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Murphy Oil Corp (MUR) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves and ...

GuruFocus Research
·4-min read

  • Total Production: 170,000 barrels equivalents per day.

  • Revenue: $746 million.

  • Net Income: $90 million or $0.59 per diluted share.

  • Adjusted Net Income: $131 million or $0.85 per diluted share.

  • Adjusted EBITDA: $205 million.

  • Accrued CapEx: $264 million.

  • Dividend: Increased to $0.30 per share quarterly, $1.20 per share annualized.

  • Stock Repurchase: $50 million of stock at an average price of $39.25 per share.

  • Liquidity: $1.1 billion as of March 31, including over $300 million in cash and equivalents.

  • Senior Notes: $1.3 billion outstanding with a weighted average maturity of nearly 8 years.

  • Debt Reduction Goal for 2024: On track to reduce debt by $300 million.

Release Date: May 02, 2024

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

Positive Points

  • Murphy Oil Corp (NYSE:MUR) exceeded production guidance in the first quarter, achieving 170,000 barrels equivalent per day at the high end of the guidance range.

  • The company is on track to achieve its $300 million debt reduction goal for 2024, aiming for a total long-term bond debt of $1 billion by year-end.

  • Murphy Oil Corp (NYSE:MUR) continued its shareholder returns, repurchasing $50 million of stock and maintaining a quarterly dividend increased to $0.30 per share.

  • The company successfully brought the Mormont #2 subsea well back online after equipment repair, enhancing production capabilities.

  • Murphy Oil Corp (NYSE:MUR) was awarded 6 deepwater blocks from the Gulf of Mexico Federal Lease Sale 261, expanding its exploration footprint.

Negative Points

  • The company's Gulf of Mexico assets experienced approximately 13,000 barrels of oil equivalent per day of planned downtime events during the quarter, impacting production.

  • Murphy Oil Corp (NYSE:MUR) faces challenges with the Neidermeyer #1 well workover, leading to a decision to drill a sidetrack well, which delays the online date to the third quarter of 2024.

  • There is significant capital expenditure planned for the first half of 2024, with about 60% of spending expected, which could strain financial resources if not managed carefully.

  • The company's Kaybob Duvernay asset produced lower than expected at 4,000 barrels of oil equivalent per day with 68% liquids in the first quarter of 2024.

  • Murphy Oil Corp (NYSE:MUR) reported workover expenses totaling $50 million for the first quarter, with an anticipated increase to $65 million for the second quarter due to additional planned work.

Q & A Highlights

Q: Could you remind me what bonds, if any, you are able to repay early and what we might see with the incremental free cash flow once you get under that $1 billion to Murphy 3.0? A: Roger W. Jenkins, CEO & Director, explained that Murphy Oil is on track to eliminate $300 million of debt, with nuances in calling the debt at different opportunities. Thomas J. Mireles, Executive VP & CFO, added that they have over $300 million to go to reach Murphy 3.0, with 2027 notes callable today. Post Murphy 3.0, the focus will shift to a more offensive strategy, potentially increasing returns to shareholders or exploring new opportunities.

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Q: What is your opinion on why Murphy Oil trades below some other companies with materially less production? A: Roger W. Jenkins, CEO & Director, suggested that the market might not fully appreciate the company's stable offshore production and diverse portfolio. He emphasized Murphy Oil's strong free cash flow relative to its market cap, which he believes provides a significant advantage.

Q: Can you provide details on the Gulf of Mexico production, specifically the expected improvements and the impact of downtime? A: Eric M. Hambly, President & COO, noted that Gulf of Mexico production was impacted by downtime but is expected to increase throughout the year due to the completion of high-rate wells and new production from the Khaleesi Mormont program.

Q: Could you discuss the Eagle Ford production trajectory for the upcoming quarters? A: Eric M. Hambly, President & COO, explained that Eagle Ford production might dip slightly in Q2 due to maintenance but is expected to peak in Q3 with the completion of the bulk of their operated wells.

Q: Could you give more context on the Niedermeyer sidetrack in the Gulf of Mexico? A: Eric M. Hambly, President & COO, detailed that the original plan to repair a leaking packer in the Niedermeyer well was adjusted to a sidetrack approach to ensure better long-term production and mechanical outcomes.

Q: What are the drivers behind the higher than expected Q2 CapEx? A: Eric M. Hambly, President & COO, attributed the increase primarily to the timing of the North America onshore drilling and completion program, with additional factors including equipment related to the Coles Mormont program and seismic spending.

Q: Can you provide details on the Khaleesi #4 development well? A: Eric M. Hambly, President & COO, shared that the Khaleesi #4 well targets a shallower reservoir not included in the initial field development, with over 200 feet of pay in one zone, expected to produce very well and extend the plateau of the total Khaleesi Mormont Samurai development.

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

This article first appeared on GuruFocus.