As crude oil prices topped $70 a barrel this week, reaching heights unseen since 2014, Murphy Oil Corp. President and CEO Roger Jenkins assessed the El Dorado oil and gas exploration and production company’s $40 million first-quarter profit, but told industry analysts not to expect an increased dividend anytime soon.
As oil prices climbed over concerns about Venezuela’s crude industry and the potential impacts of renewed sanctions against Iran, Jenkins laid out a new Murphy fuel exploration strategy in an investor phone call transcribed by Seeking Alpha.
“We achieved adjusted income of $40 million, our highest level in 12 quarters,” Jenkins said, adding that Murphy returned 16 percent of the quarter’s operating cash flow to shareholders. “We’re turning to focused strategic offshore exploration with low-cost entries that have no well commitments, with the lowest cost for drilling we’ve seen in decades.”
Those factors, among others, have commodity investors expecting a boon for well-capitalized exploration companies and trying to pinpoint where to invest. Murphy’s capital position in the first quarter was enhanced by a $120 million credit associated with a clarification of effects from the 2017 federal corporate tax reduction. The company’s total debt as of March 31 was $2.9 billion, with net debt amounting to less than 30 percent of capital employed. It also had no outstanding borrowing under a $1.1 billion revolving credit facility, and $940 million in global cash on hand at the end of the quarter.
For the rest of 2018, Murphy plans to bring another 39 operated wells online, bringing its roster of owned or partially owned oil wells to close to 1,500, with proved reserves of nearly $700 million barrels of oil equivalent, including a significant play in Malaysia that delivered about $105 million in free cash flow in the first quarter.
Jenkins discussed winning bids for exploration blocks in the Gulf of Mexico and a partnership for rights to exploring two blocks in Brazil’s Sergipe-Alagoas Basin. Murphy is also working to increase its interests in Vietnam. He said the company’s business in the Eagle Ford, Murphy’s significant shale-oil operation in south Texas, which delivered “$135 million of free cash in there this year at least,” Murphy told listeners to the call.
In response to an analyst’s question about exploration plans, Jenkins spoke of a “totally different strategy” “focusing on just four places.” Those are the Gulf of Mexico, Brazil, Vietnam and Australia, all areas where advanced seismic imaging is guiding drilling site selection.
When Pavel S. Molchanov of Raymond James & Associates asked whether Murphy might be “inclined to maybe getting the dividend back to where it was before the haircut a couple of years ago,” Jenkins replied that the company’s decision to reduce a quarterly cash dividend of 35 cents per share to 25 cents in August 2016 “was a long-term policy.”
“I wouldn’t see us jumping right back to that level,” the CEO said. “Of course, I’ve discussed this with our board. … And it’s one of our focuses for the rest of the year.”
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