Murphy Oil Corporation

Good morning, ladies and gentlemen, and welcome to the Murphy Old Corporation fourth quarter 2024 earnings conference call. If at any time during this call you need assistance, please press star zero for the operator. I would like to turn the conference over to Ms. Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us on our fourth quarter earnings call today. With me today are Eric Hambly, President, Chief Executive Officer, Tom Morales, Executive Vice President and Chief Financial Officer, and Chris Larino, Senior Vice President, Operations. Please refer to the informational slides we placed on the investor relations section of our website as you follow along with our webcast today. Throughout today's call, production numbers, reserves, and financial amounts are adjusted to exclude non-controlling interest in the Gulf of Mexico. Slide two. Please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, see Murphy's 2023 Annual Report on Form 10-K on file with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements. I will now turn the call over to Eric Hambly.

Thank you, Kelly. Good morning, everyone, and thank you for joining us on our call today. Slide three. Before I get started today, I would like to thank our employees for all their hard work this past year, and I'm looking forward to the exciting things we have ahead at Murphy. As we turn to slide three, I'd like to start with an update on our priorities of delever Execute, Explore, and Return, which we first announced four years ago. Roger, Tom, and I worked closely to develop these priorities with Murphy's board, and I'm pleased to continue our strategy as Murphy's newest president and chief executive officer. We continue to deliver in 2024 with $50 million reduction in senior notes through open market repurchases. Since 2020, we've reduced our total debt by approximately 60%, and reached our lowest net debt in more than a decade at approximately $850 million at year-end 2024. Importantly, Murphy remains committed to achieving our long-term debt goal of $1 billion. In 2024, we produced 177,000 barrels of oil equivalent per day as we brought online 36 operated and 20 gross non-operated onshore wells. and executed our offshore development plans. We also saw the non-operated St. Malo water flood initiate water injection, concluding a significant multi-year project. Overall, across our assets, we maintained our 11-year reserve life with 713 million barrels of oil equivalent approved reserves at year-end 2024. I'm pleased at the exciting news we shared earlier this month that Murphy drilled an oil discovery at the Hai Su Vong 1X exploration well in Vietnam. We'll share further details in a few minutes, but for now, I'll say that our partner group is very excited about the results, and we're preparing to drill an appraisal well in the third quarter of this year. In the near term, we will soon spud the Loc Da Hong 1X exploration well in Vietnam, and our team is also actively preparing to drill two operated exploration wells in the Gulf of Mexico and initiating a three-well exploration program in Cote d'Ivoire later this year. Looking at our fourth priority of return, I'd like to remind everyone that in the third quarter of 2024, we entered Murphy 3.0 of our capital allocation framework, which increased returns to shareholders. Last year, we repurchased $300 million of stock or 8 million shares. Today, we also announced an 8% increase in our quarterly cash dividend with our new annualized rate increasing to $1.30 per share. Slide four. The capital allocation framework remains key to the Murphy team, and we look forward to executing a full year according to the parameters of Murphy 3.0 with a minimum of 50% of adjusted free cash flow allocated to share buybacks. In 2024, we allocated nearly 80% of adjusted free cash flow to share repurchases, and we had $650 million remaining under our share repurchase authorization as of January 28th, 2025. Slide five. In fourth quarter 2024, we produced 175,000 barrels of oil equivalent per day with 85,000 barrels of oil per day. We saw nearly 11,000 barrels of oil equivalent per day of production impacts in the quarter across our operated and non-operated assets, with the largest components being non-operated Gulf of Mexico downtime from a late-season hurricane, lower performance due to a revised Eagleford Shale completion design, a mechanical issue at an offshore well, an offshore rig delay, and a small production impact due to the time required to evaluate and complete additional pay found in the Gulf of Mexico development well. Our assets generated $629 million of revenue in the fourth quarter, with an average realized oil price of $70 per barrel, natural gas liquids price of just over $23 per barrel, and natural gas price of $1.84 per 1,000 cubic feet. I will now turn the call over to our Chief Financial Officer, Tom Morales, to share our financial results, marketing update, and preliminary year-end reserves.

Thank you, Eric, and good morning. Slide six. In the fourth quarter, Murphy recorded net income of $50 million, or $0.34 per diluted share, and adjusted net income of $51 million, or $0.35 per diluted share. Overall, we generated adjusted EBITDA of $321 million, with accrued CapEx of $186 million, excluding non-controlling interest. Other impacts in the quarter included $19 million of interest expense related to the early redemption of senior notes, as well as a $28 million asset impairment for a field in the Gulf of Mexico. Slide seven. As we shared on our last call, Murphy executed a series of capital markets transactions in the fourth quarter, which ultimately extended our debt maturity profile and increased our senior unsecured credit facility by nearly 70%. Since year-end 2020, we have reduced total debt by approximately 60%, resulting in approximately 50% reduction in annualized interest expense. We ended 2024 with $1.8 billion of liquidity, positioning Murphy Well to achieve our strategic priorities in the coming years. Slide eight. As our Tepper-Motney natural gas production has increased the past few years, we have equally enhanced our natural gas marketing strategy to mitigate our price exposure to ACO as well as protect against volatility for our total natural gas volumes. Looking back at Murphy's 2024 total natural gas production, approximately 36% of our volumes were protected by ACO fixed price forward sales contracts in Canada. Another 33% of volumes were sold at Henry Hub, US Midwest, and US Gulf Coast sales points. Overall, only 17% of our total natural gas volumes were sold in the open-ago market. We believe this marketing strategy is a key differentiator for Murphy. As the demand for natural gas in Canadian and Asian markets increases in future years, and with multiple Canadian LNG export projects currently in progress, our Tupper Montney asset is strategically positioned with significant remaining locations to support this demand. Slide 9. Our preliminary approved reserves totaled 713 million barrels of oil equivalent at year-end 2024, representing an 83% reserve replacement ratio. Contributing to the increase was approximately 12 million barrels of oil equivalent for the non-operated St. Malo field, primarily attributed to the water flood project. In 2024, total approved reserves were 59% approved developed and 42% liquid-weighted. and we maintained our approved reserve life of 11 years. And with that, I will turn the call back over to Aerith.

Thank you, Tom. Slide 11. As we previously announced, Murphy drilled an oil discovery at the Hai Su Vong 1X exploration well in Vietnam in the fourth quarter. The well was drilled to a total depth of 13,124 feet in 149 feet of water and accounted approximately 370 feet of net oil pay from two reservoirs. Ultimately, it was in line with our pre-drill mean to upward gross resource potential of 170 to 430 million barrels of oil equivalent. I'm very excited to share our flow test results today as we achieved a facility-constrained flow rate of 10,000 barrels of oil per day from one reservoir. Additional testing showed high-quality 37-degree oil with a gas-oil ratio of 1,100 standard cubic feet per barrel. We're continuing to review results and are planning to drill an appraisal well in the third quarter of 2025 to further establish the size of the resource. Slide 12. During the fourth quarter, we completed our seismic reprocessing project in Cote d'Ivoire, and we are incorporating the final seismic data into our prospect assessments. We're excited at the opportunities across various exploration types on our five blocks, and we are preparing to begin a three-well exploration program late this year. Murphy also remains on track to submit a fuel development plan for the pond discovery by year-end 2025. With that, I will now turn the call over to Chris Larino, Senior Vice President, Operations. Thanks, Eric.

Good morning, everyone. Slide 13. The Nagelberg Shell Murphy produced 30,000 barrels of oil equivalent per day in the fourth quarter with 85% of liquids. We brought online four operated wells in Katarina as planned. and initiated drilling for our 2025 well delivery program with six operated wells and one non-operated well in Carnes. As we continually optimize our completions methods, we tested a revised design on the cannery to pad that was less successful than anticipated, which unfortunately resulted in nearly 2,000 barrels of all equivalent per day impact to production for the quarter. In Tupper Montney, we achieved fourth quarter production of 387 million cubic feet per day and drilled two wells that will be completed and come online in 2025. Our K-Bob DuVernay asset produced 4,000 barrels of oil equivalent per day with 71% liquids. Slide 14. In the Gulf of Mexico, we produced 68,000 barrels of oil equivalent per day during the quarter. We experienced operated production impacts of 1,800 barrels of oil equivalent per day due to a mechanical issue at a Khaleesi well and 1,400 barrels of oil equivalent per day as a result of an offshore rig delay for the Samurai No. 3 well workover. Additionally, our non-operated assets were impacted by a late-season hurricane causing 2,400 barrels of oil equivalent per day of weather downtime. On a positive note, we found additional pay when drilling operated Moormont No. 4 well, which caused a small production impact due to the time required to evaluate and complete the additional pay. This well is now forecast to come online in first quarter 2025. Our offshore Canada assets produced 7,000 barrels of oil equipment per day in the fourth quarter as we closed the first year of the non-operated Terra Nova field, resuming production following the life extension project. Slide 16. Our 2025 CapEx is forecast to be in the range of $1.135 billion to $1.285 billion, with approximately 60% of spending to occur in the first half of the year. Overall, approximately 85% of our capital plan is for development spending, with the vast majority allocated to Murphy-operated assets, giving us control over timing. Murphy is allocating nearly half of its capital plan to offshore assets, with 30% directed towards the Eagleford Shale, Consistent with previous years, approximately 12% or $145 million is dedicated to expiration spending for the year. Additionally, it's more important to note that as part of our 2025 CapEx program, we are increasing spending in Vietnam as we advance our Lock the Bane field development project. Slide 17. For first quarter 2025, we forecast production of 159 to 167,000 barrels of oil equivalent per day with 83,500 barrels of oil per day. This range is notably lower than the fourth quarter due to approximately 7,000 barrels of oil equivalent per day of natural production declines across our onshore assets, as we have not brought wells online since last May in Canada and October in the Eagleford Shale. Additionally, this range is impacted by 4,400 barrels of oil equivalent per day of planned operated onshore downtime and 2,900 barrels of oil equivalent per day of planned offshore downtime, primarily at non-operated assets. With our planned capital program for 2025, Murphy forecasts four-year production of 174.5 to 182.5 thousand barrels of oil equivalent per day with 91,000 barrels of oil per day. This represents 11% production growth or nearly 20,000 barrels of oil equivalent per day from the first quarter to the fourth quarter. Slide 18. In the Eagleford Shale, Murphy plans to spend $360 million in 2025 to bring online 35 operated and 28 gross non-operated wells, with more than 50% of operated wells located in Carnes, and nearly all wells scheduled to come online in the second and third quarters. We forecast production of 33,000 barrels of oil equivalent per day for the year as a result of these plans. Our team recently optimized Murphy's onshore development plans, given ongoing results from improved completion designs, resulting in improved capital efficiencies. We are now employing an average 9% increase in laterals, which ultimately enables us to complete more rock more efficiently. Slide 19. Murphy plans to spend $85 million in Tupper Montney in 2025 to bring online 10 operated wells with production forecast at 375 million cubic feet per day for the year. Now that we have reached processing plant capacity, we are able to scale down future development as fewer wells are needed to offset natural production declines. Further, our optimized development plan reduces Murphy's capital investment requirement while achieving a 15% increase in single-well EUR and growing our undiscounted cash flow by nearly 20% for the life of the field. As we continue monitoring the development of Canadian LNG projects in the area, we are encouraged by the recent news that the nearby Selah Sims LNG project has secured necessary funds for its facility and the related Prince Rupert gas transmission pipeline. With 750 remaining locations in Tupper Money, Murphy is well positioned to support the capacity needs as the project comes online within the next decade. Slide 20. Approximately $55 million has been allocated to K-Bob DuVernay in 2025, with four operated wells planned to come online in the third quarter. We forecast producing 5,000 barrels of bull equipment per day in 2025. Murphy also intends to drill two wells in the fourth quarter, which will be completed and brought online in 2026. While we have maintained a small well program in this area the past few years, we have improved our future field development plans similar to the Eagleford Shale. Looking at our Cabot Duvernay locations, we have increased lateral links and well spacing, which will enhance our capital efficiency by 20%. Slide 21. Our offshore capital budget includes approximately $410 million allocated to the Gulf of Mexico for development, drilling, and field development. including long-lead spending on development wells coming online in 2026 and 2027. We are also conducting an ocean bottom node seismic survey across our Khaleesi, Mormont, and Samurai fields to better understand the reservoir and plan future development wells. Murphy plans to spend approximately $110 million in Vietnam on the Loc De Vang Field Development Project in 2025, as well as approximately $5 million on the Pond Field Development Activities in Co Duong. The remaining $20 million of Murphy's 2025 offshore capital budget will be allocated to offshore Canada, primarily for non-operated Hibernia development drilling. Overall, we forecast total offshore production of approximately 78,000 barrels of oil equivalent per day in 2025, with 68,000 barrels of oil equivalent per day from our Gulf of Mexico assets. With that, I'll hand it back to Eric.

Thank you, Chris. Slide 22. We're progressing our Loc de Vang field development project in Vietnam And I'm pleased that in the fourth quarter, we commenced construction of the LBVA platform, as well as executed the contract for the floating storage and offloading vessel. Our next steps will be to initiate construction of the FSO this quarter and begin development drilling in the second half of the year. Overall, we remain on track to achieve first oil in late 2026 with ongoing development through 2029. Slide 23. Murphy plans to drill two operated exploration wells in the Gulf of Mexico this year called Cello No. 1 and Banjo No. 1. We remain focused on lower-risk opportunities near existing infrastructure and highlight that these next prospects are located near the Murphy-operated Delta House floating production system. Each well has an estimated net cost of $18 million, and we are targeting to spud Cello No. 1 in the second quarter with banjo number one to follow in the third quarter. Slide 24. Following the success at Hai Su Vong in the fourth quarter and additional time needed for evaluation, the timing of our Loc Tha Hong 1X exploration well in Vietnam shifted and we now plan to spud next month. Additionally, we're making preparations to drill an appraisal well at Hai Su Vong with a targeted spud date in the third quarter 2025. We're looking forward to the results of this well as it will help determine the high end of our resource estimate. Slide 25. Our 2025 plans also include initiating a three-well exploration program in Cote d'Ivoire beginning in the fourth quarter with the Savette Well on Block CI502. This well is targeting a mean to upward gross resource potential of 440 million to 1 billion barrels of oil equivalent and is an opportunity for us to target significant resource potential at a relatively low cost. MRPE plans to drill the next two exploration wells in 2026. While the specific order is still being determined, we've identified the prospects as Hibu on block CI709 and Karakal on block CI102. These exploration wells will also target potentially sizable resources and overall allow MRPE to test a variety of exploratory play types near recent peer discoveries. Slide 27. As we turn to Murphy's strategy over the next two years, I'd like to highlight that our plans remain essentially unchanged. The company will continue to deliver low single-digit production growth from its existing assets as we execute high-return, oil-weighted offshore projects while maintaining Eagleford Shale and Tupper Montney production. We also look to achieve organic growth from Vietnam, and potential development from Pond and Cote d'Ivoire. Murphy's team will also be drilling several meaningful international exploration wells over the next 18 months that will test prospective unrisked resources that equal five times our current offshore approved reserves. Overall, we remain committed to returning cash to shareholders through our capital allocation framework and achieving our $1 billion debt target. Slide 28. The foundation of our existing business and what we plan to accomplish across our growth opportunities in the next couple of years creates a runway for long-term success. The optionality of our existing multi-basin portfolio allows us to achieve our overall goals of oil-weighted growth and excess cash flow generation for shareholder returns. We have multiple high-impact international projects on our horizon, while we continue infrastructure-led Gulf of Mexico exploration in our own backyard. It is an exciting time at Murphy and exploration will remain a key differentiator and value creator for our company for years to come. With that, I will now turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star four by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel the request, please press star four by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Arun Jayaram from JP Morgan. Please go ahead.

Good morning, Eric. Morning, Arun. Yeah, I wanted to maybe start with maybe slide 28. You've highlighted kind of the annual planned CapEx program of $1.1 to $1.3 billion to deliver the low single-digit production growth. I guess one of the buy-side questions is, does that CapEx range kind of contemplate the plan of development at Payone? and obviously some of the positive drill bit news at the HSV field, and just help us put that 1.1 to 1.3 into context given those two potential development projects.

Thanks, Arun. I think that's a really important question to help us clarify what's included here and what's not included. To be clear, Our current long-range view that we're communicating involves developing our existing assets in line with what we're stating here on the slide of what we intend to do with our onshore assets. It also includes the full development of the Lac du Vent field, It does not include any development costs related to PON in Cote d'Ivoire, nor does it include costs related to developing Hai Su Vong in Vietnam, the recent discovery we made, which hopefully you spotted our tremendous flow rate from that well.

That's great. I just wanted to clarify that. And just, you know, maybe the follow-up to that is can you give us a sense you know, for the pay on development, I think you're submitting a plan of development to the government, you know, by year end. And help us think about maybe the capex around that project, if you size that. And, you know, we've been thinking in Vietnam around F&D costs in that $10 to $15 range. But I just wondered if you could maybe help us, give us some initial thoughts on how capex could trend for those projects.

Okay, thanks for that very much. I'll start with pond, and then I'll touch on Vietnam. The pond development is one that is an interesting field for us in Cote d'Ivoire. So we got involved in our acreage position in Cote d'Ivoire for exploration. We're exploring for oil. We have identified a number of really nice prospects that are quite sizable, and we can test them with pretty low well costs. If you can test upwards of 400 million barrels for 40 to $60 million gross well costs. That's a pretty exciting piece of business to be involved in. The pond discovery happened to be in one of the blocks and our work commitment for that production sharing contract is to develop a field development plan by the end of 2025. And we're well on track to accomplish that. The field at pond is an oil field with a relatively small oil column and a large gas cap. For that reason, negotiating the terms of a gas sales agreement are quite important to whether or not that development moves forward. We're actively involved with various Ivorian government parties on negotiations around what that can be. And at this point, we're not 100% sure we'll have a project. We think that there's an opportunity. We believe that natural gas is needed in the country, and there will be significant demand, domestic demand in Cordova for the resource that PON can develop. Because we're in an active negotiation and there's a lot of different moving parts around how we might develop the field, timing, all that, it's really a little premature to say how that might look. I would tell you that I would not expect a near-term capex of significance for PON. The typical timing for something like that might be if you can negotiate agreements this year, you might have a sanction at the latest very late in 25, more likely in 26. It's likely to be a multi-year project, like a three-year type of timeframe, something on that scale. So it may impact capital allocation in the later part of the decade, 27, 28, 29. That's a little premature to say that. In Vietnam, we're really excited about the progress that we have made. on our Lac du Vent development project. We released today some details around timing of key activities. We started our platform construction in the fourth quarter of 2024. It's moving along very nicely. We'll start construction of the FSO in the first quarter and development drilling in the fourth quarter. For the high sous-von discovery that we made, obviously we have a lot of work to do to figure out how large it is. Our appraisal well, rather, that we planned for the third quarter is targeted to understanding the upside size of the resource. As we highlighted today and earlier in the month, the results of the well are in line with our pre-drill range of 170 to 430 million barrels. It's possibly a little larger. When we drilled the Hai Su Vong 1X well, we drilled it near the crest of the structure, and we found oil in two zones. Most of the oil was in one zone. In that one zone, if we look at just what we found with the oil down to the lowest oil found in that well, that's what we say is consistent with our pre-drill estimate. We did not encounter any water level, so an appraisal well would be targeted to identify How much oil might there be below the well, lower on the structure? And the resource has significant upside potential. So we think about how do we develop the field. It's a little early to say what the total resource would be. Obviously, we're excited about the flow rate potential, which we demonstrated with our drill stem test. If I was trying to frame an early assessment of capital to develop the field, there still needs to be a pretty broad range. I would think of $5 to $10 a barrel for development costs. and probably $5 to $10 a barrel for operating costs. I think if you look at those and consider them in the context of deep water developments, then it looks really attractive. The shallow water development with high flow rates is looking to be a very attractive project for us. I gave you a little bit longer than you asked for, but I think it helps frame sort of what we're looking for there.

Yep. Super helpful, Eric. Thanks a lot.

Thanks very much.

Thank you. And your next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead.

Yeah, good morning, Eric and team. Just a couple quick questions. First one is just clarifying on Q4. Numbers have become a little softer on production than I think where the street was expecting, and you called out some downtime onshore and offshore due to some mechanical issues and some delays. So could you just Help us understand what happened in Q4 from a volume perspective and any lessons learned from that.

Sure, Neil, and thanks for joining our call. We had a pretty rough fourth quarter. You know, we really would prefer to execute quite a bit better. I would characterize quite a few of those things as short-lived, and they should mostly be resolved as we get toward the end of the second quarter this year. We had significant amount of downtime offshore for a few wells that are offline. We call out specifically the Samurai 3 workover, which we had. we had been working on in the fourth quarter and expected to be able to return to production in the fourth quarter. So it should have contributed more. We had some delays executing that work because of some downtime with a rig and some winter storm activity, which delayed the work. So that well is now scheduled to come online in the first quarter. It's a significant well, about 4,500 barrels net comes online in the first quarter. We had a well at Khaleesi that was offline for part of the fourth quarter. because we were diagnosing what we think is a safety valve issue. As we look now with more clarity heading into the year, we're going to need to put a rig on that well, do some work on it, and that well should come online in the second quarter. We also had a bit of downtime in our non-operated Gulf of Mexico business, primarily because of storms. We had a number of platform shut-ins for a late in the quarter, later than our typical storm season shut-ins, primarily again in our non-operated Gulf of Mexico deepwater assets. That was a pretty significant impact for us. The other couple of things we highlighted, which I'll just touch on briefly, we had an Eagleford shale four-well pad in Katarina that we tried a new completion style and it underperformed our expectations. that will have a lingering effect into 2025, but pretty minimal because, you know, the wells declined relatively steeply, the shale wells. So we have factored that into our guidance, of course. And then the last thing, which is really a positive for us, is that the Mormont 4 well encountered significantly more pay than we expected and more zones. And we ended up having to complete more zones or having, I should say, the opportunity to complete more zones. And it takes a little longer to complete more pay than than less pay, and so the timing of that Moormont number four well drifted into the first quarter of this year. So I gave you a lot of detail. I'll step back and sort of characterize. We don't expect storm downtime in the Gulf to repeat. The timing of well delivery, again, should be significantly resolved as we progress through the first and second quarters of 2025, and then we continue to deliver our production. I'll frame a little bit around production growth. Obviously, the The guide for the first quarter is relatively low. We've highlighted why. And if you think about the cadence for the rest of the year, the delivery of our new onshore wells is very heavy in the second and third quarters. So we'll see our production grows to be significantly over 180,000 barrels a day in the last three quarters of the year.

That was a really helpful color. And then I want to stick on the Eagleford here, which is we look at your 25 CapEx guide for onshore. Big driver of the growth does seem like it is in the Eagleford. So can you talk about how do you define success this year? What are you looking to accomplish in that revised completion design? Sounds like it was something that you worked through and shouldn't affect your performance here in 25.

Yeah, that's a great question. Let me give you some context around that. In the Eagleford business, we've highlighted in the past that we sort of shifted our program to be a more steady well delivery. So instead of running a very concentrated two-rig program early in the year, last year we ran a rig all year long, and it allowed us to set up for earlier in 25 completions than prior years. We intend to kind of keep that steady operation going. The impact of that is about a 3,000 or 10% increase 3,000 barrel a day or 10% increase in production year over year. So we're pleased with how we're on track to deliver that. We're allocating a little bit more capital because we had that program and we're going to continue drilling toward the end of the year. So if you look at well cadence, 2024, we had 20 operated wells. 2025, we have 35 operated wells for only about $65 million more capital. Significantly better looking program for us. We have a fairly significant Carnes component to our 25 program, which is different than last year, which was fairly unique. In terms of how we're trying to execute, we're always trying to improve our operations. Over the last few years, we've been very successful in both our Onshore Canada and our Eagle for Business in trialing and deploying new completion styles, new adjustments, new operational things. And we've done really well with improving our operations, not just through supply cost matters, but also through operational improvements. One of the things that the team worked on, which I think is really significant over the past year, which we're disclosing on our call here, is we've also reworked our future development program so we can take advantage of those operational improvements, but also design a full field development that's more efficient, specifically in our Eagleford area. We have a future plan of development that has 10% less wells, but those 10% fewer wells are completing 9% more rock. And so they're significantly more efficient from a capital, leads to approximately 6% lower capital to develop the remaining resource. And we have similar type of improvements in our other onshore assets. So we're really excited about how we can continue along with our peers to try to strive for better and better performance from our shale business.

Thanks, team.

Thank you. Thank you. And your next question comes from the line of Neil Dingman from Turbo Securities. Please go ahead.

Morning, all. My first question is on the Gulf of Mexico, Eric. Maybe specifically, could you speak to, you know, how you all have risked and maybe how active a workover program will be needed in the play, and maybe along with that, how active a development program will be needed in order to keep production relatively flat is, I don't know, I think you were indicating it sounds like work or activity will remain relatively high. So I'm just kind of trying to get a sense of how we should think about work over maybe even development activity.

Okay. Yeah, thanks, Neil. I'll start with that. I may have Chris help me out with some of the details. We have a fairly active first two quarters of work over activity. The Samurai 3 workover, which we expected initially to complete last quarter, has drifted in to be completed in the first quarter. We have planned a Marmalard workover in a Delta House facility to drill a sidetrack and new completion of a well that's been offline for about a year. And we have, as I just mentioned, in the Khaleesi field, a safety valve issue with one well that we'll fix in the second quarter. And that's really the bulk of our activity from a workover perspective. We highlighted in the past year that we've had an abnormally large amount of offshore workovers affecting significant wells, which has hurt our business. And the way we think about it, we're near the end of that program and should expect it to be resolved by the end of the second quarter. Maybe Chris can provide just a few details on sort of the rates of those wells to help you think about the walk-up of restoring the production from those.

Right, right. Thanks, Eric. For the Samurai well, first off, we had some rig equipment issues that pushed us in Q4 into Q1. That's all behind us. We've got that fixed and moving forward. So we're looking at Q1 online data, as we mentioned, with about 4,000 to 5,000 net barrels of BOE per day for us. And then we have the Marmalade 3 and the Khaleesi 2 that we've mentioned. Marmalade 3 should be about 1,600 BOE net. and Q2 and Khaleesi 2 should be somewhere around 3,500 DOE net. So one thing to note, it's been a frustrating run of bad luck, but there's nothing that connects to all these issues. They're all kind of unique in their own way, so it doesn't concern us long term. And so it's at least here. It doesn't bother us. And also, we have nothing. Once we finish the Khaleesi 2 well, we actually have no more planned for the second half of the year. So we'll have those behind us come mid-year. Thanks, Chris.

Hopefully that helps.

It does. That answers that. And then you touched on this earlier. My second question is just on Vietnam. I just want to make sure I'm clear. Can you give a sense of timing and the magnitude of capital spend around? I just want to make sure you've talked a bit about the development activity. that's going to be coming there as well as the exploration. And I'm just wanting to, again, make sure I have a sense of, or I'm clear with the timing and maybe magnitude of the spend.

Okay. So for the LactaVong development project, we're allocating $110 million of net capital to execute that this year. We'll have more capital to get to first oil in 2026. I believe 2026 capital is a little bit lower than 2025. If you look at the exploration and appraisal activities, we have a $10 million net cost for the Loc De Hong well, which we will execute in the first quarter. And the appraisal well, we have a bit of work to do to define exactly what the cost of that will be, but I would ballpark it in the $20 million net cost range, something on that order.

Perfect, perfect.

Thanks for the details, Eric.

Thank you. And your next question comes from the line of Paul Chang from Scotiabank. Please go ahead.

Hey, guys. Good morning. Eric, can you share with us what is the work welfare expense going to look like in the first quarter and second quarter and what it was in the fourth quarter?

Paul, that's a really good question. And I don't know that I have that number handily in front of me. Do we have it? I don't see it. No. I can talk to you a little bit about operating expenses and the impact they have on that pretty handily, but exact dollars. Give me a second if you don't mind. Sure. Paul, instead of giving you the exact dollars, let me frame it in the context of operating expenses. So I expect the first quarter operating expenses for our company to be fairly elevated, maybe in the $15 to $16 per barrel range. Because we wrap up a lot of that work in the second quarter, then we have, we should expect operating expenses to be more normal for us, probably in the $10 to $12 per barrel range.

And how about in the second quarter?

Again, the second through fourth quarter should be sort of in the $10 to $12 a barrel range.

So even in the second quarter, because I thought you still have workovers built into the second quarter.

We do, Paul, but we also have a significant increase in production across the company. And so that's why you see that dollar per barrel operating expense come down to kind of a typical run rate for us in the $10 to $12 barrel range.

Okay. In your presentation, you're saying that the $1.1 to $1.3 billion annual capex that gives you the low single digits, If we do the math based on this year number, you don't really get to the 210, 220, which I think the company seriously has been targeting, saying that by 2027, 26, 27, you get to there. So those target is now off or that we misunderstand the communication here.

No. So what we're trying to do with our longer range view here is sort of guide that we are allocating a certain amount of capital and that represents a certain reinvestment rate. When we do that in our plan in the 26 through 2030 timeframe, we do get to a production level in excess of 200,000 barrels a day and oil weighted. And we do have some years that are maybe slightly higher than really low single digit, a little higher growth numbers. But the plan that we have previously communicated that has us getting into the 200,000 barrel a day range and higher is consistent with our current view. It's the same as what we were communicating in the past couple of years.

And so maybe that you can help us where that growth going to come from. I mean, in the offshore business that I think you are probably excluding WigNAM, you are targeting about flat. And WigNAM is adding about 10 to 15, but it's probably not going to come on stream and ramp up to full until 2029. And EagleFly doesn't seem like you are increasing the production. And Dover doesn't look like you are increasing the production. So how we get to from 180 up to say the 210 and 220?

Okay, yeah, thanks. So in 2026, we'll bring online a high rate well in our samurai field and early in the year. And we're planning an activity at a very high rate, high ownership field in the Gulf of Mexico, which we'll disclose later, that helps us significantly increase our Gulf of Mexico production. And then along with that, we have and execution through the end of this decade of our long list of Gulf of Mexico development projects that we sort of steadily execute within that capital allocation of $1.1 to $1.3 billion. And then Lactavon production begins late in 26, and as we head through 27 and 28, ramps up to Plateau, which we maintain through 2029 with ongoing development. So if you look at significant high-rate wells with high ownership, In our Gulf of Mexico business, our long list of projects that are high return Gulf of Mexico, subsea tieback type of work, and our Loch de Vong development, we get to be over 200,000 barrels a day in the last handful of years of the decade.

I see. Okay, we do. Thank you.

Thanks, Paul.

Thank you. And your next question comes from the line of Leo Mariani from Roth Capital. Please go ahead.

Hi. I wanted to touch base a little bit on your offshore Canadian production. Looking at your guidance for first quarter in 2025, your offshore oil steps up, you know, a decent amount. Can you just kind of just speak to that? I mean, obviously, I think the Terra Nova fields had significant downtime for a while. Have there been some operational changes made where you guys are expecting that to kind of have a better runtime going forward? If you can just describe that a little bit.

Thanks, Leo. I'm very happy to say that Suncor has made significant improvement in the operation of Terra Nova as they exited last year. They worked with a lot more internal resource and some third parties to enhance their operational reliability, and they're doing quite well right now. And so for the first quarter of of 2025, we're expecting that trend to continue. And that's helping us have more confidence in Canadian total production offshore and also Terra Nova. So pretty pleased with the turn they've made toward the latter part of last year with their operational reliability.

Okay. And then just jumping over to the Eagle Ford here. So you guys described kind of a completion design sort of snafu on four wells that cost you around $1,900. you know, BOE per day. I mean, that $1,900 seems pretty significant for a change in a completion design. I mean, were those wells just incredibly, you know, poor performers at the end of the day where, you know, maybe the rates were kind of a fraction of whatever your standard, you know, completion design, you know, is? Just seemed a little unusual, you know, at this point in the shale kind of evolution to sort of hear that. And then I guess just also just wanted to confirm, I think you guys sort of alluded to this, but you're obviously seeing Eagle Ford growth here in 2025, that 33,000 barrels a day. Just to be clear on that, is that kind of more, you know, just somewhat of an anomaly on the growth this year, and that's more like the type of number we could see in the out years as we get into 26, 27?

Okay, great questions. Yeah, unfortunately, that four-well pad that we tried, a new completion style, it did significantly underperform. The exact underperformance is material. I mean, it's something like 50% to 60% of the rate we expected from the wells, which is unfortunate. We'll learn from it. We'll continue to try and improve. It is isolated to something we tried on one four-well pad, so it's not something that we're overly concerned about, but it is a disappointing impact to our fourth quarter. Because we're planning to run a steadier program in Eagleford over the next few years, you can expect to see our production probably in the higher end of our 30,000 to 35,000 barrel a day range. If you go back and look at 2024 was around 30, but the few years before that were in the 33 to 35 range. So we're heading more back to a little bit higher in the range we've been guiding.

Okay. It's very helpful. Thank you.

Thank you. And your next question comes from the line of Charles from Johnson's rice.

Yes. Good morning, Eric, to you and the whole Murphy team there. Um, thank you. You guys have had touched on a lot of this, this Gulf of Mexico stuff. And I think, uh, I think Chris offered, uh, kind of a summary on this, but I would just want to go back and make sure, uh, I'm understanding and kind of synthesizing it. Right. So, uh, It looks like a lot of the CapEx surprise, the higher capital spending in 1Q is Gulf of Mexico, but even kind of one step more than that, it really looks associated with the, you know, with the Kings K fields there. And I'm wondering if, you know, I think you guys have made the case that it's going to be transient, but you look at things, and, you know, in this case, it seems like a positive with Mormont. that you found another pay there. And so I'm curious, is your view of that set of fields changing? Are we on some kind of different capex but also volume trajectory there? Or is this, you know, just kind of elaborate if that's the right understanding or what's changed for the Gulf of Mexico in that set of fields specifically?

Thanks, Charles. We're overall very happy with the performance of Kings Key. We have continued to find more and more pay to develop. As a course of that, we've developed more wells, including the Mormont 4. The Coliseum Mormont fields in particular have done tremendously well. We are completing now ocean bottom node seismic survey over the Coliseum Mormont Samurai fields and surrounding area. which we think will help us identify even further future development opportunities there, infill drilling zones that are not obviously imaged with our current seismic that we can develop. Very happy with those. A Khaleesi well with what looks like a safety valve problem is a very temporary thing. We'll fix that and we'll get it back online in the second quarter. These are very high rate, high performing wells. We have high ownership. And when they're offline for a period, it is unfortunately fairly painful. In the samurai field, we've highlighted in the past that one of the wells we had previously been producing from two zones, we shifted to produce from one zone at a time. All the resource that we expected originally is there. We'll get it. We'll just get it a little bit lower rate because we'll produce one zone and then the other zone. And as we talked about this morning, the Samurai 3 is quite a high rate well that's offline for a suspected tubing leak. And we're working through that and should have the well online in the first quarter. And then we're adding a Samurai well that will come online early in 2026. And so Samurai, while in 25 has some issues, by 26 we should be back in line with kind of our life, our expectations for the field. And just kind of emphasize the reservoirs are performing as expected. Mechanical issues have impacted our rate at times, and we've also had extremely high rates in the past with really significant outperformance.

Got it. Thank you for that detail, Eric. And then if I could go to Vietnam, I was wondering if you guys could just kind of give us the narrative of that flow test you had. And I imagine that once you hit the facility constraint rate of 10,000 barrels a day, which is great, your attention starts to go to some other metrics, whether it be, you know, pressures or, you know, flowing pressures or pressure transients. And so I wonder if you could just give us the narrative of that flow rate or rather that flow test and your reaction to it and how that's informing your decision with the appraisal well, how far to step out and go down dip.

Great question. So we are really excited about the result. When you have a well at 13,000 feet that can flow 10,000 barrels a day in shallow water, that's really strong. It's really indicative of a high-quality reservoir. We're excited about it. The well potential is a little bit higher than that, obviously. We are continuing to evaluate all of the well tests that we did there and understand the implications of it. What I can say preliminarily is Everything from the test is positive, and we have more work to do to figure out what the total resource is, and that's why we planned an appraisal well for the third quarter of 2025.

Got it. Thank you.

Thank you. And your next question comes from the line of Carlos Escalante from Wolf Research. Please go ahead.

Hey, good morning there, everything team. I guess I'd like to shift gears real quick to your Canada asset. You mentioned during your opening remarks that CEDAR LNG has made some recent progress on securing pre-financing and whatnot, and we know that LNG Canada Phase 1 is due to start up soon, and Phase 2 is a possibility in the near-term future. That as well with the U.S. context in which we've had a very cold winter so far in which we've hit actually 9 BCF per day of Canada imports to the U.S. I wonder if your strategy changes at all with your money asset and how you see it moving forward.

Thanks, Carlos. So one of the things I think is important to understand about our Tupper money asset is with our well delivery program in 2024 we reached the plant capacity that we have and a plant capacity expansion project is a multi-year thing probably on this on the order of three years we do have and are considering and evaluating currently the possibility of putting more capital to work to have deliverability of wells in excess of plant capacity that would allow us to have a higher total throughput for the year because as our plan is now with our 10 well program, we'll return to plant capacity, but then at parts of the year with production decline, we drift below capacity. So near term, something we're thinking about and evaluating, we would need to see a durable commodity price signal there that would cause us to push up our capital allocation to be able to accomplish that. Something we're thinking about and evaluating. I'm not there yet, but it is something that's on our horizon. Any more significant expansion would be again, a, multi-year project from permitting, engineering, construction, commissioning, all that.

Gotcha. Thank you. I appreciate the color there. Now, going back to Vietnam, and not to beat the dead horse, but on the latest HSV discovery. So it is my understanding that one of the reservoirs that you hit is one of the sandstones that you hit is a fluvial will take kind of – geological characteristics. That to me at least, it means that there may be a chance or a high probability that you may hit good quantities of oil, but that they may not necessarily be interconnected. The concern obviously would be that you'd need to have a given amount of wells that would probably be higher than you need if the reservoir was more connected or the reservoirs, rather, would be more connected to each other. So, all that to say and ask, how do you think about the development of the HMV reservoir if you do find that they're not necessarily connected in the way that maybe or perhaps your LDV would be under the fracture granite reservoirs that you have?

Okay. That's a great question. The high-speed bong well found pay in two zones. Most of the pay was in one deeper zone, which is the zone we flow tested. That zone is expected to be laterally very extensive, and that's what we're testing with our appraisal well. The other zone that we found nice-looking, high-quality net pay-in is expected to be less laterally extensive and would be in volumes on top of the range we've already communicated. So we have work to do to appraise and assess those over time. those fields, those reservoirs likely all get developed. But the core development would be the larger zone with more significant amount of pay we've demonstrated and have flow tested. Thank you.

Appreciate the call, Eric. Thanks, Carlos.

Thank you. And your next question comes from the line of Job J from DL Energy Partners. Please go ahead.

Hi, guys. Just one quick one for me. You know, can you provide any details on what didn't work with the new Eagleford completion design? And, you know, I guess what's the path forward? Is it just going back to the old design or, you know, did you learn some things that may lead you to a different conclusion? Thanks.

Jeff, I think I'm going to let Chris handle some of that detail.

Okay. Yep. Thanks for the question. We, it really was just down to the sand intensity and the water is what we tinkered with. So those were the main components. that got us, you know, you can say we kind of found the point of diminishing returns, which, you know, for us, we've got a lot of running room in Katarina. We've got a lot of inventory. So on the positive side, it helps us kind of moving forward to be more capital efficient in Katarina. Great.

I really appreciate it.

Thank you. Once again, should you have a question, please press star followed by the one on your telephone keypad. Your next question comes from the line of Betty Jing from Berkeley. Please go ahead.

Hi, good morning. Thanks for taking my question. So I want to ask about the offshore development opportunities that you guys have that slide. It's slide 41. It seems like you guys have done a rework of the portfolio. So we'd love to hear about what has changed, what got added, what got removed. I did notice that the resource number has gone up. But the CapEx has also gone up from 380 to 450. So what's driving that? Is that cost inflation, project mix? Anything along that line will be helpful.

Thanks. Okay. Thanks, Betty. We have, as we always continue to assess the remaining opportunities in our portfolio, TeamWorks all year. The way that we typically release these slides is we work them at the end of the year, beginning of the year, and then we kind of lock them in for the year. So we talk about them all year long, but they're really driven by our annual process of identifying all the opportunities in our assets and our long-range planning process. And so I would characterize it as probably slightly more opportunities that we've identified, but not dramatically different. With our long-range planning process that we've highlighted in the past, We have built into our plan that if we don't have offshore opportunities to fund, we pivot longer term to our onshore business. So as we identify more offshore opportunities, we pivot our longer term allocation of CapEx to the offshore opportunities and not to the onshore. So if you look at the total capital for the company, our guide of how that is deployed over the long range is a similar number. But as we've identified more opportunities offshore, we plan to put more capital to work there. And we have the optionality to not invest as much in the outer years onshore because those onshore opportunities will be there when we want them beyond the end of this decade. And the offshore opportunities, most of them have a use it or lose it type of component to them where the infrastructure or other issues related to the development of them won't be waiting around for us in the later 2030s.

So should I interpret this increase in the offshore capex, the longer-range offshore capex, a function of just more projects in the backlog and as a result? Exactly. Okay.

Exactly.

Got it. Okay. And are those projects also seeing a higher break-even price? Because the break-even price has also moved up a bit.

We've assessed the costs and the development of all of them and the economics from time to time move around. The costs are probably up a little bit. One thing I'll highlight in terms of cost structure, major components for our offshore, particularly our subsea type of work, which dominates this, driven by rig rates, which have been pretty stable. We have seen some cost escalation in subsea trees, subsea tieback installation type of work. And we update our economics to reflect that. And it probably pushed the break evens up, I don't know, a few dollars a barrel.

Got it. No, that's really helpful. Thank you. My follow-up is on the HSV capital. And appreciate the color, the numbers, the bookend, the $5 to $10 that you mentioned earlier, this call. But would love your thoughts on how you think about your long-term corporate capex over time. If this is a significant discovery, which it looks like it might be, we're looking at potentially this billion to billion and a half type of capital just based on that range. How do you see that getting folded into the corporate spending level? Do you see that as an incremental, but certainly with those high return on that project? Or do you want to maintain at a capital that's similar to current but back out spending somewhere else?

Yeah, that's a great question. I think we're fortunate with the timing of our current Vietnam project and the typical timeframe it takes to develop something new that as about the time we're ramping down our spending at Lac de Vang, we could continue on with development of Hai Su Vang. And so if you just think about typical timeframe for appraisal, and field development planning, field development plan approval, and execution of something like Haisi Vong, you're looking at a four to five year type of timeframe. And so about the same time we'd be pulling down capital allocation to Lac de Vong, we could be ramping up in Haisi Vong. It's all manageable within our program. And as I highlighted a few minutes ago, we have an ability to flex our onshore spending at the later part of the decade. In our long-range plan, we typically don't include any exploration success. So when we have exploration success, it can take the place of the onshore ramp-up that we model long-range, and we just delay the ramp-up of our onshore business. So we're comfortable with the guide. I will caveat that with if we made a major discovery in Cote d'Ivoire, it would be likely beyond the CAPEX that we're showing in this guide.

Perfect. That's really helpful. Thank you.

Thank you. And your next question comes from the line of Chris Baker from Evercore ISI. Please go ahead.

Hey, good morning. Eric, I appreciate you facing a lot of these unexpected issues head on. I'm just curious, as you reflect on last year and put together this year's plan, Is there-should we think about, you know, any additional sort of conservativism baked into the guide, you know, beyond the, you know, typical GOM weather items?

Well, I think that we were pretty happy with the way we typically guide weather. Obviously, we faced in the fourth quarter a later than normal storm impact. I would characterize that as quite abnormal. We have, over the last several years, we've conducted multiple analyses of the impact that weather may have on us. We feel that the methodology that we have for accounting for storm activity in the Gulf of Mexico represents sort of a typical year. We've had some years with no storm activity. We've had some years with significant storm activity. And we typically, in our guide, will use something that aims for the kind of mean expectation. For this year, that's about 1,700 barrels annual average the storm activity is typically in the third and fourth quarter, and about 80% of it we allocate to the third quarter and the rest of the fourth quarter.

Yeah, and I guess, sorry, just to put a finer point on it, given some of the more unexpected items, you know, Gulf weather aside, just wondering if that, you know, impacts how you're thinking about guiding the rest of the portfolio outside of gone weather.

Yeah, so we did, as we've talked about previously and also this morning, had a significant amount of work over activity for mechanical issues with wells in the Gulf of Mexico. We've included what we know we need to do here in our 25 plans, and we talked about them now this morning. It's not common to have this, so we don't think it makes sense to forecast ongoing work over activity every year in our business because quite a few of these wells have been producing for years. some of them decade without any issues. And so it's not something we think is systemic or requires an allocation or an assumption of ongoing work over downtime or costs.

Great. And then I appreciate you squeezing me in here. You know, last year obviously significantly exceeded the cash return minimum that you guys have set. Maybe just any color in terms of you know, how to think about the potential to see you guys exceed again this year and, you know, just sort of how to think about that, you know, I guess almost 80% cash return last year, how that was, you know, how you guys came to that being the right, you know, sort of cash return outcome for the year.

Yeah, thanks. Let me just make a few comments and then I'll have Tom jump in and provide a little more color. I think if you characterize what we've done with our business over the last few years, we're really happy with our performance. We've reduced our long-term debt significantly from $3 billion to under $1.3 billion. We've materially increased our dividend to now up to $1.30 a share. Really happy with how it's going. And over the last couple of years, I've picked up the pace of our share repurchase program. And I think that's quite admirable. And we've made a really great progress and happy with that. We're really happy to be in the Murphy 3.0, which gives us quite a bit of flexibility. And I'll let Tom kind of talk through how we think about the impact of that and how we think about timing of that.

Thanks, Eric. Appreciate the question, Chris. Yeah, last year we leaned pretty heavily into share repurchase. We thought it was the right thing to do under Murphy 3.0, given where our share price was trading at the time. That's something we'll continue to watch. this year as well. We'll go in with the base, you know, minimum plan for share repurchase with our adjusted free cash flow, but maintain that flexibility throughout the year of making that call when we feel like there's a significant dislocation in our share price. Now, keep in mind our CapEx is a little bit more heavily loaded to the front half of the year, so we take our targets as an annual basis rather than quarter by quarter. So that may help you think through maybe the timing of when we might do something around our framework.

Makes sense. Thank you both.

Thank you.

Thank you. There are no further questions from our phone lines. I would now like to turn the call back over to Mr. Eric Hemley for any closing remarks.

Thank you for listening to our call today. Should you have any additional questions, please follow up with our outstanding IR team. Have a good day everyone.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you disconnect your lines.