Murphy Oil: 'Disappointed, but Not Surprised' by Leasing Moratorium
Like other oil and gas producers, Murphy Oil Corporation (NYSE:MUR) (Houston, Texas) endured a fairly brutal 2020, emerging somewhat worse for the wear. The company reported a full-year 2020 net loss of $1.15 billion, compared with net income of $1.15 billion in 2019. Nevertheless, the company is intent on growing its operations, planning capital expenditures (capex) of between $675 million and $725 million this year, with full-year production to be in the range of 155,000 to 165,000 barrels of oil equivalent per day. This compares with capex of $760 million in 2020 and average production of 164,000 barrels per day (BBL/d) in 2020. In the company's recent earnings conference call with industry analysts, executives spoke of recent actions taken by the new U.S. presidential administration and what the company expects in the future.
About a week after taking office, U.S. President Joe Biden issued executive orders putting a temporary moratorium on leasing of federal lands for oil and gas drilling, including offshore, where Murphy concentrates much of its activity. In the company's conference call, Chief Executive Officer Roger Jenkins said, "Murphy, like all operators across federal lands in the United States is disappointed, but not all surprised by recent actions. Unfortunately, as a matter of public policy, we believe [the administration's] efforts are misguided. U.S. emissions peaked over a decade ago in the United States and continue to fall every year. Growth in worldwide greenhouse gas emissions comes primarily from the Far East, Southeast Asia and Africa. These new initiatives will punish domestic producers and workers but will not lower worldwide emissions. Ironically, any policy that includes the Gulf of Mexico actually hurts the carbon footprint as the deepwater Gulf has the lowest carbon intensity of all of the E&P [exploration and production] business."
Jenkins noted that the moratorium would not hinder projects that are already approved and that the company is well positioned to continue short- and long-term projects based on approvals in hand. He noted in addition to its large U.S. acreage, Murphy also has a diversified international portfolio in areas such as both onshore and offshore Canada, and offshore Brazil, Mexico and Vietnam. "It's not in the government's best interest to halt operations in the Gulf for a host of financial and legal reasons. Again, we have a diverse portfolio, and all these actions are highly likely to increase oil prices, which would be in our favor over time," Jenkins said.
Among Murphy's Gulf of Mexico projects is the King's Quay floating production system situated approximately 175 miles south of New Orleans, Louisiana. The semi-submersible production platform will have a processing capacity of 80,000 BBL/d to serve as a production hub for three other project sites, where activity is expected to kick off soon. The Khaleesi, Samurai and Mormont subsea tieback projects will operate with a combined gross resource of 230 million barrels of oil-equivalent, consisting of about 90% liquids. Construction on the King's Quay floating production system kicked off in the summer of 2019. The three tieback projects are expected to kick off in the coming months. Jenkins said the King's Quay project was on schedule and 90% complete, and that drilling for the three tieback developments was set to kick off in the second quarter. King's Quay, Khaleesi and Mormont are set to be completed in the summer of 2022, followed by the Samurai tieback the following year. For more information, see Industrial Info's project reports on the King's Quay production system, and the Khaleesi, Samurai and Mormont tiebacks.
Murphy appears intent on broadening its presence in the Gulf of Mexico. Jenkins said the company participated in the latest Gulf lease sale, held in fourth-quarter 2020, and was awarded eight blocks with five prospects at a net cost of $5.3 million. As a result, said Jenkins, the company's holdings in the Gulf of Mexico total 126 blocks, with 54 exploration blocks and 15 key prospects at this time. Approximately 47% of the company's planned 2021 capex is allocated to the Gulf of Mexico.