Murphy Oil plans to curb May output by 40,000 bpd, moves HQ to Houston
Oil and gas company Murphy Oil plans to reduce its output in May by 40,000 barrels of oil equivalent per day, with the majority planned from offshore wells. Murphy is also closing two of its offices and making its office location in Houston the new corporate headquarters.
For the month of April 2020, production averaged approximately 179 thousand barrels of oil equivalent per day (mboepd), while approximately 7 mboepd was not produced due to curtailments and shut-ins primarily onshore.
The company anticipates approximately 40 mboepd of production shut-ins and curtailments for the month of May.
These decisions are made each month based on current pricing, and therefore June production curtailments are unknown at this time. Murphy explained.
Given current market volatility and the potential for additional curtailments in the coming months, the company cannot accurately guide production for the full second quarter.
Additionally, the company noted that its previous full-year 2020 guidance should no longer be relied upon.
Roger W. Jenkins, Murphy President and CEO, said: “Given the current industry turmoil, including shut-ins and curtailments across the sector, it is difficult to accurately forecast production volumes.
“However, if we assume NYMEX strip oil prices occur, we are confident that the combination of the King’s Quay transaction proceeds, hedge realizations, and lower capex, operating and G&A costs will allow us to exit 2020 with a strong liquidity position.
“This enables us to methodically continue our cost reduction plans over the course of this year and next, so that we are better positioned to weather a possible long-term low commodity price environment”.
Loss in 1Q 2020
Murphy recorded a net loss, attributable to Murphy, of $416 million for the first quarter of 2020. This compares to a profit of $40 million in 1Q 2019.
Adjusted net loss, which excludes both the results of discontinued operations and certain other items that affect the comparability of results between periods, was $46 million for the same period.
The adjusted loss from continuing operations excludes the following after-tax items: a $693 million non-cash impairment of certain Gulf of Mexico and other foreign properties, a $283 million mark-to-market non-cash gain on crude oil derivatives and a $47 million mark-to-market non-cash gain on liabilities associated with future contingent consideration.
First-quarter production averaged 186 mboepd with 59 per cent oil and 66 per cent liquids.
As reported in March, in response to challenging macroeconomic conditions, the severe decline in commodity prices and reduced demand for crude oil and natural gas, Murphy lowered its 2020 planned capital expenditures.
Since 1 April, the company has revised its budget a further $40 million down to a midpoint of $740 million, representing an approximate 50 per cent decrease from the original capital guidance midpoint.
For first-quarter 2020, Murphy spent a total of $365 million, or approximately half of the company’s new 2020 budget, consisting of $345 million for capex, excluding King’s Quay, and $20 million for exploration.
In addition to lowering capital expenditures, the company continues to prudently and dynamically manage all expenses.
Currently, Murphy is focusing on improving its operating cost structure and cash position and is targeting $30 million to $40 million in reductions across operating expenses, along with approximately $50 million in lower cash G&A and related expenses in 2020.
This includes the previously announced closing of two offices and meaningful executive salary and board compensation reductions.
Further, Murphy announced in April a 50 per cent dividend reduction to $0.50 per share on an annualized basis.
Moving HQ to Houston
In recognition of the extraordinary drop in crude oil prices, Murphy Oil is closing its legacy headquarters office in El Dorado, Arkansas, home to approximately 80 employees.
Murphy is also closing its longstanding office in Calgary, Alberta, Canada, home to approximately 110 employees.
Consequently, it will be consolidating all worldwide staff activities to its existing office location in Houston, Texas as the new corporate headquarters.