News Release Details

Expanded Hedge Coverage, Published 2020 Sustainability Report

HOUSTON--(BUSINESS WIRE)--

Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the third quarter ended September 30, 2020, including a net loss attributable to Murphy of $244 million, or $1.59 net loss per diluted share. Adjusted net loss, which excludes discontinued operations and other one-off items, was $24 million, or $0.15 net loss per diluted share.

Unless otherwise noted, the financial and operating highlights and metrics discussed in this commentary exclude noncontrolling interest. ¹

Significant items include:

• Produced 153 thousand barrels of oil equivalent per day in the third quarter, including 56 percent or 86 thousand barrels of oil per day, despite the most severe hurricane season on record  
• Continued G&A reduction trajectory, with expenses of $29 million in the third quarter compared to $39 million in second quarter 2020
• Increased 2021 crude oil hedge position, resulting in a total of 18 thousand barrels of oil per day hedged at an average price of $43.31 per barrel
• Added fixed price forward sales contracts related to the Tupper Montney asset to underpin cash flow in calendar years 2021 through 2024
• Published 2020 Sustainability Report, with expanded disclosures and greenhouse gas emissions intensity reduction goals

THIRD QUARTER 2020 FINANCIAL RESULTS

The company recorded a net loss, attributable to Murphy, of $244 million, or $1.59 net loss per diluted share, for the third quarter 2020. Adjusted net loss, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $24 million, or $0.15 net loss per diluted share for the same period. The adjusted loss from continuing operations primarily excludes the following after-tax items: a $55 million non-cash mark-to-market loss on crude oil derivative contracts and an $11 million non-cash mark-to-market loss on liabilities associated with contingent consideration. It also includes an after-tax $146 million non-cash charge for the impairment of certain assets primarily related to the Cascade and Chinook field in the Gulf of Mexico. Details for third quarter results can be found in the attached schedules.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations attributable to Murphy was $249 million, or $17.61 per barrel of oil equivalent (BOE) sold. Adjusted earnings before interest, tax, depreciation, amortization and exploration expenses (EBITDAX) from continuing operations attributable to Murphy was $262 million, or $18.46 per BOE sold. Details for third quarter adjusted EBITDA and EBITDAX reconciliations can be found in the attached schedules.

Third quarter production averaged 153 thousand barrels of oil equivalent per day (MBOEPD) with 56 percent oil and 63 percent liquids. Murphy’s offshore production for the quarter was negatively impacted by an uncharacteristically active hurricane season, resulting in 12.4 MBOEPD of storm-related downtime, compared to 4.8 MBOEPD as guided for storm downtime. Offshore storm downtime was partially offset by stronger performance in the onshore business. Details for third quarter production can be found in the attached schedules.

“Murphy, like all Gulf of Mexico operators, experienced the most severe hurricane season on record this year with four major storms during the third quarter causing short-term production shut-ins, as well as two additional storms following in October. Our assets generated strong production aside from these storms and otherwise would have reached the high end of guidance. Our cost structure improvements continue to take hold leading to improving margins. Further, we were able to safely execute evacuating and re-manning processes of our facilities, along with managing COVID-19 concerns with our proven shore base protocols,” stated Roger W. Jenkins, President and Chief Executive Officer of Murphy Oil Corporation.

PROTECTING THE COMPANY’S FINANCIAL POSITION

As of September 30, 2020, Murphy had approximately $1.6 billion of liquidity, comprised of $1.4 billion undrawn under the $1.6 billion senior unsecured credit facility and approximately $220 million of cash and cash equivalents.

At the end of third quarter 2020, Murphy had outstanding debt of $2.8 billion in long-term, fixed-rate notes with a weighted average maturity of 7 years and a weighted average coupon of 5.9 percent. The company also had $200 million drawn under its senior unsecured credit facility.

For third quarter 2020, Murphy incurred a total $120 million of CAPEX, including approximately $19 million for the King’s Quay floating production system (FPS) construction. Note that this total CAPEX figure excludes Gulf of Mexico noncontrolling interest (NCI). Murphy incurred a total $663 million of CAPEX for the nine months ended September 30, 2020, including $81 million for King’s Quay.

The company generated free cash flow of $74 million in the third quarter, including NCI. Excluding the impact of a working capital outflow of $28 million, free cash flow was $102 million.

COMMODITY HEDGE POSITIONS MITIGATE CASH FLOW VOLATILITY

The company employs commodity derivative instruments to manage certain risks associated with commodity price volatility and underpin capital returns associated with certain assets. During the third quarter, Murphy layered on hedges to protect cash flow with the execution of WTI fixed price swaps, resulting in a total 18 thousand barrels of oil per day (MBOPD) hedged for full year 2021 at an average price of $43.31 per barrel. Also during the quarter, the company entered into fixed price forward sales contracts for the delivery of 20 million cubic feet per day (MMCFD) at the Malin hub in Oregon at an average price of $2.60 per thousand cubic feet (MCF) for calendar years 2021 and 2022.

Subsequent to quarter end, Murphy entered into fixed price forward sales contracts for physical delivery at the AECO hub in Canada for calendar year 2021, resulting in total contracts of 96 MMCFD at an average price of C$2.53 per MCF. Murphy further extended its price protection with fixed price forward sales contracts at AECO for full years 2022 through 2024 for the delivery of 71 MMCFD at an average price of C$2.50 per MCF.

Details for the current hedge positions can be found in the attached schedules.

FOURTH QUARTER 2020 GUIDANCE

Murphy reaffirms its previously stated full year 2020 capital budget guidance of $680 million to $720 million, excluding Gulf of Mexico NCI and King’s Quay floating production system (FPS) construction spending. In the fourth quarter, Murphy anticipates production volumes of approximately 146 MBOEPD to 154 MBOEPD. This guidance range is primarily affected by two factors – Gulf of Mexico storm downtime of 8.2 MBOEPD due to impacts from hurricanes Delta and Zeta, as well as 6.4 MBOEPD of planned downtime.

OPERATIONS SUMMARY

North American Onshore
The North American onshore business produced approximately 90 MBOEPD in the third quarter. No operated drilling and completions activity is planned across the onshore business for the remainder of 2020.

Eagle Ford Shale – Production averaged 35 MBOEPD with 71 percent oil volumes in the third quarter. As planned, eight non-operated Karnes wells came online in the quarter. Murphy’s operating partner plans to drill four Karnes wells during the fourth quarter, with completions anticipated in early 2021.

Tupper Montney – For the quarter, natural gas production averaged 235 MMCFD. No drilling or completions activity occurred in the third quarter.

Kaybob Duvernay – Production averaged 13 MBOEPD in the third quarter. Four wells were brought online during the quarter.

Placid Montney – Murphy’s non-operated position produced 3 MBOEPD in the third quarter. As previously disclosed, six non-operated wells resumed production in July after being shut in for May and June due to low commodity prices.

Global Offshore
The offshore business produced 63 MBOEPD in the third quarter, comprised of 82 percent oil. This excludes production from discontinued operations and noncontrolling interest. Gulf of Mexico production in the quarter averaged 59 MBOEPD, consisting of 80 percent oil. Canada offshore production averaged 4 MBOEPD, comprised of 100 percent oil.

EXPLORATION

Gulf of Mexico – The non-operated Highgarden well (Green Canyon 895) was spud in the third quarter for an estimated $11 million cost net to Murphy as a 20 percent working interest owner. Drilling was delayed due to an active Gulf of Mexico storm season.

SUSTAINABILITY REPORT

Subsequent to quarter-end, Murphy published its 2020 Sustainability Report, taking into consideration various third-party reporting standards and ratings, and including additional disclosures spanning climate-related performance metrics to workforce diversity. As part of this report, the company announced its goal of reducing its greenhouse gas emissions intensity by 15 to 20 percent by 2030 from 2019 levels, excluding Malaysia.

CONFERENCE CALL AND WEBCAST SCHEDULED FOR NOVEMBER 5, 2020

Murphy will host a conference call to discuss third quarter 2020 financial and operating results on Thursday, November 5, 2020, at 9:00 a.m. ET. The call can be accessed either via the Internet through the Investor Relations section of Murphy Oil’s website at http://ir.murphyoilcorp.com or via the telephone by dialing toll free 1-888-886-7786, reservation number 19218031.

FINANCIAL DATA

Summary financial data and operating statistics for third quarter 2020, 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 and EBITDAX between periods, as well as guidance for the fourth quarter 2020, are also included.

¹ In 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.

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. It 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 or results, are subject to inherent risks and uncertainties. Factors that could cause one or more of these future events or results not to occur as implied by any forward-looking statement 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 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. 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.

Non-GAAP Financial Measures

Presented above is a reconciliation of Net (loss) income to Adjusted (loss) income from continuing operations attributable to Murphy. Adjusted (loss) income excludes certain items that management believes affect the comparability of results between periods. Management believes this is important information to provide because it is used by management to evaluate the Company’s operational performance and trends between periods and relative to its industry competitors. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results. Adjusted (loss) income is a non-GAAP financial measure and should not be considered a substitute for Net (loss) income as determined in accordance with accounting principles generally accepted in the United States of America.

Amounts shown above as reconciling items between Net (loss) income and Adjusted (loss) income are presented net of applicable income taxes based on the estimated statutory rate in the applicable tax jurisdiction. The pretax and income tax impacts for adjustments shown above are as follows by area of operations and exclude the share attributable to non-controlling interests.

Non-GAAP Financial Measures

Presented above is a reconciliation of Net (loss) income to Earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Management believes EBITDA and adjusted EBITDA are important information to provide because they are used by management to evaluate the Company’s operational performance and trends between periods and relative to its industry competitors. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results. EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for Net (loss) income or Cash provided by operating activities as determined in accordance with accounting principles generally accepted in the United States of America.

Presented above is adjusted EBITDA per barrel of oil equivalent sold. Management believes adjusted EBITDA per barrel of oil equivalent sold is important information because it is used by management to evaluate the Company’s profitability of one barrel of oil equivalent sold in that period. Adjusted EBITDA per barrel of oil equivalent sold is a non-GAAP financial metric.

¹ Depreciation, depletion, and amortization expense used in the computation of EBITDA and impairment of assets used in the computation of Adjusted EBITDA exclude the portion attributable to the non-controlling interest.

Non-GAAP Financial Measures

Presented above is a reconciliation of Net (loss) income to Earnings before interest, taxes, depreciation and amortization, and exploration expenses (EBITDAX) and adjusted EBITDAX. Management believes EBITDAX and adjusted EBITDAX are important information to provide because they are used by management to evaluate the Company’s operational performance and trends between periods and relative to its industry competitors. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results. EBITDAX and adjusted EBITDAX are non-GAAP financial measures and should not be considered a substitute for Net (loss) income or Cash provided by operating activities as determined in accordance with accounting principles generally accepted in the United States of America.

Presented above is adjusted EBITDAX per barrel of oil equivalent sold. Management believes adjusted EBITDAX per barrel of oil equivalent sold is important information because it is used by management to evaluate the Company’s profitability of one barrel of oil equivalent sold in that period. Adjusted EBITDAX per barrel of oil equivalent sold is a non-GAAP financial metric.

¹ Depreciation, depletion, and amortization expense used in the computation of EBITDA and impairment of assets used in the computation of Adjusted EBITDA exclude the portion attributable to the non-controlling interest.

¹ Includes results attributable to a noncontrolling interest in MP Gulf of Mexico, LLC (MP GOM).
² Includes impairment charges of $1,152.5 million and $39.7 million for the United States and Other for the nine months ended September 30, 2020.
³ Malaysia is reported as discontinued operations in current and comparative periods effective January 1, 2019.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005304/en/

Investor Contacts:
Kelly Whitley, kelly_whitley@murphyoilcorp.com, 281-675-9107
Megan Larson, megan_larson@murphyoilcorp.com, 281-675-9470

Source: Murphy Oil Corporation