Murphy Oil Corporation Announces Fourth Quarter and Full Year 2022 Results
Achieved 2022 Debt Reduction Goal of $650 Million While Doubling Dividend,
Grew Oil Volumes 29 Percent From First Quarter to Fourth Quarter 2022,
Completed Khaleesi, Mormont, Samurai Field Development Project With Production Exceeding Expectations,
Delivering 10 Percent Oil Production Growth With 2023 Capital Plan
HOUSTON–(BUSINESS WIRE)–Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the fourth quarter ended December 31, 2022, including net income attributable to Murphy of $199 million, or $1.26 net income per diluted share. Excluding discontinued operations and other items affecting comparability between periods, adjusted net income attributable to Murphy was $173 million, or $1.10 adjusted net income per diluted share.
For the full year 2022, the company recorded net income attributable to Murphy of $965 million, or $6.13 net income per diluted share. Murphy reported adjusted net income, which excludes both the results of discontinued operations and other items affecting comparability between periods, of $881 million, or $5.59 adjusted net income per diluted share.
Unless otherwise noted, the financial and operating highlights and metrics discussed in this commentary exclude noncontrolling interest (NCI). 1
Highlights for the fourth quarter include:
- Redeemed $200 million of 5.75 percent senior notes due 2025
- Completed the Khaleesi, Mormont, Samurai field development project with seven wells brought online
Highlights for full year 2022 include:
- Generated net income of $965 million, with $2.2 billion of net cash provided by continuing operations
- Produced 167 thousand barrels of oil equivalent per day (MBOEPD) with 29 percent growth in oil volumes from first quarter 2022 to fourth quarter 2022
- Initiated production above expectations and ahead of schedule from the Khaleesi, Mormont, Samurai field development project
- Acquired additional highly accretive working interests in non-operated Lucius and Kodiak fields for $129 million
- Introduced and successfully implemented capital allocation framework, focusing on increasing shareholder returns tied to targeted debt reduction goals
- Doubled the quarterly cash dividend since fourth quarter 2021 to $1.00 per share annualized
- Completed Murphy 1.0 of capital allocation framework, reducing debt by 26 percent, or $650 million, to $1.82 billion at year-end 2022
- Maintained reserve life of more than 11 years with total proved reserves of 697 million barrels of oil equivalent (MMBOE)
- Continued environmental excellence with second year of zero recordable spills
Subsequent to the fourth quarter:
- Announced an additional 10 percent increase of quarterly cash dividend to $0.275 per share, or $1.10 per share annualized
“I am proud of all we accomplished at Murphy in 2022. Our meaningful progress and consistent execution were particularly evident in our offshore business, as we completed the initial phase of the Khaleesi, Mormont, Samurai field development project with production exceeding expectations throughout the year,” said Roger W. Jenkins, President and Chief Executive Officer. “Our disciplined spending, coupled with higher realized oil prices, enabled us to increase our long-standing dividend, achieve our debt reduction goal and position the company for the second phase of our capital allocation framework, Murphy 2.0. As we look ahead to 2023 and continue building on the momentum of 2022, we remain confident in our strong operational capabilities and financial positioning.”
FOURTH QUARTER 2022 RESULTS
The company recorded net income attributable to Murphy of $199 million, or $1.26 net income per diluted share, for the fourth quarter 2022. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $173 million, or $1.10 adjusted net income per diluted share for the same period. Adjusted net income primarily includes the following after-tax increases of $60 million non-cash mark-to-market gain on derivative instruments and $16 million non-cash mark-to-market gain on contingent consideration, and after-tax losses of $24 million in asset retirement obligations and an $18 million write-off of previously suspended exploration wells. Details for fourth quarter results and an adjusted net income reconciliation can be found in the attached schedules.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to Murphy was $466 million. Adjusted earnings before interest, tax, depreciation, amortization and exploration expenses (EBITDAX) attributable to Murphy was $527 million. Details for fourth quarter EBITDA, EBITDAX, adjusted EBITDA and adjusted EBITDAX reconciliations can be found in the attached schedules.
Fourth quarter production averaged 173.6 MBOEPD and consisted of 56 percent oil volumes, or 97.0 thousand barrels of oil per day (MBOPD). Production in the quarter was impacted by 1.5 MBOEPD of primarily non-operated unplanned Gulf of Mexico downtime, 1.2 MBOEPD of winter weather impacts and 1.2 MBOEPD due to lower performance in the Tupper Montney. Details for fourth quarter production can be found in the attached schedules.
FULL YEAR 2022 RESULTS
The company recorded net income attributable to Murphy of $965 million, or $6.13 net income per diluted share, for the full year 2022. The company reported adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, of $881 million, or $5.59 adjusted net income per diluted share for the same period. Adjusted net income primarily includes the following after-tax increase of $170 million non-cash mark-to-market gain on derivative instruments, and after-tax decreases of $62 million non-cash mark-to-market loss on contingent consideration and $24 million asset retirement obligation losses. Details for full year 2022 results and an adjusted net income reconciliation can be found in the attached schedules.
Adjusted EBITDA attributable to Murphy was $2.1 billion. Adjusted EBITDAX attributable to Murphy was $2.2 billion. Details for full year 2022 EBITDA, EBITDAX, adjusted EBITDA and adjusted EBITDAX reconciliations can be found in the attached schedules.
Production for full year 2022 averaged 167.0 MBOEPD and consisted of 54 percent oil volumes, or 89.9 MBOPD, with 29 percent growth in oil volumes from first quarter 2022 to fourth quarter 2022. Accrued capital expenditures (CAPEX) for full year 2022 totaled $1,016 million, excluding NCI, acquisitions and acquisition-related CAPEX. Details for full year 2022 production and CAPEX can be found in the attached tables.
FINANCIAL POSITION
As previously announced, during the fourth quarter Murphy entered into a new $800 million senior unsecured credit facility. The credit facility matures in November 2027 and was undrawn as of December 31, 2022. During the quarter, Murphy also redeemed $200 million of 5.75 percent senior notes due 2025.
Murphy had approximately $1.2 billion of liquidity as of December 31, 2022, comprised of the $800 million credit facility and $492 million of cash and cash equivalents, inclusive of NCI. The company’s total debt was $1.82 billion as of December 31, 2022, and consisted of long-term, fixed-rate notes with a weighted average maturity of 7.7 years and a weighted average coupon of 6.2 percent.
In 2022, Murphy reduced total debt by 26 percent since year-end 2021, thereby achieving its $650 million debt reduction goal while lowering annual interest obligations by approximately $42 million. The company’s steady focus on delevering has reduced total debt by 40 percent or $1.2 billion since year-end 2020.
YEAR-END 2022 PROVED RESERVES
After producing 61 MMBOE for the year, Murphy’s preliminary year-end 2022 proved reserves were 697 MMBOE, consisting of 41 percent oil and 47 percent liquids. Total proved reserves were essentially flat from year-end 2021 with a total reserve replacement of 98 percent.
The company maintained a solid reserve life of more than 11 years with 60 percent proved developed reserves.
|
2022 Proved Reserves – Preliminary * |
|||||
|
Category |
Net Oil (MMBBL) |
Net NGLs (MMBBL) |
Net Gas (BCF) |
Net Equiv. (MMBOE) |
|
|
Proved Developed (PD) |
195 |
29 |
1,179 |
421 |
|
|
Proved Undeveloped (PUD) |
92 |
12 |
1,035 |
276 |
|
|
Total Proved |
287 |
41 |
2,214 |
697 |
|
|
* Proved reserves exclude noncontrolling interest and are based on preliminary year-end 2022 third-party audited volumes using SEC pricing. |
|||||
OPERATIONS SUMMARY
Onshore
In the fourth quarter of 2022, the onshore business produced approximately 87 MBOEPD, which included 36 percent liquids volumes. Onshore production increased 11 percent since first quarter 2022.
Eagle Ford Shale – Production averaged 32 MBOEPD with 70 percent oil volumes and 85 percent liquids volumes. Two non-operated wells were brought online in Karnes late in the fourth quarter.
Tupper Montney – Natural gas production averaged 288 million cubic feet per day (MMCFD) in the fourth quarter.
Kaybob Duvernay – Production averaged 5 MBOEPD with 72 percent liquids volumes during the fourth quarter.
Offshore
Excluding NCI, the offshore business produced just over 86 MBOEPD for the fourth quarter, which included 82 percent oil. Total offshore production excluding NCI increased nearly 40 percent since first quarter 2022.
Gulf of Mexico – Production averaged approximately 84 MBOEPD, consisting of 81 percent oil during the fourth quarter. Murphy brought online two operated wells in the Samurai field during the fourth quarter, thereby completing the initial phase of the Khaleesi, Mormont, Samurai field development project. The company continues to achieve an average 97 percent uptime at the Murphy-operated King’s Quay floating production system since production commenced in April 2022. Also during the fourth quarter, Murphy’s operating partner brought online the Lucius #10 (Keathley Canyon 919) well.
Canada – Production averaged nearly 3 MBOEPD in the fourth quarter, consisting of 100 percent oil. The asset life extension project is ongoing for the non-operated Terra Nova floating, production, storage and offloading vessel, which is anticipated to return to production in second quarter 2023.
EXPLORATION
Gulf of Mexico – During the fourth quarter, Murphy as operator spud the Oso-1 (Atwater Valley 138) exploration well, with drilling ongoing in the first quarter 2023. Additionally, in conjunction with a Gulf of Mexico lease expiration in the fourth quarter 2022, Murphy wrote off previously suspended exploration well costs of $18 million after tax.
Mexico – As previously announced, Murphy as operator concluded drilling the Tulum-1EXP exploration well in Block 5 in the Salina Basin. The well did not find commercial hydrocarbons. Murphy plugged and abandoned the well and the partnership is evaluating the results. The net well cost of $22 million was fully expensed in the fourth quarter.
2023 CAPITAL EXPENDITURE AND PRODUCTION GUIDANCE
The 2023 CAPEX plan is expected to be in the range of $875 million to $1.025 billion. Full year 2023 production is expected to be in the range of 175.5 to 183.5 MBOEPD, consisting of approximately 99 MBOPD oil and 109 MBOEPD liquids volumes, equating to 55 percent oil and 61 percent liquids volumes, respectively. This reflects a 10 percent increase in oil volumes and 7 percent increase in total volumes from full year 2022.
Production for first quarter 2023 is estimated to be in the range of 161 to 169 MBOEPD with 92 MBOPD, or 56 percent, oil volumes. This range is impacted by planned downtime of approximately 7.1 MBOEPD, consisting of 2.0 MBOEPD of operated offshore downtime, 2.5 MBOEPD of non-operated offshore downtime and 2.6 MBOEPD of onshore downtime. Both production and CAPEX guidance ranges exclude Gulf of Mexico NCI.
|
2023 CAPEX by Quarter ($ MMs) |
|||||
|
1Q 2023E |
2Q 2023E |
3Q 2023E |
4Q 2023E |
FY 2023E |
|
|
$380 |
$305 |
$155 |
$110 |
$950 |
|
Accrual CAPEX, based on midpoint of guidance range and excluding NCI.
“Consistent with prior years, our capital spending program is more heavily weighted to the first half of 2023, enabling Murphy to maximize annual production and free cash flow. Further, we expect lower capital spending than in 2022, while increasing overall production and more notably, oil production as compared to 2022. We continue to maintain capital discipline across the business and execute on our capital allocation framework to further strengthen our balance sheet and provide enhanced shareholder returns,” stated Jenkins.
The table below illustrates the capital allocation by area.
|
2023 Capital Expenditure Guidance |
|||
|
Area |
Total CAPEX $ MMs |
Percent of Total CAPEX |
|
|
Gulf of Mexico |
$335 |
35 |
|
|
US Onshore |
$325 |
34 |
|
|
Canada Onshore |
$130 |
14 |
|
|
Exploration |
$100 |
11 |
|
|
Canada Offshore |
$30 |
3 |
|
|
Other |
$30 |
3 |
|
Murphy plans to spend approximately $335 million of 2023 CAPEX in the Gulf of Mexico for development drilling and field development projects, including executing three operated subsea tiebacks and three non-operated subsea tiebacks, and advancing the non-operated St. Malo waterflood project prior to its completion in early 2024.
Murphy has allocated $325 million of 2023 CAPEX to the Eagle Ford Shale. This includes $250 million to drill 25 wells and bring online 35 operated wells, as well as drill 11 wells and bring online 17 non-operated wells. The remaining $75 million is allotted to support field development.
The company plans to spend $130 million of its 2023 CAPEX in Canada onshore. Approximately $100 million is allocated to the Tupper Montney to drill 14 wells and bring online 16 operated wells, and the remaining $30 million supports field development in Tupper Montney and Kaybob Duvernay.
The table below details the 2023 onshore well delivery plan by quarter.
|
2023 Onshore Wells Online |
|||||||||
|
|
1Q 2023 |
|
2Q 2023 |
|
3Q 2023 |
|
4Q 2023 |
|
2023 Total |
|
Eagle Ford Shale |
10 |
|
17 |
|
8 |
|
– |
|
35 |
|
Kaybob Duvernay |
– |
|
– |
|
– |
|
– |
|
– |
|
Tupper Montney |
5 |
|
3 |
|
8 |
|
– |
|
16 |
|
Non-Op Eagle Ford Shale |
7 |
|
2 |
|
4 |
|
4 |
|
17 |
|
Non-Op Placid Montney |
– |
|
– |
|
– |
|
– |
|
– |
Note: All well counts are shown gross. Eagle Ford Shale non-operated working interest averages 21 percent.
Approximately $30 million of CAPEX is allocated to Canada offshore, with $18 million for non-operated Hibernia development drilling, as well as $12 million for non-operated Terra Nova for field development ahead of returning to production in the second quarter 2023.
Murphy has allocated $100 million to its 2023 exploration program, with the majority of spending designated for drilling operated exploration wells in the Gulf of Mexico.
Other capital of approximately $30 million, or 3 percent of CAPEX, consists primarily of capitalized interest costs and corporate CAPEX.
“Along with supporting an increased quarterly dividend to our valued shareholders, Murphy is positioned for another successful year with capital spending primarily allocated to high-returning, oil-weighted Gulf of Mexico and Eagle Ford Shale assets. At current commodity prices, our 2023 capital and production plans position us to progress into Murphy 2.0 of our capital allocation framework, which allocates 75 percent of adjusted free cash flow to debt reduction and 25 percent to enhanced shareholder returns,” stated Jenkins.
Detailed guidance for the first quarter and full year 2023 is contained in the following schedules.
FIXED PRICE FORWARD SALES CONTRACTS
Murphy maintains fixed price forward sales contracts tied to AECO pricing points 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 JANUARY 26, 2023
Murphy will host a conference call to discuss fourth quarter 2022 financial and operating results on Thursday, January 26, 2023, at 9:00 a.m. EST. 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 99312590.
FINANCIAL DATA
Summary financial data and operating statistics for fourth quarter 2022, 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 first 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 this 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 this 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, 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 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 our company to review the information we post on our website. 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.
Contacts
Investor Contacts:
Kelly Whitley, kelly_whitley@murphyoilcorp.com, 281-675-9107
Megan Larson, megan_larson@murphyoilcorp.com, 281-675-9470
Nathan Shanor, Nathan_shanor@murphyoilcorp.com, 713-941-9576
