MURPHY OIL CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Operational Execution: Drilled longest laterals in Eagle Ford and Tupper Montney. Achieved 1,000,000 work hours with no lost time injuries in Vietnam's Lok Da Vong field development project.
• Acquisitions and Discoveries: Acquired Pioneer floating production storage and offloading vessel in Gulf of Mexico for $104 million. Drilled oil discovery in Vietnam's Loch Da Hong 1X.
• Shareholder Returns: First quarter shareholder returns totaled $147M via $100M share repurchases and $47M dividends. Committed to allocate at least 50% of adjusted free cash flow to shareholder returns, primarily through buybacks.
• Exploration Strategy: Focus on near-field infrastructure-led in Gulf of Mexico and high-impact growth in Vietnam and Cote D'Ivoire. Plan to drill two operated exploration wells in Gulf of Mexico, and three-well program in Cote D'Ivoire starting in Q4.

Segment Performance

• Eagle Ford Shale: Produced 25,000 barrels of oil equivalent per day in Q1 with 83% liquids. Drilled the longest lateral in company history at 13,976 feet.
• Tupper Montney: Produced 340 million cubic feet per day in Q1, brought online 10 wells. Drilled the longest laterals in company history, with initial production rates up over 30% compared to historical performance.
• Kaybob Duvernay: Produced 4,000 barrels of oil equivalent per day in Q1 with 71% liquids.
• Offshore assets: Produced 71,000 barrels of oil equivalent per day in Q1 with 83% oil. Brought online Mormont No. Four well and progressed Samurai number three workover.
• Vietnam: Drilled second oil discovery at Loch Da Hong 1X, encountered 106 net feet of oil pay from one reservoir, with preliminary mean to upward gross resource potential of 30 to 60 million barrels of oil equivalent.

Guidance

• Production: Q2 2025 production forecast 177,000-185,000 barrels of oil equivalent per day. Full-year 2025 production range 174,500-182,500 barrels of oil equivalent per day.
• Capital Expenditure: 2025 accrued CapEx range $1.135 billion to $1.285 billion, including $104 million for FPSO acquisition.
• Shareholder Returns: Allocate minimum 50% of adjusted free cash flow to shareholder returns, primarily via buybacks; assess dividend increases and balance sheet allocation of remaining cash.

Risks

• Operational Downtime: Nonoperated unplanned downtime in Gulf of Mexico and production curtailments in offshore Canada impacted Q1 production.
• Commodity Price Volatility: Potential impact on capital allocation and need to trim capital spending in lower oil price environments.
• Supply Chain Pressures: Potential pressure on tubular goods and OCTG costs, though managed to some extent.

Question and Answer

Q: How do you think about your game plan in a lower oil price environment?

A: At this time, maintain 2025 capital plan, but may reduce spending if oil prices below $55 for remainder of year, with potential cuts in 2026 if prices stay low.

Q: How does the recent discovery in Vietnam impact the LDV development plan?

A: Likely set wellhead platform at Loch De Hong discovery, with production processed from Loch Dehong A platform, enabling faster development.

Q: How are the Khaleesi number two and Marmalard number three workovers trending?

A: Khaleesi two expected done in Q2, Marmalard three in Q3, with good progress despite winter delays.

Q: What milestones or benchmarks needed for Canadian gas growth?

A: Plant capacity constraints at Tupper West, but higher gas prices could drive more investment if plant stays full longer.

Q: Thoughts on share repurchases in lower oil price environment?

A: Disciplined, will be opportunistic but protect balance sheet; likely not take on significant debt for repurchases.