Exceeded Upper End of Guidance Range With Production of 202 MBOEPD,
Sanctioned Lac Da Vang Field Development Project in Vietnam,
Executed $249 Million of Debt Reduction, Repurchased $75 Million of Shares Outstanding
HOUSTON–(BUSINESS WIRE)–Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the third quarter ended September 30, 2023, including net income attributable to Murphy of $255 million, or $1.63 net income per diluted share. Excluding discontinued operations and other items affecting comparability between periods, adjusted net income attributable to Murphy was $249 million, or $1.59 adjusted net income per diluted share.
Unless otherwise noted, the financial and operating highlights and metrics discussed in this news release exclude noncontrolling interest (NCI). 1
Highlights for the third quarter include:
Subsequent to the third quarter:
“Murphy had another great quarter with strong execution across our assets, resulting in significant free cash flow that we dedicated to paying down debt and repurchasing stock in accordance with our capital allocation framework. We also utilized part of the proceeds from the divestiture of a non-core portion of our Canadian assets to support our new country entry in Côte d’Ivoire and advance our Lac Da Vang field development project in Vietnam,” said Roger W. Jenkins, President and Chief Executive Officer. “I am delighted we are progressing our strategy of Delever, Execute, Explore, Return as we close out 2023, and I look forward to Murphy’s many opportunities in the new year.”
THIRD QUARTER 2023 RESULTS
The company recorded net income attributable to Murphy of $255 million, or $1.63 net income per diluted share, for the third quarter 2023. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $249 million, or $1.59 adjusted net income per diluted share for the same period. The only adjustment to net income this quarter was foreign exchange gain totaling $9 million before tax. Details for third quarter results and an adjusted net income reconciliation can be found in the attached schedules.
Earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to Murphy were $595 million. Earnings before interest, tax, depreciation, amortization and exploration expenses (EBITDAX) attributable to Murphy were $618 million. Adjusted EBITDA attributable to Murphy was $597 million. Adjusted EBITDAX attributable to Murphy was $620 million. Reconciliations for third quarter EBITDA, EBITDAX, adjusted EBITDA and adjusted EBITDAX can be found in the attached schedules.
Third quarter production averaged 202 MBOEPD and consisted of 51 percent oil volumes, or 103 MBOPD. Production for the quarter exceeded the upper end of the guidance range due to several factors, including strong well performance across onshore assets, lower realized royalty rates in the Tupper Montney natural gas asset and outperformance in the Gulf of Mexico due to an absence of hurricane downtime. Details for third quarter production can be found in the attached schedules.
FINANCIAL POSITION
Murphy had approximately $1.1 billion of liquidity on September 30, 2023, with no borrowings on the $800 million credit facility and $328 million of cash and cash equivalents, inclusive of NCI.
On September 15, 2023, the company announced the redemption of its remaining $249 million of 5.75 percent Senior Notes due 2025. Murphy funded the redemption during the third quarter and the obligation was satisfied. As a result, at the end of the third quarter, Murphy’s total debt was reduced to $1.6 billion, and consisted of long-term, fixed-rate notes with a weighted average maturity of 7.8 years and a weighted average coupon of 6.2 percent. Overall, Murphy has achieved a 47 percent, or $1.4 billion, reduction in total debt since year-end 2020.
SHARE REPURCHASE PROGRAM
During the third quarter, Murphy repurchased $75 million, or 1.7 million shares outstanding, at an average price of $44.53 per share. Subsequent to the quarter, the share repurchase authorization was increased by $300 million, and Murphy now has $525 million remaining.
“I am pleased that the adjusted free cash flow generated allowed us to execute the senior notes redemption and share repurchases under Murphy 2.0 of our capital allocation framework. With continued operational success next year, we will further strengthen our balance sheet and enhance shareholder returns through the allocations established in our framework,” said Jenkins.
OPERATIONS SUMMARY
Onshore
In the third quarter of 2023, the onshore business produced approximately 113 MBOEPD, which included 33 percent liquids volumes.
Eagle Ford Shale – Production averaged 38 MBOEPD with 74 percent oil volumes and 88 percent liquids volumes. As planned, Murphy brought online four operated wells in Catarina and three operated wells in Tilden during the quarter.
Tupper Montney – Natural gas production averaged 414 million cubic feet per day (MMCFD) in the third quarter. Production exceeded guidance by 35 MMCFD, of which 17 MMCFD was due to record high initial production rates, and 18 MMCFD was the result of a lower realized royalty rate of 3.9 percent.
Kaybob Duvernay – During the third quarter, production averaged 5 MBOEPD with 67 percent liquids volumes. As previously announced, in the third quarter Murphy closed the divestment of certain non-core operated Kaybob Duvernay and all of its non-operated Placid Montney assets for cash proceeds of $103 million, with an effective date of March 1, 2023. As a result of this transaction, Murphy no longer holds working interests in Placid Montney.
Offshore
Excluding NCI, the offshore business produced approximately 89 MBOEPD for the third quarter, which included 81 percent oil.
Gulf of Mexico – Production averaged approximately 86 MBOEPD, consisting of 80 percent oil during the third quarter. While production was positively impacted by the absence of Gulf of Mexico storms in the quarter, a mechanical issue developed at a well in the operated Neidermeyer field, causing production from that well to be shut in late in the quarter. In addition, a well in the operated Dalmatian field remains offline due to a mechanical issue that occurred earlier in the year. Workovers are planned for both wells in 2024.
Canada – In the third quarter, production averaged 3 MBOEPD, consisting of 100 percent oil, all from the Hibernia field. The asset life extension project is progressing for the non-operated Terra Nova floating, production, storage and offloading vessel, which Murphy anticipates will return to production by year-end 2023.
Vietnam – Subsequent to the third quarter, the Board of Directors sanctioned the Lac Da Vang field development project in Block 15-1/05 of the Cuu Long Basin. Murphy as operator holds a 40 percent working interest in the block. This project is expected to achieve first oil in 2026, with development phased through 2029. Overall, the field has an estimated ultimate recovery of 100 million barrels of oil equivalent (MMBOE) gross resources, with peak gross production of 30 to 40 MBOEPD.
Côte d’Ivoire – During the quarter, Murphy commenced initial work, including a review of commerciality and field development concepts for the Paon discovery in Block CI-103.
EXPLORATION
Gulf of Mexico – The company advanced preparations to resume drilling the Oso #1 (Atwater Valley 138) exploration well.
Côte d’Ivoire – Murphy commenced seismic reprocessing during the third quarter.
2023 CAPITAL EXPENDITURE AND PRODUCTION GUIDANCE
Third quarter accrued CAPEX of $162 million was lower than guidance primarily due to timing of non-operated projects. Murphy maintains its 2023 accrued CAPEX range of $950 million to $1.025 billion, which excludes $49 million in acquisition-related CAPEX for Côte d’Ivoire and Vietnam.
The company is raising its full year 2023 production range to 185 to 187 MBOEPD, consisting of approximately 53 percent oil and 59 percent liquids volumes. This represents a 3 MBOEPD increase in the midpoint from the previous range.
Production for fourth quarter 2023 is estimated to be in the range of 181.5 to 189.5 MBOEPD with 95 MBOPD, or 51 percent, oil volumes. This range includes planned downtime of 500 BOEPD in the Gulf of Mexico and 1.5 MBOEPD onshore. Production is also impacted by mechanical issues in two operated Gulf of Mexico wells, with plans in place for workovers in 2024.
Both production and CAPEX guidance ranges exclude NCI. Detailed guidance for the fourth quarter and full year 2023 is contained in the attached schedules.
FIXED PRICE FORWARD SALES CONTRACTS
Murphy maintains fixed price forward sales contracts in Canada to lessen its dependence on variable AECO prices. These contracts are for physical delivery of natural gas volumes at a fixed price, with no mark-to-market income adjustments. Details for the current fixed price contracts can be found in the attached schedules.
CONFERENCE CALL AND WEBCAST SCHEDULED FOR NOVEMBER 2, 2023
Murphy will host a conference call to discuss third quarter 2023 financial and operating results on Thursday, November 2, 2023, at 9:00 a.m. EDT. The call can be accessed either via the Internet through the events calendar on the Murphy Oil Corporation Investor Relations website at http://ir.murphyoilcorp.com or via telephone by dialing toll free 1-888-886-7786, reservation number 10064350.
FINANCIAL DATA
Summary financial data and operating statistics for third quarter 2023, with comparisons to the same period from the previous year, are contained in the following schedules. Additionally, a schedule indicating the impacts of items affecting comparability of results between periods, a reconciliation of EBITDA, EBITDAX, adjusted EBITDA and adjusted EBITDAX between periods, as well as guidance for the fourth quarter and full year 2023, are also included.
1In accordance with GAAP, Murphy reports the 100 percent interest, including a 20 percent noncontrolling interest (NCI), in its subsidiary, MP Gulf of Mexico, LLC (MP GOM). The GAAP financials include the NCI portion of revenue, costs, assets and liabilities and cash flows. Unless otherwise noted, the financial and operating highlights and metrics discussed in this news release, but not the accompanying schedules, exclude the NCI, thereby representing only the amounts attributable to Murphy.
CAPITAL ALLOCATION FRAMEWORK
This news release contains references to the company’s capital allocation framework and adjusted free cash flow. As previously disclosed, the capital allocation framework defines Murphy 1.0 as when long-term debt exceeds $1.8 billion. At such time, adjusted free cash flow is allocated to long-term debt reduction while the company continues to support the quarterly dividend. The company reaches Murphy 2.0 when long-term debt is between $1.0 billion and $1.8 billion. At such time, approximately 75 percent of adjusted free cash flow is allocated to debt reduction, with the remaining 25 percent distributed to shareholders through share buybacks and potential dividend increases. When long-term debt is at or below $1.0 billion, the company is in Murphy 3.0 and begins allocating 50 percent of adjusted free cash flow to the balance sheet, with a minimum of 50 percent of adjusted free cash flow allocated to share buybacks and potential dividend increases.
Adjusted free cash flow is defined as cash flow from operations before working capital change, less capital expenditures, distributions to NCI and projected payments, quarterly dividend and accretive acquisitions.
ABOUT MURPHY OIL CORPORATION
As an independent oil and natural gas exploration and production company, Murphy Oil Corporation believes in providing energy that empowers people by doing right always, staying with it and thinking beyond possible. Murphy challenges the norm, taps into its strong legacy and uses its foresight and financial discipline to deliver inspired energy solutions. Murphy sees a future where it is an industry leader who is positively impacting lives for the next 100 years and beyond. Additional information can be found on the company’s website at www.murphyoilcorp.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified through the inclusion of words such as “aim”, “anticipate”, “believe”, “drive”, “estimate”, “expect”, “expressed confidence”, “forecast”, “future”, “goal”, “guidance”, “intend”, “may”, “objective”, “outlook”, “plan”, “position”, “potential”, “project”, “seek”, “should”, “strategy”, “target”, “will” or variations of such words and other similar expressions. These statements, which express management’s current views concerning future events, results and plans, are subject to inherent risks, uncertainties and assumptions (many of which are beyond our control) and are not guarantees of performance. In particular, statements, express or implied, concerning the company’s future operating results or activities and returns or the company’s ability and decisions to replace or increase reserves, increase production, generate returns and rates of return, replace or increase drilling locations, reduce or otherwise control operating costs and expenditures, generate cash flows, pay down or refinance indebtedness, achieve, reach or otherwise meet initiatives, plans, goals, ambitions or targets with respect to emissions, safety matters or other ESG (environmental/social/governance) matters, make capital expenditures or pay and/or increase dividends or make share repurchases and other capital allocation decisions are forward-looking statements. Factors that could cause one or more of these future events, results or plans not to occur as implied by any forward-looking statement, which consequently could cause actual results or activities to differ materially from the expectations expressed or implied by such forward-looking statements, include, but are not limited to: macro conditions in the oil and gas industry, including supply/demand levels, actions taken by major oil exporters and the resulting impacts on commodity prices; increased volatility or deterioration in the success rate of our exploration programs or in our ability to maintain production rates and replace reserves; reduced customer demand for our products due to environmental, regulatory, technological or other reasons; adverse foreign exchange movements; political and regulatory instability in the markets where we do business; the impact on our operations or market of health pandemics such as COVID-19 and related government responses; other natural hazards impacting our operations or markets; any other deterioration in our business, markets or prospects; any failure to obtain necessary regulatory approvals; any inability to service or refinance our outstanding debt or to access debt markets at acceptable prices; or adverse developments in the U.S. or global capital markets, credit markets, banking system or economies in general. For further discussion of factors that could cause one or more of these future events or results not to occur as implied by any forward-looking statement, see “Risk Factors” in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K that we file, available from the SEC’s website and from Murphy Oil Corporation’s website at http://ir.murphyoilcorp.com. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the investors page of our website. We may use these channels to distribute material information about the company; therefore, we encourage investors, the media, business partners and others interested in the company to review the information we post on our website. The information on our website is not part of, and is not incorporated into, this news release. Murphy Oil Corporation undertakes no duty to publicly update or revise any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
This news release contains certain non-GAAP financial measures that management believes are useful tools for internal use and the investment community in evaluating Murphy Oil Corporation’s overall financial performance. These non-GAAP financial measures are broadly used to value and compare companies in the crude oil and natural gas industry. Not all companies define these measures in the same way. In addition, these non-GAAP financial measures are not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures. Please see the attached schedules for reconciliations of the differences between the non-GAAP financial measures used in this news release and the most directly comparable GAAP financial measures.
| MURPHY OIL CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
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| Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||
| (Thousands of dollars, except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||
| Revenues and other income | |||||||||||||
| Revenue from production | $ | 945,889 | 1,120,909 | $ | 2,541,956 | 3,101,736 | |||||||
| Sales of purchased natural gas | 7,877 | 45,500 | 64,628 | 132,285 | |||||||||
| Total revenue from sales to customers | 953,766 | 1,166,409 | 2,606,584 | 3,234,021 | |||||||||
| Gain (loss) on derivative instruments | — | 115,191 | — | (308,654 | ) | ||||||||
| Gain on sale of assets and other income | 5,879 | 21,825 | 9,365 | 32,076 | |||||||||
| Total revenues and other income | 959,645 | 1,303,425 | 2,615,949 | 2,957,443 | |||||||||
| Costs and expenses | |||||||||||||
| Lease operating expenses | 193,402 | 198,710 | 587,678 | 482,887 | |||||||||
| Severance and ad valorem taxes | 10,937 | 15,140 | 35,142 | 47,340 | |||||||||
| Transportation, gathering and processing | 61,518 | 55,348 | 175,308 | 152,219 | |||||||||
| Costs of purchased natural gas | 5,467 | 43,622 | 47,393 | 125,258 | |||||||||
| Exploration expenses, including undeveloped lease amortization | 26,514 | 9,491 | 152,489 | 72,208 | |||||||||
| Selling and general expenses | 30,745 | 29,348 | 74,398 | 90,007 | |||||||||
| Depreciation, depletion and amortization | 237,493 | 214,521 | 648,830 | 574,501 | |||||||||
| Accretion of asset retirement obligations | 11,675 | 11,286 | 34,196 | 34,725 | |||||||||
| Other operating expense (benefit) | 4,385 | (27,129 | ) | 21,333 | 115,726 | ||||||||
| Total costs and expenses | 582,136 | 550,337 | 1,776,767 | 1,694,871 | |||||||||
| Operating income from continuing operations | 377,509 | 753,088 | 839,182 | 1,262,572 | |||||||||
| Other loss | |||||||||||||
| Other income | 8,811 | 18,301 | 1,044 | 21,114 | |||||||||
| Interest expense, net | (29,984 | ) | (37,440 | ) | (88,695 | ) | (116,102 | ) | |||||
| Total other loss | (21,173 | ) | (19,139 | ) | (87,651 | ) | (94,988 | ) | |||||
| Income from continuing operations before income taxes | 356,336 | 733,949 | 751,531 | 1,167,584 | |||||||||
| Income tax expense | 78,111 | 159,451 | 166,813 | 247,574 | |||||||||
| Income from continuing operations | 278,225 | 574,498 | 584,718 | 920,010 | |||||||||
| Loss from discontinued operations, net of income taxes | (421 | ) | (422 | ) | (744 | ) | (1,916 | ) | |||||
| Net income including noncontrolling interest | 277,804 | 574,076 | 583,974 | 918,094 | |||||||||
| Less: Net income attributable to noncontrolling interest | 22,462 | 45,648 | 38,701 | 152,445 | |||||||||
| NET INCOME ATTRIBUTABLE TO MURPHY | $ | 255,342 | 528,428 | $ | 545,273 | 765,649 | |||||||
| INCOME (LOSS) PER COMMON SHARE – BASIC | |||||||||||||
| Continuing operations | $ | 1.64 | 3.40 | $ | 3.50 | 4.94 | |||||||
| Discontinued operations | — | — | — | (0.01 | ) | ||||||||
| Net income | $ | 1.64 | 3.40 | $ | 3.50 | 4.93 | |||||||
| INCOME (LOSS) PER COMMON SHARE – DILUTED | |||||||||||||
| Continuing operations | $ | 1.63 | 3.36 | $ | 3.47 | 4.87 | |||||||
| Discontinued operations | — | — | — | (0.01 | ) | ||||||||
| Net income | $ | 1.63 | 3.36 | $ | 3.47 | 4.86 | |||||||
| Cash dividends per common share | $ | 0.275 | 0.250 | $ | 0.827 | 0.575 | |||||||
| Average common shares outstanding (thousands) | |||||||||||||
| Basic | 155,454 | 155,446 | 155,749 | 155,221 | |||||||||
| Diluted | 156,829 | 157,336 | 157,135 | 157,407 | |||||||||
| MURPHY OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
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| Three Months Ended September 30, |
Nine Months Ended
September 30, |
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| (Thousands of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||
| Operating Activities | |||||||||||||
| Net income including noncontrolling interest | $ | 277,804 | 574,076 | $ | 583,974 | 918,094 | |||||||
| Adjustments to reconcile net income to net cash provided by continuing operations activities | |||||||||||||
| Loss from discontinued operations | 421 | 422 | 744 | 1,916 | |||||||||
| Depreciation, depletion and amortization | 237,493 | 214,521 | 648,830 | 574,501 | |||||||||
| Unsuccessful exploration well costs and previously suspended exploration costs | 11,292 | 1,122 | 107,825 | 35,224 | |||||||||
| Amortization of undeveloped leases | 2,846 | 2,671 | 8,215 | 10,651 | |||||||||
| Accretion of asset retirement obligations | 11,675 | 11,286 | 34,196 | 34,725 | |||||||||
| Deferred income tax expense | 59,547 | 140,414 | 152,104 | 207,105 | |||||||||
| Contingent consideration payment | — | — | (139,574 | ) | — | ||||||||
| Mark-to-market (gain) loss on contingent consideration | — | (31,367 | ) | 7,113 | 98,451 | ||||||||
| Mark-to-market (gain) loss on derivative instruments | — | (239,050 | ) | — | (138,707 | ) | |||||||
| Long-term non-cash compensation | 20,426 | 17,145 | 42,502 | 57,612 | |||||||||
| Gain from sale of assets | (12 | ) | (18,836 | ) | (12 | ) | (18,871 | ) | |||||
| Net (increase) decrease in non-cash working capital | (127,447 | ) | 61,724 | (142,788 | ) | (59,874 | ) | ||||||
| Other operating activities, net | (37,978 | ) | (14,643 | ) | (97,395 | ) | (42,101 | ) | |||||
| Net cash provided by continuing operations activities | 456,067 | 719,485 | 1,205,734 | 1,678,726 | |||||||||
| Investing Activities | |||||||||||||
| Property additions and dry hole costs | (207,542 | ) | (248,043 | ) | (902,295 | ) | (800,868 | ) | |||||
| Acquisition of oil and natural gas properties | (22,773 | ) | (79,111 | ) | (22,773 | ) | (125,602 | ) | |||||
| Proceeds from sales of property, plant and equipment | 102,913 | (2,176 | ) | 102,913 | (2,129 | ) | |||||||
| Net cash required by investing activities | (127,402 | ) | (329,330 | ) | (822,155 | ) | (928,599 | ) | |||||
| Financing Activities | |||||||||||||
| Borrowings on revolving credit facility | 100,000 | 200,000 | 300,000 | 300,000 | |||||||||
| Repayment of revolving credit facility | (100,000 | ) | (200,000 | ) | (300,000 | ) | (300,000 | ) | |||||
| Retirement of debt | (248,675 | ) | (246,032 | ) | (248,675 | ) | (446,032 | ) | |||||
| Early redemption of debt cost | — | (1,981 | ) | — | (5,419 | ) | |||||||
| Repurchase of common stock | (75,023 | ) | — | (75,023 | ) | — | |||||||
| Contingent consideration payment | — | — | (60,243 | ) | (81,742 | ) | |||||||
| Cash dividends paid | (42,790 | ) | (38,863 | ) | (128,657 | ) | (89,354 | ) | |||||
| Distributions to noncontrolling interest | (4,069 | ) | (50,419 | ) | (20,052 | ) | (145,273 | ) | |||||
| Withholding tax on stock-based incentive awards | (12 | ) | (641 | ) | (14,232 | ) | (17,338 | ) | |||||
| Capital lease obligation payments | (161 | ) | (155 | ) | (457 | ) | (475 | ) | |||||
| Issue costs of debt facility | — | — | (20 | ) | — | ||||||||
| Net cash required by financing activities | (370,730 | ) | (338,091 | ) | (547,359 | ) | (785,633 | ) | |||||
| Net cash required by discontinued operations | — | (14,500 | ) | — | (14,500 | ) | |||||||
| Effect of exchange rate changes on cash and cash equivalents | 479 | (3,585 | ) | (414 | ) | (5,180 | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | (41,586 | ) | 33,979 | (164,194 | ) | (55,186 | ) | ||||||
| Cash and cash equivalents at beginning of period | 369,355 | 432,019 | 491,963 | 521,184 | |||||||||
| Cash and cash equivalents at end of period | $ | 327,769 | 465,998 | $ | 327,769 | 465,998 | |||||||
Contacts
Investor Contacts:
InvestorRelations@murphyoilcorp.com
Kelly Whitley, 281-675-9107
Megan Larson, 281-675-9470