Murphy Oil to curtail output by more than 20% in May, closes 2 offices

Murphy Oil Corp. said May 7 it would shut in 40,000 barrels per day of oil production in May, mostly from offshore wells, but might be able to avoid curtailments in June if current prices hold.

The independent producer announced it would close its headquarters in El Dorado, Ark., and its Calgary, Alberta office, laying off staff in both cities, as part of significant cost cuts to survive the industry downturn.

It plans to consolidate all global staff to its existing office in Houston as the new corporate headquarters.

Murphy has slashed its 2020 capital spending nearly in half to $740 million, down a total of $700 million during three rounds of cuts.

CEO Roger Jenkins said the recent run-up in crude prices, "away from this super-contango," made him optimistic that the driller could avoid production shut-ins next month.

"The June price is well above the May physical price, probably $10-$11/bbl higher today or more," he said. "But we need these prices to hold and not have volatility as we get into the trading off of the crude month, which is around the 20th of every month."

Murphy said it is counting on its hedging position to mitigate cash flow volatility this year. It has an average of 48,000 bbl/d hedged at an average price of $54.35/bbl. For May and June, it has 65,000 bbl/d hedged at an average price of $47.20/b.

Murphy pumped 186,000 bbl/d of oil equivalent in the first quarter, including 110,000 bbl/d of oil output. About half of its first-quarter production was from global offshore fields, with another 28% from onshore Canada and 23% from the Eagle Ford in Texas.

For the first quarter, Murphy reported an adjusted net loss from continuing operations attributable to the company of $45.7 million, or 30 cents per share, down from the adjusted net income of $26.5 million, or 15 cents per share, noted for the first quarter of 2019. The S&P Global Market Intelligence consensus normalized earnings estimate for the first quarter was a loss of 44 cents per share.

Meghan Gordon is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.