highest too long discovery and our code of watch duration program, we think that the value creation potential there is really significant and we're unlikely to not do those those are things that we think are really worth doing considering the long term midterm value creator.
Speaker Change: Isn't there.
Speaker Change: When we think about 2026.
Speaker Change: If we expected average oil prices in 2026 to be below a $55. A barrel then we would likely come up with a capital plan in 2006 that had a reduction of capex by say, 20% to 40% from the one one to $1 $3 billion level that we've previously communicated.
Speaker Change: To expect from us kind of on a long term basis.
Speaker Change: And the types of cuts that I talked about for 25 would be the sort of thing that we would do in 2006, we could have a very limited onshore program for example.
Speaker Change: Hope that helps.
Speaker Change: Okay.
Speaker Change: That's super helpful. Thanks for going through.
Speaker Change: Your thought process there makes it makes a lot of sense to us.
Speaker Change: Maybe a follow up.
Chris Laurino: I wanted to get your thoughts Eric and how the recent discovery in Vietnam impacts the L. D V. A development plan I know you're you're.
Speaker Change: The platform.
Speaker Change: The a platform in 2026, and then you are scheduled to do the <unk> platform and call. It. The 2028 timeframe. How does this discovery impact the development and planet of the old Navy.
Speaker Change: It's a great question. So we're really happy with this discovery.
Speaker Change: Nice sized 30 to 60 million barrels.
Speaker Change: And just a few miles away from the locked along development and the way that this will likely unfold of course, we still have work to do with field development planning, but the way. This will likely unfold is we'll probably set a wellhead platform at our recent discovery locked the hull and have wells drilled there and have production be prop.
Speaker Change: <unk> from the locked up on a platform, which we will bring online in 2026, so it's going to be a very capital efficient project with an ability to probably get online faster rather than slower.
Speaker Change: We're gonna be moving rapidly to develop and get approved from partners and government a field development plan to do that work.
Speaker Change: I would hesitate to give you exact timing of when that would happen because we have a long way to go with approval process, but I would imagine before the end of the decade that that we'd have that online.
Speaker Change: Yeah.
Speaker Change: Great. Thanks, a lot Eric.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Greg that there from Goldman Sachs. Your line is open.
Greg Theroux: Good morning, and thank you for taking my question I was just wondering if you could speak a bit about how the caliche number two in Martin Malloy number three workovers currently underway are trending what operational steps remaining and if there's any incremental color you could provide on their timing.
Speaker Change: Yeah, I might have Chris Laurino dive in there and give you some details on that yes.
Chris Laurino: Yes, all of them.
Speaker Change: Yeah, I'll talk about the police to first it's.
Speaker Change: We've just got on the <unk>, two and <unk> three Workovers, we mentioned the kind of winter storms that pushback samurai three.
Speaker Change: So we're kind of toward the beginning stages, but things are moving along like we had hoped and.
Speaker Change: And as far as our Opex goes for our work overs. We did have some opex slide in from Q1 to Q2, but even with <unk> III slipping into Q3, we're looking at getting back to our normal Opex run rate around 10 to $12 per Boe for the back half of the year.
Speaker Change: We feel comfortable about the <unk> being done in the second quarter.
Speaker Change: And the normal our three well being down in the third quarter and making good progress.
Speaker Change: Great. Thank you and then my second question I was wondering if you could comment on your <unk> exposure to current prices for the remainder of the year and into 2026, how many months out deeper carrier still for your onshore operations and what sort of impact your well costs are you currently embedding in your outlook.
Speaker Change: I may give some high level comments and then maybe Tom can provide additional detail since he's runs our supply chain organization and they've done a fabulous job.
Tom: I would characterize in general with all the pluses and minuses in our supply chain.
Tom: We feel that our onshore wells are effectively have flat total costs for.
Tom: For the year compared to prior year, we do see some pluses and some minuses.
Tom: Rig rates in 2025 for Eagle Ford are lower than 2024, we do see a little bit of pressure on tubular goods, maybe in the second half of 2025, but it's fairly limited I think we're thinking of a 3% to 5% type of impact on potential exposure in Cana.
Tom: The onshore our program of course is nearly done, but we saw effectively flat cost year over year. So we don't see an issue there and offshore.
Tom: Seeing a reduction in drillship cost.
Tom: We'll see a reduction in diesel costs, which is material probably seeing slight pressure on OTT G.
Speaker Change: In General I think our team has done a great job of securing the equipment that we need and most of the things that we need are already in country and not subject to tariff pressures. This year I don't know Tom if you want to add any more commentary on that Erik I think you covered it. It's a 2025, we're in really good shape in particular with our onshore plans and even in 2020.
Tom: Six offshore we have along with a lot of long leads that we'd already locked in place.
2025.
Tom: I would say 70% of our spend is in the U S. The remainder is outside of the U S which.
Tom: Is it really subject to tariffs and then 2026, it might be similar or even a little bit more spending outside the U S.
Tom: Okay.
Tom: Great. Thank you.
Speaker Change: Our next question comes from the line of Gavin Mccanless from Morgan Stanley. Your line is open.
Gavin Mccanless: Hey, good morning, Thanks for taking my questions.
Gavin Mccanless: I wanted to ask about the production profile for this year, we will look at <unk> I think it was a mix of non op operated activity in Canada.
Gavin Mccanless: <unk> results the full year guide implies a step up in the back half oil production relative to the first half. So I was hoping you could talk through.
Gavin Mccanless: Some of the key drivers of that the <unk> step up and then the incremental growth in the back half and just the confidence in achieving kind of the implied full year oil guidance range.
Gavin Mccanless: Yes, that's a great question Devin done so one of the things that I'm really happy with is.
Gavin Mccanless: The bulk of our onshore program is online right now are our karnes wells, which are highly productive are all flowing today and they're performing really well our tupper Montney 10, well program are all online and frankly exceeding our expectations. So I'm really feeling very confident that we've turned the corner operationally here and the production rates.
Gavin Mccanless: We're already seeing in this quarter give me quite a bit of confidence in our ability to deliver our guide for the second quarter.
Gavin Mccanless: If you move through the rest of the year, we will bring on the remainder of our onshore wells. So that'd be more operated and non operated Eagle Ford wells in the third quarter.
Gavin Mccanless: And also our K, Bob Duvernay, four well pad and so you see production in the third quarter increase a bit from the first and then the fourth quarter, probably start to see a little bit of a decline from the high of the year, which would be in the third quarter.
Gavin Mccanless: Got it Okay. That's really helpful. And then you provided a lot of great detail on our response.
Speaker Change: One of the earlier questions on just capital allocation and thoughts about where you could trim capital and a loyal lower oil price environment.
Speaker Change: World, where oil softens, but natural gas prices stay strong or improve further we have a tremendous amount of gas resource in Canada, but what what milestones or what benchmarks, we need to see in order for that to become more competitive for further growth I understand there is capacity constraints on the processing plant right now but are there.
Speaker Change: Environments, where that would actually compete for capital more and not be an area, where your trend when you look out over the next few years.
Speaker Change: Yeah, I think what you mentioned was is really important we do have a plant capacity issue that.
Speaker Change: We are currently have a plant for a tougher west which is where the bulk of our copper production comes from.
Speaker Change: So the ability to add more there and they really short run is limited, although and I've mentioned this in past calls I think.
Speaker Change: We could see commodity price signal there that would cause us to have more investment in wells. So we maintain the plant full for a large longer part of the year. Our typical plan over the last few years has been to build a plant and the plant stay full for a while and then after a lot of.
Speaker Change: Many months of no new wells, we declined from the peaks. So we could potentially have another another pad wells. Another five wells are three wells that could allow us to maintain our plant at a higher capacity. That's something we could do well are fairly short cycle. That's something that we think about the model we evaluate.
Speaker Change: I'll be watching that as we think Canadian gas prices may improve materially in the second half of 'twenty five with LNG, Canada finally taken some volumes to the west and so it's something we'll watch and monitor the capital efficiency of our Tupper wells there is tremendous and we're getting wells this year that are.
Speaker Change: Producing early days at 17% to 25 million cubic feet per day. These wells cost us about $5 million 505, $5 million and so it's pretty easy.
Speaker Change: To spend that.
Speaker Change: Really capital efficient to bring on gas if we saw high enough gas price the concern I have and that we were we've been fairly careful about.
Speaker Change: Is historically with a high price signal every single player in Western Canada has pretty significant capital efficiency and they spend money to bring on new wells and gas price is negatively affected so it's something that we're going to be watching carefully if.
Speaker Change: If we think theres, a durable higher price than we have a great opportunity to short cycle of invest into that but we're going to be watching the larger macro issues pretty carefully before we make that decision.
Speaker Change: It makes a lot of sense. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Paul Cheng from Scotiabank. Your line is open.
Speaker Change: Hey, guys good morning.
Speaker Change: Paul.
Speaker Change: Eric.
Speaker Change: I don't know whether this is a fair question.
Speaker Change: Looking at the in the first quarter.
Speaker Change: Free cash flow negative and you spend 100 million in buybacks just curious that I mean, how we contemplate that the board is thinking about the buyback.
Speaker Change: It says we need such a quick idea, especially given the uncertainties that we are seeing.
Speaker Change: To buy back stock and bond borrowing money, which you draw down on your credit facility and obviously that with the uncertainty. It could also come with opportunities. So should we tried to have a stronger balance. So in the event that you have opportunities that come up that you can Australia I mean given.
Speaker Change: We actually have a very good track record in terms of acquisition.
Speaker Change: That's the first question.
Speaker Change: Well, it's a great question.
Speaker Change: The draw on our revolving credit facility, primarily driven by a $100 million share repurchase and the capital weighting of our.
Speaker Change: First quarter capital weighting of our program, including the purchase of the DSO I think we did a really good deal with that at BSO oil price independent about two year payout and it really helps us unlock an opportunity there so pleased with that and when we repurchased $100 million of our stock in the first quarter and we.
Speaker Change: Pretty significant oil prices in the first quarter and our view at the time that they were going to remain to be fairly significant. So we felt were our shares were trading at the time represented a significant disconnect in intrinsic value and it made sense to do that obviously commodity prices have softened since and it's something that we're watching carefully we.
We do we do in general want to be very disciplined around protecting our balance sheet. So we're not likely to spend at a point, where we would take on significant debt, we're going to be very careful about that but we will also potentially be opportunistic if we see a very large disconnect between our share price and what we think it's worth so.
Speaker Change: I don't want to get in front of a board decision around what we might do about further share repurchase obviously there'll be limited.
Speaker Change: Adjusted free cash flow, which as of November after our dividend.
Speaker Change: With oil prices in the low fifties so.
Speaker Change: Taking on debt to buyback our stock is something that we would consider but it's probably not likely.
Speaker Change: Okay Hum.
Speaker Change: Second question that.
Speaker Change: The BW pioneer them yet.
Speaker Change: These then looked to us that is a great deal I mean, two year payback.
Speaker Change: A lot of the pushback that we heard from Titan is that a.
Speaker Change: Normally that no one can we sign a deal with that too.
Speaker Change: And what I stand point that to do a two year buyback.
Speaker Change: So is there any kind of covers additional would need that you can put one watt incentive nice soda to sale at.
Speaker Change: At this price.
Speaker Change: Yeah. So the seller was looking for two things.
Speaker Change: <unk> and what to expect from potential ability to make money there and also to raise cash for other issues and the rest of their business is the only <unk> operating for them.
Speaker Change: In the Gulf of America.
Speaker Change: And at some point they decided it wasn't something they wanted to keep on owning.
Speaker Change: And we were happy to do a deal there that we think was a good deal and we are we did award a contract to the seller to continue to operate there had been a very.
Speaker Change: Very good operator for us on the asset. So we are paying them to operate on our behalf and theyre, making a little money doing that and theyre happy with that the certainty that that cash flow provides for them and they were able to address other corporate needs for cash and I think it was a win win deal for both parties and we're pretty pleased with it.
Speaker Change: Alright, thank you.
Speaker Change: Paul.
Speaker Change: Our next question comes from the line of Charles Meade from Johnson Rice. Your line is open.
Speaker Change: Good morning, Eric Tom, Chris and the whole Murphy team there.
Speaker Change: Just wanted to go back to the.
Speaker Change: Two what's happening in the Gulf of Mexico, if I'm understanding things correctly.
Speaker Change: It's your activity, including your planned activity in.
Speaker Change: With these workovers, that's really the big variables about how the 25 production will play out so.
Speaker Change: Can you talk a little bit more about what those those two workovers alright, Khaleesi Malm Malm lauded I'm thinking along the lines of are these relatively.
Speaker Change: Simple zone changes moving up the hole or are they are they more complex things, where youre trying to remediate sand or water production or something like that.
Speaker Change: Okay. Yeah, Let me let me tell you what we're doing there and then I'll go back and talk about the production impact for the year.
Speaker Change: The Khaleesi too well is a investigating what we believe is a failed safety valve that's a fairly simple thing to fix we pull the tubing out of the well and rerun tubing with a new safety valve in the world So something that is routine.
Speaker Change: Frustrating and disappointing that we have to do that obviously thats not something we expect especially from a relatively new well, but it's a pretty quick fix.
Speaker Change: The <unk> three is to do a sidetrack and new completion of an existing well that's a slightly more involved activity and that's why it'll take a little more time, and we will wrap it up in the third quarter.
Speaker Change: Production impacts for the year, we highlighted some of the downtime we had in the Gulf from non operated assets and also from offshore Canada.
Having obviously, a first quarter impact the other issue, which maybe is a little more nuanced is.
Speaker Change: The rigs that we had doing work at <unk> and samurai three that are now online we were a little slower in conducting the work that we have been doing on those because we had winter storm activity that made periods of time, where we couldnt be productive with the use of the rig. So we had we had nonproductive time, which delayed them coming online now.
Speaker Change: The normal art and the Khaleesi well activities are using the same two rigs so the rig out to the <unk> II and <unk> III later than we originally expected for the year and then we just have to execute those and they're going well now, but it's hard to go back in and make the rigs show up earlier that happened already.
Speaker Change: I don't think no.
Speaker Change: That does help that.
Speaker Change: That's the kind of thing that.
Speaker Change: That wouldn't necessarily be obvious if you just looked at the presentation. So I appreciate that.
Speaker Change: I wanted to ask a question on my second follow up on on Vietnam and so.
Speaker Change: This most recent recent discovery look I think it's a up it's obviously going to be a good piece of business in shallow water nearby existing development, but I wanted to ask you. It looks like it came in a little smaller than your pre drill and I wondered if you could tell if theres any what the relationship if any years between what.
Speaker Change: You've found in this zone.
Speaker Change: And what you found in your the two zones you found in your earlier earlier Vietnam discovery.
Speaker Change: And if anything you saw in this most recent one is going to affect or inform how you design your appraisal well on that earlier larger discovery.
Speaker Change: That's a great question Charles.
Speaker Change: We did have a post drill result that we believe is a bit lower than the pre drill.
Speaker Change: <unk> expected that we pre drill we expected that we would encounter oil and multiple pay sands, we ended up encountering what's a nice discovery in one pay sand.
Speaker Change: Pay sand is the same.
Speaker Change: H reservoir.
Speaker Change: As our HIFU Bong Oracle in CLI and discovery.
Speaker Change: What is significant about the relationship between the two is that the locked to hog. The most recent discovery and Campbell was drilled at a depth that is now deeper than the highest you bong disc.
Speaker Change: Discovery at the say in the same pace and they are separated structurally separated from each other.
Speaker Change: Encountering oil deep in the <unk>.
Speaker Change: Overall system and demonstrating that that locked the Hong recent discovery was able to flow at commercial rates is very encouraging for us so distribution of sand depth of oil productivity of the well reservoir quality all those things are encouraging for further appraisal at high single.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Carlos Escalante from Wolfe Research. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Right.
Speaker Change: Luke.
Speaker Change: And I guess I'd like to ask about.
Speaker Change: He had nam as well.
Speaker Change: Adding a lot of my colleagues.
Speaker Change: Comments.
Speaker Change: The results are.
Speaker Change: There are certainly encouraging and I think that it continues to derisk a development at scale.
Speaker Change: But just along those same lines of what you said, Eric the reservoir quality, if you compare and contrast, both HSV versus LDH.
Speaker Change: I think on your opening remarks, you mentioned that the flow rates for this latest well came at 2500.
Speaker Change: Max flow rate capacity.
Speaker Change: Whereas if I compared to your <unk> comments, where you mentioned that the 10000 barrels of oil per day, we're facility constrained.
Speaker Change: Not sure if we're reading too much into this but was hoping that you guys can perhaps elaborate a little bit on what you're seeing in terms of.
Speaker Change: In apples to apples comparison of the flow rates and you know.
Speaker Change: Also qualify for how long did this wells flow at such rates because that matters as much as the size of the flow rate.
Carlos Escalante: Carlos I appreciate that.
Speaker Change: When we do these slow tests.
Carlos Escalante: Wells will flow for days.
Carlos Escalante: We conduct flow test that a variety of production rates and we do pressure buildup testing to learn as much as we can about the reservoirs.
Carlos Escalante: Typically toward the end of one of these tests, we do flow the wells at a maximum rate just to get a sense for the total deliverability that's possible. So over the wells flow per days, but the highest production periods are hours long there theyre not minutes long their hours long and theyre not days long so.
Carlos Escalante: We're pretty comfortable that they tell us quite a bit about the ability of the reservoirs to produce.
Carlos Escalante: I'll note that the pay thickness of the recent discovery locked to Hong and Camel.
Carlos Escalante: <unk> is about one third of the thickness in the main pay sand that we tested flow tested at the highest volume discovery.
Carlos Escalante: Because we found that thinner pay we would expect it to produce at a lower rate. So if you adjust for pay thickness. There. There is similar the blocked the Hong maybe a slightly.
Carlos Escalante: Slightly less productive per foot than the high <unk>, but we're really happy with it. It's clearly commercial typical production rates in this basin are.
Carlos Escalante: In 2500 barrels per day per well, we're really pleased obviously with the strong flow rate from hiseq wrong, and they're really quite.
Carlos Escalante: Compelling flow rate from locked at home.
Carlos Escalante: So just to clarify both were both flow rates are at facility constrained levels correct.
Carlos Escalante: No.
Speaker Change: Hi, Sue long that we announced the result earlier in the year was at a facility constrained level 10000 barrels a day lots of Hong produced what the well could deliver it was less of a production rate primarily because it's three times thinner.
Carlos Escalante: You would expect.
Carlos Escalante: The thickness.
Carlos Escalante: Driving partly the production rate potential.
Speaker Change: Gotcha, Alright makes sense and then for my second question on Cote d'ivoire, we're going to talk about that for a minute.
Speaker Change: What are you looking for on those doing exploration success and knowing that theres been some.
Speaker Change: Adjacency it says in the recent <unk>.
Speaker Change: Often times with other companies what are you looking for there and how do you benchmark that.
Speaker Change: And plan for 2026 and 2027 in the event of a successful campaign up there.
Speaker Change: Carlos we provide on our slides quite a bit of detail around expected resource ranges for the three prospects that we expect to test.
Speaker Change: We provide details on those the Savannah.
Speaker Change: The mean is 440 million barrels with a potential up to $1 billion. The kobus is expected to be fairly similar with our higher end a bit higher but maybe over $1 2 billion.
Speaker Change: I recall prospect, which is Blaine look alike is probably 150 million barrels up to 360 million barrels. So these are really sizable opportunities for us we still have to award a rig there do the work and finalize our well costs, we're talking about wells that are around $50 million to $60 million.
Speaker Change: Peace and to test these type of volumes.
Speaker Change: Well cost is really compelling for us to fiscal terms, while I can't give you all the details they were very strong the fiscal regime and go to work.
Speaker Change: Has.
Speaker Change: Has metrics financial metrics that are not very different from the United States, which is the best fiscal regimes in the world. So we're really happy with the potential here to find significant resource tested with low well costs and with success can be very profitable for us the savate prospect, which is likely to be our first well, which we'll drill later this year.
Speaker Change: <unk> is geologically very similar to Eni's moraine onex or callout discovery that was announced in March of 'twenty, four and the Caracol prospect is very similar to the Blaine producing field.
Speaker Change: Which obviously gives us quite a bit of confidence that we have some nice looking prospects here.
Speaker Change: This prospect is more frontier testing two different play types and one well and we're really excited at the potential there is material. The other thing I'll point out is with success here. There is significant running room on other prospects on these blocks. So potentially this could be really exciting for us. If we have success in any of these prospects.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Tim <unk> from Keybanc capital markets. Your line is open.
Speaker Change: Good morning folks and thank you for taking my questions.
Speaker Change: I just wanted to kind of close the loop on repurchases.
Speaker Change: Absent following.
Speaker Change: A pretty heavy first quarter.
Speaker Change: Just to clarify is it safe to say you are still in the market, but you're obviously.
Speaker Change: But keeping an eye on.
Speaker Change: Negative free cash flow for the year I'm, just trying to understand I know you won't talk about the amounts and timing, but is it safe to say that you're still going to remain active to some extent going forward.
Speaker Change: The way I would characterize it is we.
Speaker Change: We will not preclude being opportunistic, but we are very attentive to paying careful attention to our balance sheet, we like our industry, leading balance sheet, we're going to protect our industry leading balance sheet. We think we have a good dividend policy, we're happy with the share repurchase we've done in the past, we won't preclude doing it but we're probably not leaning into it too heavily.
Speaker Change: Okay.
Speaker Change: Cancer. Thank you.
Speaker Change: And then just again one more on Vietnam.
Speaker Change: As the platform construction continues.
Speaker Change: I know, it's easy for me here.
Speaker Change: The U S to say this but why wouldn't you kind of incorporate this.
Speaker Change: Exploratory success from from LDH, given its three miles away are you sort of set in stone with.
Speaker Change: The process you have in place.
Speaker Change: Why wouldn't you kind of pull that value forward, if its just a three mile tieback to that facility.
Speaker Change: I guess the bigger question is sort of how we should think about gross flow rates at that facility from startup and <unk> 26, I'm just trying to kind of get a little more context on that thank you yeah, great Great question, Tim So.
Speaker Change: Recent discoveries lots of hauling or pink camel like I said earlier, we expect that that will probably be developed with wellhead platform tied into the production facility and locked up on a which is the first platform that will come online.
Speaker Change: We will need.
Speaker Change: Another platform to be able to drill wells that we can produce so we don't expect we'll be able to drill wells from locked up long a platform to develop the locked the Hong discovery.
Speaker Change: So a fairly simple wellhead platform with which we can be the basis of the location of the drilling wells.
Speaker Change: Is likely the development concept there now we can incorporate that in to the production platform and the <unk> that are already part of the locked among development, which should allow us to speed up the development. It was a standalone with its own processing platform and own oil storage than it would be a slower development. So in a sense, what we're saying.
Speaker Change: As we believe the.
Speaker Change: <unk> plan will be an accelerated version of a development and that's why I think it's possible that we could be producing there before the end of this decade.
Speaker Change: Total capacity of the facility is probably 30000 barrels a day gross.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Leo Mariani from Ross Your line is open.
Speaker Change: Hi, guys wanted to follow up a little bit on activity levels. So.
Speaker Change: I appreciate all the commentary around.
Speaker Change: Looking to cut activity if oil is below <unk>.
Speaker Change: $5, a barrel sustainably you talked about a potential rather substantial cut of 20% to 40% next year, but just wanted to kind of.
Speaker Change: Investigate potentially a middle ground scenario I mean, what if oil is closer to 60 do you guys kind of hold firm on sort of that capital spending range. The one one to one three or is there kind of somewhere in the middle where maybe there is some more modest cuts as we look forward here.
Speaker Change: That's great question.
Speaker Change: We really feel comfortable with the kind of capital level that we've been guiding the $1. One to one 3 billion at oil prices that are anywhere from the high <unk> to low $60 a barrel of UTI.
Speaker Change: So that so it's a good question. So I think that if we thought we would have sustained 2026 oil prices that would be 60 to $58 something like that we would probably have a more significant capital program closer to what we've been guiding long term with that type of oil price were able to easily manage our dividend.
Speaker Change: And the capital program at that level, we would likely not have material free cash flow beyond that for debt reduction but.
Speaker Change: That we'd be happy with that and I think considering that it quite a bit of our capital investment is middle or longer cycle, and if you think that oil prices towards the later half of the decade are going up because of exhaustion of top tier shale than we think it would make sense to kind of invest through the cycle, especially with oil kind of in the low 60 high <unk>.
Speaker Change: Range.
Speaker Change: Okay. That's helpful.
Speaker Change: And I guess just on offshore Canada, obviously, you guys had a bit of a hiccup there in the second in the first quarter. We lost some volumes it seems like it's kind of been.
Speaker Change: The ongoing problem.
Speaker Change: For a while where volumes I don't think ive been what you guys wanted them to be and could you maybe just give a little bit more kind of color in sort of a little bit more detailed update on kind of what you see happening there and also just on LOE.
Speaker Change: You guys talked about although coming down in the second half of the year or do you expect it to still be elevated kind of in the second quarter.
Speaker Change: Great questions. So in Canada offshore what happened has really nothing to do with the assets themselves. The Hibernia Terra Nova the issue was a oil shuttle tanker had.
Speaker Change: Our collision with the port and it became unavailable and the operators there had to come up with alternative methods alternative tankers too.
Speaker Change: Deliver the oil from the facility to the.
Speaker Change: Tanker so.
Speaker Change: Really it had nothing to do with the operators or the assets themselves. It was a short lived issue it did impact us Unfortunately, and in fact that everybody is producing offshore Canada.
Speaker Change: We're happy with the performance of the assets other than that and it's an unfortunate incident that affected us a bit but it's not something that is expected to be ongoing its very unusual and it was fairly short lived.
Speaker Change: If you look at operating expenses.
Speaker Change: For the second quarter because of the ongoing work over activity.
Speaker Change: I think that Youll see operating expenses continued to be elevated above sort of our long run level I think you'll see something in the $14 range for the second quarter and I think you'll see that drop into the 10 to $11 range for the last two quarters of the year.
Speaker Change: Yeah.
Speaker Change: Thank you thank.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen.
Speaker Change: Any additional questions at this time. Please press star followed by the number one as a reminder, if you are using a speakerphone. Please lift the handset before pressing the keys.
Speaker Change: Our next question comes from the line of Josh Silverstein from UBS. Your line is open.
Josh Silverstein: Yeah. Thanks, good morning, everybody.
Speaker Change: Everybody is trying to talk about some kind of added flexibility to their programs I'm curious how you kind of think about your Eagle Ford program, It's clearly kind of.
Speaker Change: Wait at the two quarters from a turn in line standpoint as you go forward.
Speaker Change: The most efficient way to operate this asset.
Do you think there could be a little bit more of a balanced approach across the year.
Speaker Change: Josh Thanks for that.
Speaker Change: <unk> been managing our Eagle Ford business. If you go back to say 2021 through 2023, we were running a program that was very heavily weighted to the first two quarters.
Speaker Change: 24, we shifted our program to have a steady drilling operations throughout the whole year and we're.
Speaker Change: Repeating that in 2025, it turns out just based on the amount of activity of drilling in the fourth quarter in the later half of the third quarter, we had planned.
Speaker Change: That we won't get to completing those wells that we drilled late twenty-five until early 'twenty six so the cadence of online. This is still a little bit more weighted to the first three quarters, but our rig activity is constant through the year. So.
Speaker Change: The capital level, we're investing we really cant do more to smooth it out into that.
Speaker Change: Got it understood and then.
Speaker Change: As you guys are starting to.
Speaker Change: Contract out the offshore rigs for exploration and development programs kind of later on this year and into next year.
Speaker Change: What's the current availability look like and how are the discussions on pricing relative to maybe what you saw three six months ago.
Speaker Change: So far our could've what plans we are close to awarding a rig contract there I'd rather not describe exactly what the rig rates are because we have an award of the contract, but we're comfortable that you'll be happy I think with.
Speaker Change: The rig there it won't be.
Speaker Change: Particularly high.
Speaker Change: The rig availability is significant I think we had over 10 rigs participate in our tender process, so quite a bit of.
Speaker Change: Rig activity as possible in Africa and.
Speaker Change: When we get to the point of being able to award a contract will probably be able to say more there in Vietnam.
Speaker Change: The appraisal program that we have coming up we have a rig contract that is.
Speaker Change: Nearly ready to be signed and the rig rate is quite low.
Speaker Change: It is significantly lower than the rig rate we had during the exploration program. So again, when we have those contracts awarded I'd, rather they will talk about later, but we're seeing some softening in rig rates, both in Jackup and Drillships. So.
Pretty happy with that development as it relates to our ability to efficiently.
Speaker Change: Execute our exploration programs.
Speaker Change: Got it appreciate the color.
Speaker Change: Thanks, Josh.
Speaker Change: Our next question comes from the line of Brian Velie from capital One Securities. Your line is open.
Brian Velie: Hey, good morning, everybody I thought that I had jumped out of the queue or at least I tried to kind of beat me to the punch with <unk>.
Speaker Change: <unk> question. So thank you for those comments.
Brian Velie: Happy to hear from you, Brian Thanks, Alright. Thanks.
Brian Velie: Thanks.
Eric Hambly: There are no further questions from our phone lines I would now like to turn the call back over to Eric <unk> for any closing remarks.
Eric Hambly: Thank you for listening to our call today, if you have any additional questions. Please follow up with our outstanding IR team have.
Eric Hambly: Have a good day everyone.
Eric Hambly: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and you may ask that you disconnect your lines.
Eric Hambly: Yeah.
Eric Hambly: Okay.
Eric Hambly: Yes.
Eric Hambly: Yeah.
Eric Hambly: Okay.
Eric Hambly: Yeah.
Eric Hambly: Okay.
Eric Hambly: Yeah.
Eric Hambly: Okay.