Murphy Oil Eyes Eagle Ford, Gulf of Mexico for Growth Projects, Holds Line on Capital Spending Plans

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Researched by Industrial Info Resources (Sugar Land, Texas)--Murphy Oil Corporation (NYSE:MUR) (El Dorado, Arkansas) followed many other oil & gas producers in announcing net losses for second-quarter 2015, as dramatically lower sales prices more than offset the benefits of production growth. The company plans to shift focus to more profitable exploration assets, particularly in the Eagle Ford Shale and the Gulf of Mexico, while keeping capital-expenditure plans unchanged. Industrial Info is tracking $1.85 billion in projects involving Murphy Oil.

Among the company's largest onshore projects is the proposed, $600 million construction of a bitumen oil production plant near Peace River, Alberta. The production field will include 84 dual horizontal well pairs and a central processing facility with a bitumen capacity of 12,450 barrels per day (BBL/d), utilizing horizontal cyclic steam stimulation (HCSS) technology. The project, now in its permitting phase, is slated to kick off construction in fourth-quarter 2015.

Capital expenditures for the quarter were reported to be much lower at $532.2 million, compared with $969.1 million in the same period last year. The Malaysia business saw the biggest drop, to $57 million from $211.2 million. Murphy Oil's expectations for full-year capital expenditures remain unchanged at $2.3 billion.

Net losses stood at $73.83 million for the quarter, compared with net income of $129.41 million in second-quarter 2014. Total revenues stood at $738.29 million, down from $1.35 billion in the same period last year.

Eagle Ford Drives Production
Murphy Oil's total quarterly production averaged 201,952 barrels of oil equivalent per day (boepd), a 2.51% increase from the company's prior guidance but a drop of about 8,000 barrels from second-quarter 2014. Total production in the third quarter is expected to be slightly lower, at about 200,000 boepd; for full-year 2015, production is expected to be between 200,000 and 208,000 boepd.

Murphy Oil reported strong quarterly results in the Eagle Ford Shale, where the company averaged about 60,800 boepd, a level at which it expects to stay for the rest of the year. The company's onshore production in North America during the third quarter is expected to average more than 59,000 boepd, with the full-year outlook near the same number.

The company has not fared as well in offshore production, where it is paring back its footprint to focus on the Gulf of Mexico and Southeast Asia. A quarterly earnings release was blunt: "Recognizing our lack of exploration success, we plan to focus rig commitments on our lower-risk appraisal wells in blocks where we have had prior exploration success. We will allocate capital to higher return opportunities near existing infrastructure, such as Thunder Bird and Dalmatian South [in the Gulf of Mexico], and not invest in the higher-risk, higher-cost wells at this time."

Among the positive results in the Gulf of Mexico was the two-well expansion at Murphy Oil's Medusa project, which began production ahead of schedule. The company also completed the first of two subsea wells in the Gulf's Kodiak development, also ahead of schedule.

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