Analyst Note| Dave Meats, CFA |
Murphy Oil delivered consolidated production of 165 thousand barrels of oil equivalent per day in the first quarter, which was 5% higher sequentially and 17% lower year over year. Net production, excluding noncontrolling interests, was 155 mboe/d, exceeding the top end of the guidance range of 146-154 mboe/d. The beat was partly due to the purchase of a higher working interest stake in the Lucius field in the Gulf of Mexico for $20 million (which contributed an incremental 1.1 mboe/d with an expected payback period of one year). However, management also highlighted better-than-expected well performance in the Eagle Ford play. The firm concentrated on Lower Eagle Ford wells in its top-tier Karnes County acreage in the first quarter, and the initial production rates it highlighted, while impressive in absolute terms, were not substantially higher than what we’d expect in that particularly lucrative location. But the firm’s highlighted Austin Chalk results, also in Karnes, were much better than expected, hinting at upside for the firm’s remaining East Texas shale inventory.