MUR - Earnings call transcript Q3 2018

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Operator

Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation Third Quarter 2018 Earnings Conference Call. At this time, all lines are in a listen-only mode. But following the presentations, we will conduct a question-and-answer session. This call is being recorded on Thursday, November 8, 2018. And I would like to turn the conference over to Kelly Whitley, Vice President Investor Relations and Communications. ahead. go Please

Kelly L. Whitley

Executive comments and call the have Relations third everyone, Roger for section us the David mind joining President follow Officer. Chief be Good webcast refer our with keep Please statements Investor earnings thank call in our to of Looney, and Officer; in quarter Chief you slides as this of are President on the Litigation today. today. on some that made and and considered forward-looking Financial we morning, informational the Executive Private you Vice placed of along With Jenkins, will Reform our website during XXXX. Please defined as Act Securities me

events As A such, results will be projections of that variety to no may attained. will the differ. assurances or can cause these exists that occur that factors actual be given

takes XX-K Roger. update on For with will the further Annual statements. to forward-looking the XXXX discussion now Murphy Report duty Murphy's I of turn factors, call file on revise see any no over to Form risk SEC. or publicly

Roger W. Jenkins

Thank so you, excellent Thanks and with for morning, Kelly. listening a been for bear has today. Murphy. in XXXX me. year a cough both I bit an have of Good financially today, operationally everyone.

third Montney of third and generated Malaysia in illustrate Our our drive million XXX,XXX This $X.XX to averaged we X,XXX continued liquids. and diversified equivalent Tupper portfolio day. Production outperformance excellent high was by our exceeded XX% $XX day to per beat quarter commitment and per margin results third driven plays the over offshore guidance as of in Canada Sarawak oil-weighted quarter quarter, by Production share a assets. our our barrels offshore robust end earnings. barrels onshore high the at In production realizations. equivalent from onshore per

upgrade quarter, XX% of to our annualized and shareholders. building per capital of cash We return of Our own enabled our subsea BB+. this Mexico step our on Kikeh billion Ratings employed gas our EBITDA received In deepwater our sheet accretive in maintained the way unique We successfully the with of Gulf also balance position. Fitch back disciplined XX% the Gulf in grade. October, offshore cycle, announcement strength Dalmatian execute operating installed an We In paid the achieved from capital Malaysia while view Mexico. pump right early $X us projects to following in as as Through we've we project an the transaction, maintained cash path allocation well a to to of investment ability we've offshore. our flow to our of the direction lift the liquidity. as

the Duvernay be month. Samurai-X of end on release $XXX the we expected spending we consideration closing core of our assets million Gulf transaction a to full approximately equivalent cost American business, of sidetrack million continuous drilled we're XX% per combined flow. shale lease This onshore of October extremely JV on cash accomplished end, The free will able believe in deal while successfully immediately discovered barrels own press Subsequent flow ultimately of The logs close early improvement by in Kaybob XX the can of growing and to now the company's well, equivalent found $X by quarter analysis the show in well reductions we growth forming sold. data, we bolt-on operating accretive times and XX. adjustments. where over for subject is plans, to we X. and with In transaction cash will also additional We expenses Petrobras announced the delivered issued of We that provide simultaneously details within was Mexico by just by after Slide resource. have North to our our X.X year-over-year. achieving our barrel

on our of and offshore are turned exploration production and successfully we've in at beginning to the continue strategy to projects We installed where Mexico Samurai execute Malaysia to now our project, Gulf offshore with see uplifts. low-cost innovative success

team performance the see to Our third we our Kaybob quarter operational where delivered continuing an excellent exceed expectations. in

During remains over matter No oil, the weighted barrel advantaged a Slide quarter, our of to of per oil third price our diversified price Murphy sold. portfolio average delivered the peers. $XX of X.

three Canada, being Slide assets. intend in expected have full We and with the levels. CapEx We a maintaining and to to been EBITDA of the announced generated barrel. our turnaround quarter. delayed events XXX,XXX strong and many In rectified for day. the temporary the across to tropical the Malaysia, issues these affected guidance. those We've production These account In delivered oil in Gulf events restored updates is the areas. production facilities fourth of prices Field due had hurricane and we billion XXXX, ranging joint year of by in results to in October, previous production of assets, X. our fourth onshore Hibernia to our equivalent. solid We're the high total numbers accounted to received of day of XX% field those of mechanical not be to The closing. in at upon quarter recently production equivalent In shut per storm an production for extended active scheduled margin from annual barrels being EBITDA into and and of include lowered to to $XX in, the production XX% the XXX,XXX was course some production non-operated impacts from of our and XXX,XXX our one-off of adjustments do Mexico, in venture. you levels. for Fourth $XX issues non-operated generation areas These core CapEx offshore season. a range of per per per is from the series series that production which Over the $X.XX XXX,XXX BOE key provide premium capital. quarter barrels our annual Both is range

acreage most our Eagle our call David financial has shut-ins At across damage Shale a our to Ford road of some flooding Looney, over due the for turn facilities. to update. recent Additionally, I'll this CFO, of time, at caused

David R. Looney

Thank $X.XX you, quarter slide loss in $X.XX starting on compared diluted a $XX be the Roger. income I'll of is of in per which X. diluted loss results $XX quarter a net of or share one ago. million Consolidated to share, included XXXX year third million same the of per

tax had is relates interest of net to quarter-end. derivative company. capital a $XX of of Gumusut-Kakap oil settlement the block in Number of revolving leases change XX% Field profit from last capital settlement facility, was on $XX the $X.XX which outstanding Number our million Ecuador was contracts relates Ecuador no million. the working Our income the at or net debt-to-total gain of important of $XX arbitration Malaysia $X The finally, At prior $XX unitization note income capital, adjusted an associated the of of total of the in in XXXX million. share debt million proceeds we or diluted the period credit Murphy's change billion reconciliation September And XXXX was fiscal the items. for $XXX $X.X and from accounts amounted quarter while million. in This by equivalents signed no the loss a approaching Murphy's Field. terms reconciliation The of $X our net there of Brunei foreign At adjusted arbitration million Two, working to to and the versus three, per total XX, following for cash in to a adjustment end income. under settlement, a an to the with billion on owned parties. were $X.X unrealized income previously quarter a one, crude was quarter, and the amongst borrowings exchange that year. excluding interest in loss in It comparable a million Brunei third Gumusut-Kakap XX%. to third income mark-to-market quarter due after varies the

Moving hallmarks over our one years been to within capital of the spending at the to disciplined approach our flow. slide X, Murphy has cash

leading we're in generate currently free our one again cash companies only As to group this our every flow as peer slide two this XX-company Murphy in of group is indicates, area year. peer X once quarter

group. cash capitalization our the yield us the metric by this in our free free nine-month graph among cash $XXX at flow flow peer equity indicates, as calculated ranked our Additionally, annualizing dividing by first million and

free see, new can talk Murphy's. many at Murphy, while you about really delivering. nothing This flow, cash is are others As for we,

predictable, as assets our rather of is negative strong with have only generation, been execution. assets, free At operating the present, on disciplined We focused a among unusual I'll at innings then a year, which shale sake, be entity. we quarter turn for cash company's We're free flow growth's all the cash execution, goal approach for the but Duvernay of and allocation way. to to asset company and the allocate out. this. operations. consistent employing shareholder-friendly review By a the in we generate as flow leads it capital free such cash play that, to This level, at an not for free each cash Kaybob flow-generating this not individual our which simply growing to early approach With over quarter as is primary expected Roger flow disciplined in always

Roger W. Jenkins

you, Thank David.

XX. slide continued In cash to reliable flow be on Malaysia, free me assets Let generating start a business.

we In cubic to Kikeh drilling the project complete. deliverability for Sarawak liftings Acis, now completing quarter, the since per and a we the recompletion asset. a that third Kikeh X-well million feet up we we Sarawak started over day is X-well wells completed South lift achieved gas completed In gas Our with XXX continued an production that allowed infill FPSO DTU with with now online. gross. project XXX campaign milestone gas

XXX% to with and of project barrels the equivalent for plan Gulf track the installation and apart. the FLNG It's we at H-Rotan installation Block was quarter, of pumps the year-end. In from per Subsea and record. a our gross. XX,XXX progress progressing again is longest that of fourth equivalent remains sets on pump XX aiming with a section. umbilical of rates Vietnam, flexible development commenced increase quarter. LDV dynamic continues prior sets a lines currently it's in field quarter development in production Early Also over Our approvals completed subsea in flow Pump example is riser completed the used installation the Dalmatian exceeding delivering an gross X,XXX team commerciality day the the declare miles. incremental This day production. Mexico, This this Murphy by to barrels In late manufacturing

Eagle the can technology new we on industry joint Gulf long Another Ford term including fields. Mexico we implemented in Shale. our use first as the believe Slide venture we a of XX

nine In the brought cost in the During quarter, Eagle Ford additional Ford X we fourth area online. team maintaining costs of plan cost Catarina. all to in quarter, spite an we Eagle wells continues Shale lower while service wells drilling Catarina bringing online inflation. completion in on

We XXXX continue to year-to-date below improvements foot year. per last cost with see

year-to-date as approaching XXXX completion driven cost per procurement of This and lower costs with to our continue We outstanding work. sand from is XXXX continued backdrop and performance the foot is timeframe. increases all overall from execution now inflation levels this during

well the this the below free XX, this deliver with $XXX Slide flow expenses cash US$X.XX free has reliable to XX, and For Montney quarter. months generated cash continues Tupper ended September nine million asset operating flow. of performance

flow generated the cash $XX For this ended million gas in of price the nine assets free months environment. XX, September

quarter AECO to third with quarter, realized of and the gas today. mitigate Creeks online. AECO continue natural XX. active our complete we're Slide our Kaybob feel drilling plan spot. which to their Montney and wells CAD time, this exceptions for off in with area daily bringing exposure sales of spot gas. X.XX At We appraisal to An In hedges XX we Tupper is XX% Duvernay our Two MCF executing the per exposed

than per to quarter, online we're our quarter day XX,XXX fourth Slide to exit deliver the barrels XX. plan field. XXXX this During five plan, wells track With this XX. bring more brings to equivalent of total wells rate we on online which in fourth

to second at quarter, exceeding Duvernay. XX,XXX strong We XX% have XX% continue liquids. well Production increase barrels performance equivalent is per from with day

longer, XX area. were drilled fastest Kaybob in $X drill cheaper We a longest wells our well expensive West where feet for lateral least drilled the Simonette play area million. to we the XX,XXX continue We wells. in exceeding drilled well The in the faster, and in days

the all for Our trend areas executed delineating in barrel of an the with continuing illustrating our as we're two lease with since we've We four production achieved slide we some outstanding the down. our IPXX that to the operating and pleased cumulative operator, has well across which years results exploration becoming of $X.XX is new again operated new Murphy play On to pads value development here clearly this mode showing XX, expense proving rates low equivalent all-time only move only creation is per our outstanding early and execution. in full volumes. and considering I'm results strategy. quarter, wells XX year, of outstanding focused executed from XX, acreage. we

Our Samurai-X to to zones. connected where that we well were pay contiguous sands hydrostatically find able updated were

adjacent With XXX pay. across the where sands of proven maintained Samurai-X three Canyon block in oil the we an accumulations Green sidetrack, we have extending

the received expected year. is with XX.X% net a XX. slide Drilling our in is to King Discovery next barrels to equivalent on XXX million or Prospect intervals call Cake barrel see two plan with equivalent, plans. Murphy's look to $XX sidetrack, Palenque of targeting cycle all expect As same we we also. approval in out working over mean gross With resource King forward quarter XX the well, this LDT well from to currently we other increasing look million now IRR you Amplitude-Supported the over size, the and equivalent. the update is in of the cycle more XX%. bringing this the Cake interest. core we upside to first Vietnam, XXXX. the of successful in to full exploration exploration around feel success known from in now XX%. the XX important In quick and million we're as spud in samples an year. nearby updating We million barrels A the objectives of in regulators, testing XXXX cycle potential We Today spud barrels analyze prospect Middle $XX of XX. XX Mexico the barrels Cholula confident wells, again of equivalent on well plays approval the plan. cost a breakeven prospect, XX-XX/XX The million. be with We're logs I resource full Mexico will we as working the Cake on in resource the development Gulf the King while the IRR Murphy-operating how information well pre-drill Gunflint mean in quarter formerly Slide you awaiting plan spud early forward from well to Samurai per Miocene. new The estimate potential the fourth less drilling well of prospect, and primary

track in of have in wells Brazil our offices look and acreage Mexico. XXXX in growth Basin, exploration oil the exploration we the early the continued is quarter of non-operated We'll success. offshore you survey XXXX, our on XXXX. very fast plus completed. Gulf reserves for our first group, and to seismic in two Sergipe-Alagoas forward and plan back to wells These data XD the additional As in wells Mexico upon are to In allow the exciting drill in Vietnam work

flow upside with yield executing global Gulf our companies We onshore our of cash to to enhanced exploration shareholders with well prospect the immediately offshore strategy, continue for and of in plus cash additional Mexico In I'm the Highgarden significant North continued America businesses. our our plan. in ability Green with we in to cash And closing, of to add success by is the Canyon we're the Block one free This in delivering few proud award shareholders. especially recent unique exciting our XXXX flow. and exploration on we're the XXX. our be joint have to our returning free inventory venture that delivers Mexico Gulf new create of

for this of Finally, work like thank your I I'd open day diligently our employees will and all calls to, as today up strategy. executing that at I dedicated usual, appreciate time time. our each

Operator

please, Arun be ahead. will Please first Thank from One you, at moment, JPMorgan. go for sir. which question your

Roger W. Jenkins

good morning. Arun,

Arun Jayaram

is word at commentary, we Good free free but million of Petrobras mentioned morning, our cash number $XXX heard deal Roger. in times post for see the recent price a which I of the over generation a Murphy encouraging, stack. in model, flow cash flow the

the buybacks, we your that flow So, process are guess do what on flow, debt free reduction, is have question is deploying cash I how your thought thoughts free cash in XXXX? where behind

Roger W. Jenkins

into we the of Eagle and want portion cash flow Well, get to CapEx use a Ford. that

we well low-entry It's a in like today still a good our won't working tell results cost You in it play make there. well. pretty call and quarter that. that oil-rich But have four delivering just can executing wells

to want year We're not say away for next in that we going So, CapEx increase this lot release year. late to behind the CapEx just from that. January, into and to the get things of budget a far is get now. that would type I which so

We providing about that closed have accretive significant I about closing good business flow by really change. a feel then. that to and cash get

on. really slightly will maintained with budget's again a flow all our putting low from We're going to our this flow growth, free XX% probably cash just the things and CapEx oil of we're are to And year. Eagle We're going of on rest in Shale low-XXs our dividend work free in have exploration but the Brent. back increase so, those way. probably to there. it being to than right alone. different and we're year our And less Eagle we have growth. this Ford not cash going ahead have a We're using be going WTI, working focusing businesses the to be have XXs to Ford significant positive focusing We're but We're going CAGR. not And production last in very on

work. that that capital not all to we're And so, putting it's

higher. be be production oil-weighted will cash production be will free going higher Our and flow be higher, oil CapEx CAGR higher, be higher, will yield's our will to our

So, disclose budget to it. very then. We'd like board through it should our when we go disclosed, positive be and do a get that

roundabout this free having additional your maintaining time, cash that's way and At So, question. of yield. we're answering dividend our a flow

We our the get our that see once years have on of Arun. very proud with about prices a how how we're of have lot asset this as and around in optionality oil But behave to we look we here going over that. and paying the draw real the we're as budget's our looking soon, of couple of option next back control fit, some revolver

Arun Jayaram

Two right. for me. ones All other quick

Regarding deal, of the and estimate had cash volatility, the stream maybe your that know Petrobras just it the hedging I XX/X reduce date. how Any flow would Petrobras closing, on and much a generate between price effective cash the oil deal. asset thoughts from overall to XX/X

Roger W. Jenkins

$XX kind of $XX probably Arun, to something a effect. million month It's thing, million, that

transaction complex course, Of the right the with is in final pillars XXXX. our hedged closing bunch my have comfortable XXs of budget This get And went for still to you've because that a a I outcomes pretty a but WTI comfortable I high just assets, budget. involving good that about using now. that as in got I'm I discussion I'm level budget low our statement. feel not with number. to We're through of we're the

to hedged don't require on mine hopeful that times more that that's that not doesn't which in we not It and will get stable think through this we to need improving. and our liquidity we in and our after going of and oil is return our we today. price are late revolver been everything we're So, situation hedging

Arun Jayaram

fourth knock-on reported the final XXXX? you in any kind just of items, specific just quarter is, weather, highlighted in cetera. And press you Okay. to QX of items towards quarter question effect some release that the et there Is some

Roger W. Jenkins

wouldn't anticipate No, that I at all.

Arun Jayaram

Roger. a Thanks lot, Okay.

Roger W. Jenkins

thank No, you.

Operator

Thank you.

be will go Leo Please NatAlliance from question ahead. Securities. Next at

Roger W. Jenkins

Hello, Leo. morning. Good

Leo P. Mariani

Couple gas here. Hey, for working guys. here. you you Kikeh, On Hey. questions Good project obviously morning got that guys here. guys lift

that? get actually And if a that is at of Kikeh or production? uplift, see quantifying can uplift production Just maintenance at trying of stab or you sense there you to whether more not a of is a take

Roger W. Jenkins

and We've an one that's some from probably of FPSO, where DTU a a platform, debottlenecking mechanical some on is uplift today trying with the prior work. on inshore uplift get some where water sources hurt system doing if This because the back it, pressure along Don't gas. you gas our the subsea sell we all work we X,XXX issues and our wells were in it's compressor, is flowing on over, by been really issues problems and – some the (XX:XX) some lowering been main doing of to to There plant in. infield some the follow range. calls, had have the we injection

more good the and strings the kicked been So, a maintenance-type of believe, then very tubing end well to for performing overall kind years. field increase. but off time between a that to it's add, produced a of to anticipating XX I'm going get hasn't I a year. X,XXX now we're up that's now and five But in deal

Leo P. Mariani

That's Okay. I helpful. question Dalmatian. guess similar around

Do you You talked that X,XXX What incremental term flush day short about declining per guys about some than that that tell can you do as sort that? periods? lower of maintained think might us in incremental BOE that for could production. you the see or start X,XXX be obviously of guys production BOE

Roger W. Jenkins

in lower Houston exceptionally It's to outstanding long so pressure our at a pretty out is It's This wells going because to allow from reservoir while. evacuation incredibly no This we the well. office. industry leading. drawdown in it's to much there working the mechanical performing is through. a the think project be be executed this evacuate budget system go in for pressure. a drill maintained There to today a is as another of the of well. We're I an here well draft looking a will oil It's budget pipeline situation. oil our

that decline into seeing not overriding well a that major I'm uplift, it's mechanical it's coming so, because of out XXXX. And

Leo P. Mariani

well another Okay. potentially That's helpful. And mentioned I there. just drilling guess you

Would the wells your of talked the in two XXXX. be I you about in Mexico that think in (XX:XX)? wells of prepared one Gulf comments,

Roger W. Jenkins

in That field. addition a in well we from would that exploration a be well. that. have be reservoir not would a It's to That

Leo P. Mariani

Okay.

wells year. So the Gulf it'd budget in potentially two the in be exploration for next

Roger W. Jenkins

and off well. the the Correct. Vietnam the Mexico Plus finishing of

Leo P. Mariani

Okay. at guys appraisal initial some the but on might go? size, initial there? I of finished know Samurai, And as just to then it any program development thoughts thoughts any you doing where

Roger W. Jenkins

with a that very to very nice to this the pleased outcome, is use very pleased tie-back are We system. resource us the in

a drill a have development well or October We our drilling We reservoirs there. year. that looking just to now. development series work, seven our in plans, development next We not we've four-well completions work discovered. three study in of probably We're development at deciding in with We early developed type like later. a to well. different that We various partner of slides probably to how pre-AFE various just outlined shows with drill probably the may of could six or from XX that a middle would months the have well a the

from a in XX,XXX compete economics XX-XX We're a that with at and outstanding XXXX, top with late flowing point, two years at things months to world. any gross years on nice gross. to are point, well probably that it's years from of a production from kind capital basis of XX very and that can the in looking these oil asset out and the couple X there, drilling So, decline going

Leo P. Mariani

the All right. Thanks for color.

Roger W. Jenkins

appreciate you, it, Thank Leo.

Operator

And from be Thank will question Muhammed Raymond next ahead. go James. you. at Please

Muhammed Ghulam

question. the taking Thanks Hey. for

this the What to next that? is reading going is pretty Eagle be behind driver correctly, exactly production quarter. down Ford significantly I'm if So,

Roger W. Jenkins

afraid of week, service had a turn of area. to With Karnes actual where is segments we've hundreds the to of had the attend rough pretty in newer as of the there out. leave some can't and we and into some wells. Well, road start we continued boats our into We're water this roads and them we going wells Catarina yards removed go get the to washed pads to

well to up it's And decline. very a completions a a take play, much in a it one be and on count. the We just So, that, and area doesn't that. on the where when quarter drilling. we're production much next you're four wells hurt put and shale drier delivering in so happen in coming limited doing to nine in Not have

our for is cash Ford business, focus our those is a primarily advantage allow to our again, non-front free type that of issue. flow get that and the and up take will the more Eagle Gulf pullbacks consistent So, to tax have capital business accretive end business order in gain not loaded

Muhammed Ghulam

Mexico, the prospect next Okay. to come timetable there new that's in any to going And there year, in say, administration with given risk is December? the the in

Roger W. Jenkins

that again? what What was Mexico? area? In

Muhammed Ghulam

Yeah. (XX:XX).

Roger W. Jenkins

well. No, gaining that it. some are able ahead the milestone There of communicating program progressing exploration of approved. We with and had they've with peers we're a do them. are nearby been that approval us, theirs We're are slightly to

government quality the and relationship with that Our has the of the permit we turned in helped us.

our them in, and work working relationship drill well. internationally And Murphy. of get to and the and and with the feel that December we're We have going used our we able here a in outstanding get permit quality to at that's team to our

Muhammed Ghulam

for you of us you? in remind of Do Vietnam? in you one Can have front and cost Okay. that estimate the also guys it pre-drill well

Roger W. Jenkins

It should be here.

one was slide this here – the we're using It's at is. it that reading on morning. I second. and Just it

$XX Here will go. million, The the And $XX we million. million that, in be around on Gulf Murphy, question Mexico is well be else be will Vietnam in what Muhammed? Mexico and will your the of $XX well the for well

Muhammed Ghulam

Pre-drill estimates, if any? there are

Roger W. Jenkins

We're our The Mexico Vietnam King well barrels, well The barrels. of million XX%. XXX opportunities but barrel to we're XXX million hasn't is XX%. mean upside XXX million XXX well very XX%, big barrels. – million and We're has for a The improvements. is million all XX Cake XX gross these it to million upsides have ranging are barrel company. These from barrel us enormous and

Muhammed Ghulam

all Thank from you. me. Okay. That's

Roger W. Jenkins

Thank soon. you. you Talk to

Operator

you. Thank

ahead. Please will go Luke question (XX:XX) Intelligence. Energy Next from at be

Unknown Speaker

plans the taking just you my operatorship that be might among at wondering call. Chevron. Hoffe full guys acquired next forward? year, your Thanks just just there any appraisal exploration if I wells if you're planning from wondering Hi. going know for was that discovery I'm Park? I what for of involves further

Roger W. Jenkins

budget current a we're at drilled it. and our be included In is excited Park well very to Yes. about Hoffe draft

Unknown Speaker

you And got any for estimate that? resource

Roger W. Jenkins

XXX will It around barrel be this time. probably prospect million at

Unknown Speaker

Thanks. Okay.

Roger W. Jenkins

Mean.

Operator

any Did sir? questions, you have further

Unknown Speaker

me. for it That's

Roger W. Jenkins

Thank you.

Operator

are closing questions for There call Jenkins at over I the back like phone further to remarks. no to this would time. any Roger turn

Roger W. Jenkins

Appreciate further you and you you. those we'll our talk questions, if to up have get and people and IR and calling we'll lined in you it any team today, soon. appreciate for Thank contact

Operator

that your gentlemen, please disconnect thank Thank call conclude conference you, lines. Once you today. again, for Ladies your sir. and for you now this We ask does attending.

Murphy Oil (MUR) 8 Nov 182018 Q3 Earnings call transcript