Murphy Oil posts $287 million first quarter loss

Murphy Oil Corp., Houston, had a loss of $287 million for first-quarter 2021 compared to a net loss of $416.1 million in the same quarter last year.

Excluding total after-tax charges of $297 million, comprised primarily of $128 million of non-cash asset impairments on the non-operated Terra Nova asset, $121 million unrealized non-cash mark-to-market losses on crude oil derivative contracts and $29 million cost of early redemption of debt, adjusted net income was $10 million.

The company reduced debt by $233 million, or 8%, for the quarter from year-end 2020.

“Murphy is off to a great start for the year, completing strategic financial transactions that delevered our balance sheet and extended our maturity profile. I am especially proud of our operational accomplishments across all of our assets, with a significant beat on oil production despite the severe winter storm in February. We remain in full execution mode on all of our Gulf of Mexico projects. Further, I am proud to see our exploration opportunities progress, with wells starting now in the Gulf of Mexico and later this year in Brazil,” said Roger W. Jenkins, president and chief executive officer.

Drilling of the first well of the deepwater Gulf of Mexico Khaleesi, Mormont, Samurai program began in this year’s second quarter and remains on track for first oil mid-2022, the company said. Top hole sections for three wells have been drilled and the company is currently drilling Samurai #3. Construction for the King’s Quay floating production system was completed in this year’s second half. Sail away is on track for the third quarter with first oil expected to be received in first-half 2022.

Drilling began in April on the Chevron-operated (80%) Silverback #1 exploration well in Mississippi Canyon 35. The well will test a play-opening trend near existing Murphy-operated assets, the company said. Murphy holds 10% interest.

Elsewhere, the company said drilling of Cutthroat-1 in the Sergipe-Alagoas basin of Brazil (Exxon-operated with 50%) is on track for third-quarter 2021. With a 20% interest, Murphy’s net cost for the well is $15 million.

Production

For the quarter, the company produced 155,000 boe/d, above the midpoint of guidance, with 88,000 b/d of oil.

The onshore business produced 80,000 boe/d.

Production from the Eagle Ford averaged 30,000 boe/d with 74% oil volumes during the quarter. Murphy brought online 16 operated wells in Karnes and achieved an average gross 30-day (IP30) rate of 1,400 boe/d, with the two best wells achieving 2,000 boe/d IP30 rates in the Lower Eagle Ford shale. A three-well pad targeting the Austin Chalk zone has outperformed expectations, with production averaging 1,400 boe/d IP30 rate.

Murphy also had 12 non-operated Karnes wells and four non-operated Tilden wells come online during the quarter.

In the first quarter, Tupper Montney natural gas production averaged 234 MMcfd. The company brought online four wells as planned.

First quarter Kaybob Duvernay production averaged 9,000 boe/d (74% liquids volumes). No activity is scheduled to occur in 2021.

The offshore business produced 76,000 boe/d for the quarter (79% oil). This excludes production from noncontrolling interest and an asset held for sale.

During the quarter, Gulf of Mexico production averaged 71,000 boe/d (78% oil). Murphy completed certain operated and non-operated subsea equipment repairs, and all wells were brought back online. Additionally, the non-operated Lucius 918 #3 and Lucius 919 #9 wells in Keathley Canyon came online during the quarter, and the non-operated Kodiak #3 well (Mississippi Canyon 727) was completed, with first oil achieved in second-quarter 2021.

Production from Canada averaged 5,000 boe/d in the quarter (100% oil). Operations at Terra Nova field have remained offline since December 2019. During first-quarter 2021, Murphy recorded a non-cash after-tax impairment charge of $128 million on the asset. Partners continue to evaluate options that could support a long-term production plan.

Capital expenditure, production guidance

Murphy maintains its 2021 capital expenditures guidance of $675-725 million and is tightening full year 2021 production to 157,000-165,000 boe/d. Production for second-quarter 2021 is expected to be 160,000-168,000 boe/d. Both production and CAPEX guidance ranges exclude Gulf of Mexico noncontrolling interest.