Murphy CEO sees ‘once-in-a-lifetime opportunity’ to cut debt

Murphy Oil Corp., Houston, expects high prices will help it continue to deleverage its balance sheet in 2022, building on a 2021 in which it reduced its total debt by $530 million.

Speaking to analysts and investors at the 50th Annual Scotia Howard Weil Energy Conference March 22, Murphy President and Chief Executive Officer Roger Jenkins said his team’s 2022 goal for debt reduction is now $600-650 million, more than double the $300 million it envisioned in late January. The new target is based on the cash flow Murphy should bring in with West Texas Intermediate prices averaging $85/bbl in 2022 and looks to take advantage of what Jenkins called “a once-in-a-lifetime opportunity to fix your balance sheet forever.”

Murphy, which finished 2021 with total debt of nearly $2.5 billion, could push on from its 2022 debt reduction goal in 2023. Based on an average WTI price of $75, Jenkins said his team would have the option of paying down another $900 million to $1 billion of the company’s debt. Doing so would leave the company, which last year generated $2.6 billion in revenues and $1.4 billion in net cash from operations, with about $800 million in total debt.

Along with his debt reduction comments, Jenkins also said Murphy’s board of directors will review the company’s dividend payout ratio quarterly as it seeks—like most of its peers these days—to put to work at least some of its excess cash flow on direct shareholder returns.

Jenkins also told conference attendees Murphy remains on track to meet the 2022 production goals it laid out along with its fourth-quarter results 2 months ago. Those are centered on growing oil-equivalent production from a first-quarter rate of roughly 140,000 b/d (53% oil) by an average of 11% per quarter to more than 180,000 b/d (52% oil) late in the year.

Driving that growth are new wells on the company’s properties in the Eagle Ford and in Canada’s Kaybob Duvernay and Tupper Montney regions as well as the beginning of production from its King’s Quay holdings in the Gulf of Mexico. At the last, Jenkins said, the mechanical work is complete and “all we need now is barrels to flow” starting in the second quarter. In the Eagle Ford, plans calls for bringing 27 wells online while the company’s holdings in Tupper Montney will add 20 wells.

Shares of Murphy rose about 1% to $41.46 Mar. 23, adding to gains of about 6% early in the week. Over the past 6 months, the stock has nearly doubled, pushing the company’s market capitalization to about $6.4 billion.