Strong global assets part of oil major’s new focus

strongSINCE the first half of the 20th century, Murphy Oil has quietly plodded along with its global operations; persistently moving forward to become an international pursuer of crude oil, natural gas and natural gas liquids more than 80 years after its inception.
Second quarter financial results revealed the company was moving onward and upward, with net income from the first six months of 2013 at $763.2 million, compared to $585.5 million in the corresponding quarter last year. This was primarily due to the company selling its UK oil and gas assets.
Murphy Oil also recently completed the spin-off of its US retail marketing business into independent company Murphy USA.
Former Murphy Oil president and chief executive Steve Cosse said the company had a new strategy and was now a “focussed exploration and production company with a strong portfolio of global assets”.
Speaking at the Barclays CEO Energy Conference in September, Murphy Oil president and chief executive Roger Jenkins said he was proud to lead the company in a more focussed direction.
“The new Murphy [Oil] is here today,” he said.
“We’re a pure play E&P [exploration and production] player and we’re very excited about being in that space. “I think we’re going to trade well and perform well.”
The company’s exploration program concentrates on four key regions: the Gulf of Mexico, the Atlantic Margin, South East Asia and Australia.
The company has projects in countries including the US, Canada, Malaysia, Vietnam, Cameroon and within the Kurdistan region of Iraq. Despite being based in the US state of Arkansas, the company has a strong presence in Australia, particularly off the WA coast.
Murphy Oil has assets in some of the most well-known offshore basins in Australia and is currently drilling an ongoing well.
“We’re an exploration-first company,” Mr Jenkins said.
“We’re focussed on four areas around the world. We’re looking for three different play types globally. “This is something that’s new to us over the last year – we were a little bit unfocussed in years past. What we’re really trying to have is a consistent 10-well program per year [but] it’s difficult at times to do that.
“This year we’re probably looking at seven wells.”
The well program fell short this year,mainly due to a delay in rig availability, but will still manage to test 2.4 billion barrels of oil.
On its website, Murphy Oil stated that it was seeking “high-impact opportunities, places that allow us to take advantage of our strong expertise in specific play types”, such as large structures in new areas, oil-prone deepwater stratigraphic plays and multiple structures as a cluster development.
The company has 4.4 billion barrels of oil equivalent of reserves, resources and risked exploration. Of this total, 6.4 million barrels of oil equivalent are proven reserves, 630mmboe are non-proved, 2050mmboe are contingent resources and 1100mmboe are net risked exploration.
At the beginning of this year, Murphy Oil had $4.1 billion of capital for exploration and production and $3.6 billion for development.
Investment in Australia
Murphy Oil’s Australian assets are part of the company’s long term LNG/floating LNG plans, with the possibility of high value and near-term production.
The company has interests in the Bonaparte, Browse, Carnarvon and Perth basins, with a total of more than 6.1 million acres.
Murphy Oil has a 70 per cent operating interest in the NT/P 80 block in the Bonaparte Basin, which is more than 1.2 million acres and prospective for natural gas/LNG.
The company undertook a 2D marine seismic survey of the area, offshore the Northern Territory, in 2010 but has not reported on the block since.
Murphy Oil has owned the oil-prospective WA-476-P block in the Carnarvon Basin since May 2012 and held a 40 per cent working interest in the WA-481-P block within the Perth Basin since August the same year.
WA-476-P covers parts of the Abrolhos Islands, a well-known area for marine diversity and home to a variety of marine life such as sea lions and turtles.
In September last year the company proposed a work program of 641 square kilometres of 3D seismic, 100km of 2D seismic and geotechnical studies worth $1.8 million, as well as a secondary work program of one exploration well and geotechnical studies worth $20.4 million.
The company conducted a marine seismic survey at the Perth Basin block in February and is planning to drill three exploration wells.
However, despite extensive acreage in a number of basins, the Browse Basin has seen the most action.
Mr Jenkins described Browse as a “very prolific basin with a lot of success, and something that we think fits well into our long-term portfolio”.
The company has a 20 per cent interest in the WA-408-P permit in joint venture with Total (50 per cent) and Santos (30 per cent), and has already had a degree of success.
The Bassett West-1 well was drilled in 2012, 475km north-northeast of Broome, and reached a total depth of 5239m. Wireline logging and sampling in June confirmed 7.5m of gas pay in Jurassic sandstones.
Santos head of exploration Bill Ovenden said the result was encouraging. “Further work is required to fully understand the overall resource picture for the Bassett feature,” he said.
Following Bassett West-1, Dufresne-1 is being drilled and results are expected to be revealed in this year’s third quarter. According to Murphy Oil, the Dufresne prospect could contain gross resources of between 2 trillion cubic feet and 2.8tcf.
Murphy Oil also has a 50 per cent interest in the AC/P36 permit about 550km north-northeast of Broome in joint venture with operator, INPEX.
A statement by INPEX in 2012 said there were plans to carry out exploration activities including drilling one exploratory well. In the company’s 2012 annual report, the block was described as having “high potential”.
Other locations
Although Murphy Oil is focussed on its Australian assets, its biggest plans lie in other parts of the world.
The company produces oil and natural gas in the US from six operated fields and five non-operated fields: seven fields are in the Gulf of Mexico; one in Alaska; two onshore Louisiana; and one in the Eagle Ford Shale area in South Texas.
Throughout 2012 US net production reached about 35,000 barrels of oil equivalent per day, or 18 per cent of total production, and booked 142.6mmbbls of oil and 209.7bcf of total proved reserves.
Murphy Oil holds a number of assets in the Gulf of Mexico, operating Thunder Hawk (62.5 per cent), Medusa (60 per cent), Front Runner (62.5 per cent) and Dalmatian (70 per cent), with interests in Habanero (33.5 per cent), Mondo (50 per cent) and Tahoe (30 per cent).
An exploration well discovered 120ft of natural gas pay and first production is expected in 2014.
“Murphy has a long history of operating in the Gulf of Mexico,” according to the company website, and has a strategy to stay active in the area with two to three exploration wells per year.
In a move to bolster its portfolio, the company’s North American onshore operations would provide “a long-term, stable production base” to balance “cyclical production common to offshore fields”, the company website stated.
Producing wells in the Eagle Ford Shale area and western Canada were set up to reduce company-wide risk. Murphy Oil has interests in, and operates, the Karnes (75 per cent),
Catarina (100 per cent), Tilden (100 per cent) and Nueces (86 per cent) fields in the Eagle Ford Shale area, which contains about 150,000 net acres of unconventional oil and gas play. In the second quarter of this year Murphy Oil was producing more than 40,000boepd with more than 90 per cent oil.
Even bigger than the company’s US operations are its Western Canadian and offshore Eastern Canadian exploration and production assets, which made up about 33 per cent of the company’s total net production in 2012 at 64,000boepd.
Additionally, the company has 151,000 net acres of land in southern Alberta and 166,000 net acres in northern Alberta, with a focus on shale.
Murphy Oil’s Canadian projects have total proved reserves of 155.9mmbbls of oil and 550.4bcf of gas.
The Montney project is 100 per cent owned by Murphy Oil and covers about 144,000 acres within the Western Canadian Sedimentary Basin in northeast British Columbia. Gas
production began in 2008 at its Tupper facility and in 2011 at Tupper West.
When it began operating, the 180 million cubic feet per day Tupper West gas plant was described by former Murphy Oil president and chief executive David Wood as an “important growth milestone for our Canadian business”. Seal, the company’s 100 per cent owned heavy oil project in northern Alberta, produces from horizontal wells and was progressing with an enhanced oil recovery project with polymer flooding and thermal recovery.
Additionally, Murphy Oil has a 5 per cent interest in the Syncrude joint venture in Alberta and a 6.5 per cent interest and 10.5 per cent interest in the Hibernia and Terra Nova producing fields, offshore Newfoundland.
Malaysia is the company’s core asset base, which produced more than 45 per cent of total production in 2012.
Murphy Oil’s five production sharing contracts and three gas holding agreements, such as Kikeh, Kakap and West Patricia, produced about 89,000boepd and have total proved
reserves of 95.7mmbbls of oil and 357.6bcf of gas.
The immediate future
Following the recent completion of the spin-off of its US retail marketing business, Murphy Oil is now intently focussed on exploration and production.
This year it is anticipated that worldwide production volumes would reach about 190,000boepd in the third quarter and full year production volumes of 203,000boepd.
Mr Jenkins saw the completion of the Murphy USA spin-off as a company reinvention. “We’re well positioned financially with an oil-weighted portfolio [and] very visible high-margin oil-weighted growth ahead,” he said.
Mr Jenkins said he was proud that the company was still exploring and that all wells in it’s portfolio would have a real impact on the company’s future.
Murphy Oil’s strategy for future success included a focus on developing underexplored basins and plays; complementing its offshore business by developing unconventional onshore plays in North America and achieving and maintaining a sustainable and profitable oil-weighted portfolio.
“[We have a] big portfolio to drill today; a very, very nice complementary onshore business that we find fights the decline of the offshore assets that we have, and this is going very well for us,” Mr Jenkins said.
“Big discovered resources are now probable – very strong to help our E&P going forward – and we have a new onshore capability in our company, one we didn’t have three years ago…I think that’s a new avenue to capture value for us.
“It’s all about consistently drilling and having acreage. We have a very strong acreage position, we like our portfolio…I think it to be successful going forward.”