Murphy sees US Gulf of Mexico assets a ‘home run’ for the company

US independent Murphy Oil believes the success the company is having in the Gulf of Mexico is helping it delever its balance sheet at a faster than expected rate.

Murphy chief executive Roger Jenkins said the company achieved first oil ahead of schedule from its Khaleesi, Mormont and Samurai fields in the deep-water US Gulf of Mexico, with additional production being brought online since April.

“We have now brought online four wells in our seven-well Khaleesi-Mormont-Samurai field development, with the King’s Quay floating production system achieving 97% uptime,” he said.

“The fifth well… is expected to come online imminently.”

Murphy made a number of “highly accretive” bolt-on transactions in the US Gulf, adding non-operating positions in the Kodiak and Lucius fields.

The deals will add approximately 1500 barrels of oil equivalent per day to its overall production totals, increasing output to 4100 boepd in 2023.

Murphy said the acquisition in the Kodiak field added an 11% working interest for $47 million, while the company has signed a purchase and sale agreement to acquire an extra 3.4% stake in the Lucius field for $77 million.

Jenkins said the company did not enter the second quarter looking to expand its position in the US Gulf, but the opportunity to grow its stake in the Kodiak and Lucius fields was too good to pass up.

“Any company that has an incredible deal [has to move] and we have had some incredible deals and these two today are very good,” he said.

Murphy executive vice president Eric Hambly said the company’s Gulf of Mexico assets have been a “home run” for the company, as they continue to produce at high levels.

“Murphy produced 70,000 boepd in the second quarter [of 2022] and [production] was 79% oil volumes,” he said.

Hambly added 80% of its US Gulf capital budget for the year is directed at the Khaleesi, Mormont, Samuri fields and the non-operated St Malo play.

“The remainder of our capital plan for this asset (the Gulf of Mexico) is dedicated to development and tie-back wells, with the operated Dalmatian number one well and two non-operated Lucius wells all being drilled this quarter (Q3), while a non-operated Kodiak well is being completed,” he said.

Murphy also announced it increased its projected production levels for the year, placing its average output range for 2022 at between 180,000 and 188,000 boepd, while keeping the company’s capital budget from $900 million to $950 million.

The company will use approximately 75% of its free cash flow to reduce debt, while 25% will go to shareholder returns.

For the quarter, Murphy reported net income of $351 million, its highest quarterly earnings in nearly a decade. The company reported a $63 million net loss during the second quarter of 2021.