Murphy Oil Corporation announces fourth quarter and full year 2019 results, 2020 guidance

Achieved 172% Organic Reserve Replacement

Signed Memorandum of Understanding for King’s Quay Floating Production System

Murphy Oil Corporation (NYSE: MUR) today announced its financial and operating results for the fourth quarter ended December 31, 2019, including a net loss attributable to Murphy of $72 million, or $0.46 net loss per diluted share. Adjusted net income, which excludes discontinued operations and other one-off items, was $25 million, or $0.16 per diluted share.

As previously announced, Murphy closed the Malaysia asset divestiture in the third quarter for $2.0 billion in cash proceeds. These assets were reported as “discontinued operations” for all periods presented. Unless otherwise noted, the financial and operating highlights and metrics discussed in this commentary exclude discontinued operations and noncontrolling interest. ¹

Highlights for the fourth quarter include:

• Generated adjusted EBITDA of $404 million, or $22.94 per barrel of oil equivalent sold
• Extended debt maturity profile with the issuance of $550 million of 5.875 percent senior notes due 2027, with proceeds used to repurchase an aggregate $521 million of senior notes due 2022
• Achieved first oil from the Nearly Headless Nick well and completed the Chinook #5 well workover, both located in the Gulf of Mexico

Highlights for full year 2019 include:

• Attained 172 percent organic reserve replacement with an average three-year total finding and development cost of $12.95 per barrel of oil equivalent
• Transformed Murphy into an oil-weighted, Western Hemisphere focused company by closing two significant transactions with the Malaysia divestiture and Gulf of Mexico acquisition
• Increased average daily oil production from continuing operations by 66 percent, with total average daily production rising 41 percent from 2018 levels
• Completed the $500 million share repurchase program, resulting in a total share count reduction of 12 percent, or approximately 20.7 million shares, to 152.9 million shares
• Generated $1.5 billion of adjusted EBITDA, or $23.99 per barrel of oil equivalent sold
• Drilled successful exploration wells in Vietnam, Gulf of Mexico and offshore Mexico
• Increased reserve life to 11.8 years

Highlight subsequent to year-end 2019:

• Entered into memorandum of understanding regarding Murphy’s 50 percent ownership in the King’s Quay floating production system

FOURTH QUARTER 2019 RESULTS

The company recorded a net loss, attributable to Murphy, of $72 million, or $0.46 net loss per diluted share, for the fourth quarter 2019. Adjusted net income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, was $25 million, or $0.16 per diluted share for the same period. The adjusted income from continuing operations excludes the following primary after-tax items: a $106 million non-cash mark-to-market loss on crude oil derivatives and a $25 million loss on extinguishment of debt. Details for fourth quarter results can be found in the attached schedules.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations attributable to Murphy was $404 million, or $22.94 per barrel of oil equivalent (BOE) sold. Adjusted earnings before interest, tax, depreciation, amortization and exploration expenses (EBITDAX) from continuing operations attributable to Murphy was $424 million, or $24.05 per BOE sold. Details for fourth quarter EBITDA and EBITDAX reconciliations can be found in the attached schedules.

Fourth quarter production averaged 194 thousand barrels of oil equivalent per day (MBOEPD) with 59 percent oil and 67 percent liquids. Production was impacted by total unplanned downtime of 8 MBOEPD for the quarter. Non-operated, unplanned downtime was 1,900 barrels of oil equivalent per day (BOEPD) across various fields in the Gulf of Mexico and 1,000 BOEPD at Terra Nova in offshore Canada.

Operated unplanned downtime of 1,500 BOEPD in the Gulf of Mexico was primarily due to a subsea equipment malfunction at Neidermeyer (Mississippi Canyon 209), causing a five-day impact on the three-well field. One well remains down during equipment repairs, which are expected to be complete by second quarter 2020.

Operated production variances of 3,600 BOEPD in the Eagle Ford Shale were the result of well workover activity on higher rate wells in Catarina, as well as new East Tilden wells outperforming historical Tilden wells but producing below their corporate forecast for the quarter. The majority of the Catarina workovers were complete by the end of fourth quarter 2019 and are currently producing in line with expectations. Details for fourth quarter production can be found in the attached schedules.

FULL YEAR 2019 RESULTS

The company recorded net income, attributable to Murphy, of $1.1 billion, or $6.98 per diluted share, for the full year 2019. The company reported adjusted income, which excludes both the results of discontinued operations and certain other items that affect comparability of results between periods, of $144 million, or $0.87 per diluted share. Details for full year 2019 results can be found in the attached schedules.

Production for the full year averaged 173 MBOEPD and consisted of 60 percent oil and 67 percent liquids volumes. Details for 2019 production can be found in the attached tables.

“Over the course of 2019, we executed two noteworthy transactions as we continued to strategically transform our asset base. Our new portfolio generated strong net income in 2019, supported by increased oil production and positive differentials to West Texas Intermediate oil pricing. This growth led to additional cash flow generation which, in addition to proceeds from the sale of Malaysia, allowed us to return more than $660 million to shareholders through share repurchases and a competitive dividend,” stated Roger W. Jenkins, President and Chief Executive Officer.

FINANCIAL POSITION

In the fourth quarter, Murphy issued $550 million of 5.875 percent senior notes due 2027. Proceeds were used to redeem approximately $240 million of the 4.0 percent senior notes due 2022 and $281 million of the 3.7 percent notes due 2022.

The company had $2.8 billion of outstanding long-term, fixed-rate notes at the end of fourth quarter 2019. The fixed-rate notes had a weighted average maturity of 7.7 years and a weighted average coupon of 5.8 percent.

As previously announced, Murphy completed its $500 million share repurchase program. The remaining $94 million under the authorization was used to repurchase 4.3 million shares in the fourth quarter. Over the course of the year, Murphy reduced its outstanding shares by approximately 12 percent, or 20.7 million shares, from 173.6 million shares as of April 30 to 152.9 million shares outstanding at completion of the program on October 4, 2019.

As of December 31, 2019, Murphy had approximately $1.9 billion of liquidity, comprised of a fully undrawn $1.6 billion senior unsecured credit facility and approximately $307 million of cash and cash equivalents.

YEAR-END 2019 PROVED RESERVES

Murphy’s preliminary year-end 2019 proved reserves were 800 million barrels of oil equivalent (MMBOE), consisting of 50 percent oil and 57 percent liquids. Total proved reserves were 2 percent lower than at year-end 2018 as a result of the Malaysia divestiture and 2019 production, which were largely offset by the Gulf of Mexico acquisition, improvements to reserves from revisions and extensions across the business. Excluding Malaysia proved reserves of 129 MMBOE at year-end 2018, Murphy increased its proved reserves by 17 percent in 2019.

The company achieved organic reserve replacement of 172 percent with a three-year total finding and development cost of $12.95 per BOE.

“With the transition out of Malaysia, increasing our Gulf of Mexico business, and continued investment in our onshore businesses, we have been able to maintain a sizeable asset base – all while maintaining our liquids weighting at 57 percent. I am also pleased with an increase in our proved developed reserves to 57 percent from 50 percent and our competitive three-year total finding and developing cost metric of $12.95 per BOE,” stated Jenkins.

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