PETROLEUM EQUIPMENT SUPPLIERS ASSOCIATION

Transcription

1 PETROLEUM EQUIPMENT SUPPLIERS ASSOCIATION SEPTEMBER 18, 214 ROGER JENKINS PRESIDENT & CHIEF EXECUTIVE OFFICER MURPHY OIL CORPORATION NYSE: MUR 1

2 Cautionary Statement Cautionary Note to U.S. Investors - The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We may use certain terms in this presentation, such as resource, gross resource, recoverable resource, net risked P MEAN resource, recoverable oil, resource base, EUR or estimated ultimate recovery and similar terms that the SEC s rules strictly prohibit us from including in filings with the SEC. This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of These statements, which express management s current views concerning future events or results, are subject to inherent risks and uncertainties. Factors that could cause one or more of the events forecasted in this presentation not to occur include, but are not limited to, a deterioration in the business or prospects of Murphy, adverse developments in Murphy's markets, or adverse developments in the U.S. or global capital markets, credit markets or economies generally. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include, but are not limited to, the volatility and level of crude oil and natural gas prices, the level and success rate of our exploration programs, our ability to maintain production rates and replace reserves, political and regulatory instability, and uncontrollable natural hazards. Additionally, the Company may be unable to sell its U.K. downstream business as it desires to do because it may fail to execute a sale of these operations on acceptable terms. For further discussion of risk factors, see both Murphy s 213 Annual Report on Form 1-K and Form 1-Q for the quarterly period ended June 3, 214, on file with the U.S. Securities and Exchange Commission. Murphy undertakes no duty to publicly update or revise any forward-looking statements. MURPHY OIL CORPORATION NYSE: MUR 2

3 Agenda Industry & Regional Overview Murphy Strategy & Overview Eagle Ford Shale Murphy Activity Gulf of Mexico Murphy Activity Takeaways MURPHY OIL CORPORATION NYSE: MUR 3

4 Murphy Oil Corporation Global E&P Business 11 Countries; 1,5 Employees Worldwide Global Operations Preferred Partner with Super-Major Capabilities High Impact Oil Exploration Program Onshore Canada Calgary Hibernia / Terra Nova Balanced Onshore & Offshore Businesses Eagle Ford Shale El Dorado Houston G O M 7+ MMBOE Proved Reserves 2+ MBOEPD Daily Production >7% Oil or Oil-indexed Paramaribo Suriname Cameroon Equatorial Guinea Namibia Douala Malabo Windhoek Kuala Lumpur Perth Vietnam Brunei Malaysia Indonesia Australia EXPLORATION / PRODUCTION OPERATIONS OFFICE LOCATIONS Ho Chi Minh City Jakarta MURPHY OIL CORPORATION NYSE: MUR 4

5 INDUSTRY & REGIONAL OVERVIEW MURPHY OIL CORPORATION NYSE: MUR 5

6 U.S. Overview Steady Production Growth in both Oil and Gas Oil Continued Support from High Prices; Unconventionals Gas Efficiency Gains and Associated Gas Production Oil Rig Counts Dominated by Key Unconventional Plays Recent Permian Resurgence Gas Rig Counts Continue to Fall Due to Sustained Low Prices ~25% of Gas Drilling is in the Marcellus Source: EIA; Baker Hughes U.S. Crude Oil Production, MMBOPD U.S. Oil Rig Count Eagle Ford Granite Wash Permian Williston Others U.S. Dry Gas Production, BCFD U.S. Gas Rig Count Eagle Ford Granite Wash Marcellus Haynesville Others MURPHY OIL CORPORATION NYSE: MUR 6

7 MUR EFS Industry Overview Key Growth Play in North America Remaining Capex, PV1 $MM 4% Production CAGR from 21 to Out of Every 1 Rigs in the U.S. is in the EFS MBOEPD 3,5 3, 2,5 2, 1,5 1, 5 EFS Production EOG Resources BHP Billiton Marathon Chesapeake ConocoPhillips SM Energy Sanchez Energy Anadarko Murphy Oil EP Energy Statoil Talisman Pioneer Penn Virginia Rosetta BP Cabot Carrizo ExxonMobil Forest Oil Swift Energy Matador Others $123 Billion Total in Remaining Oil/Condensate NGL Gas 5, 1, 15, 2, 25, Source: Wood Mackenzie MURPHY OIL CORPORATION NYSE: MUR 7

8 EFS Industry Capex Well Production $MM % Water Management $1,945 54% Artificial Lift $584 16% Well Servicing $55 15% Other Production $545 15% TOTAL $3,624 1% Well Completion $MM % Hydraulic Fracturing $4,558 5% Completion Equipment $1,97 12% Other Completion $1,126 12% Fishing & Rental $82 9% Wireline Cased Hole $664 7% Surface Trees $566 6% Coiled Tubing Services $361 4% TOTAL $9,192 1% EFS Estimated Capex (214) 17% 46% ~$2 Billion Drilling Completion Production 37% Well Drilling $MM % Contract Driller $2,678 36% OCTG $1,287 17% Cement $1,94 15% Drilling Mud $821 11% Directional Services $56 7% Solids Control $51 7% Other Construction $195 3% Bits $147 2% Casing Running $1 1% Wireline Open Hole $1 1% Cementing Hardware $1 1% TOTAL $7,538 1% Source: Spears & Associates, Inc Oilfield Logix MURPHY OIL CORPORATION NYSE: MUR 8

9 GOM Industry Overview Positives Strong Production Growth Outlook 9% CAGR Resurgence in GOM Activity Levels $13B Peak Capex in 218 $MM Development Capex $13.1B Peak Capex (218) Threats Increasing Competition and Rising Costs Additional Regulatory and Policy Constraints 4 2 MBOEPD 2,5 2, 1,5 Production Other Mid Cap - Int'l Large Cap - Int'l Major Well Count Producer Injector Exploration 1, Source: IHS MURPHY OIL CORPORATION NYSE: MUR 9

10 # of Bids # of Bids Amount Exposed ($MM) MUR # of Leases Bonus Per Acre $ Amount Exposed ($B) GOM Industry Lease Sale Activity # of Leases by Region Lease Bonus and Amount Exposed 1,2 1, WGOM EGOM CGOM Average Bonus Per Acre Amount Exposed ,2 1, # Bids by Water Depth > 2 Meters 8-2 Meters Meters < 2 Meters MUR Lease Activity # Blocks Bid Murphy Exposure Source: BOEM MURPHY OIL CORPORATION NYSE: MUR 1

11 U.S. Russia Malaysia Europe Middle East Far East Africa International Australia Central & S America Central Asia China CAGR U.S. Central & S America Australia Europe Africa Far East International Middle East Russia Central Asia China CAGR Industry Drilling & Completions Costs 12% Global Land Drilling Costs, $/ft. CAGR $MM 3 GOM DW Drilling Costs (26-213) High 9% 25 6% 2 3% % -3% P75 P5 P Low 12% Global Offshore Drilling Costs, $/ft. CAGR $/ft. 4 GOM DW Completions Cost, $/ft. (27-212) 9% 6% 3% % Increase % 25-3% 2 Source: Rushmore Reviews; Baker Hughes; Spears & Associates, Inc MURPHY OIL CORPORATION NYSE: MUR 11

12 MURPHY STRATEGY & OVERVIEW MURPHY OIL CORPORATION NYSE: MUR 12

13 Key Segments of Our Strategy EXPLORATION Needle Moving Portfolio OPERATIONS ABILITY History of Offshore New Onshore Capability PREFERRED PARTNER Efficient & Commercially Focused VALUE Diverse & Highly Profitable Oil Weighted Portfolio BALANCE De-Risked NA Onshore & Global Offshore FINANCIAL Capability & Discipline MURPHY OIL CORPORATION NYSE: MUR 13

14 Case Study Unconventional vs. Deepwater Production (MBOEPD) Oil Gas Well Count Capex & Free Cash Flow ($MM) 2, Onshore Unconventional Recovery: 327 MMBOE Well Count Cumulative FCF ($MM) 12, Production (MBOEPD) Oil Gas Well Count Capex & Free Cash Flow ($MM) 2, Offshore Deepwater Recovery: 287 MMBOE Well Count Cumulative FCF ($MM) 12, ,5 9, 1,5 9, 1, 6, 1, 6, 5 3, 5 3, (3,) (3,) -1, Capex Free Cash Flow Cumulative Free Cash Flow Source: Wood Mackenzie (6,) -1, Capex Free Cash Flow Cumulative Free Cash Flow (6,) MURPHY OIL CORPORATION NYSE: MUR 14

15 Case Study Unconventional vs. Deepwater Positives Predictable Production Long-term Source of Cash Flow Large Resource Base Lower Risk and Initial Capital Requirements Threats Very Capital Intensive Lower Rate of Return Longer Payout Period Area Onshore Unconventional Dev. Capex ($B) EUR (MMBOE) Payback Period (Yrs) NPV/BOE ($/BOE) Unconventional IRR (%) Positives High Rate of Return Faster Payout High NPV per Barrel Lower Overall Capex Threats Production Volatility Area Offshore Deepwater Higher Exploration Risk, Lower Success Rate Higher Initial Capital Commitment Risk of Lower-than-Expected EUR Dev. Capex ($B) EUR (MMBOE) Payback Period (Yrs) NPV/BOE ($/BOE) Deepwater IRR (%) Source: Wood Mackenzie MURPHY OIL CORPORATION NYSE: MUR 15

16 Key Portfolio Assets 214E Total Production Guidance 214E Total Capex 15% 54% MBOEPD 46% NA Onshore Global Offshore 57% $3.8 Bn 28% Exploration Field Development Development Drilling 214E Total Production Guidance 214E Development Capex 4% MBOEPD 24% 26% 1% US-EFS US-GOM Canada Malaysia 29% 15% $3.2 Bn 11% 45% US-EFS US-GOM Canada Malaysia MURPHY OIL CORPORATION NYSE: MUR 16

17 Murphy EFS Capex Production / Facilities $MM % Water Management $46 4% Other Production $3 26% Artificial Lift $24 21% Well Servicing $14 12% TOTAL $114 1% Completion $MM % Hydraulic Fracturing $31 5% Completion Equipment $13 21% Other Completion $88 14% Coiled Tubing Services $5 8% Surface Trees $24 4% Fishing & Rental $23 4% Wireline Cased Hole $1 % TOTAL $626 1% MUR - EFS 213 Capex 44% 8% 3% $1.4 Billion Drilling Completion Production/Facilities Other 45% Drilling $MM % Contract Driller $28 44% OCTG $116 18% Other Construction $92 12% Wireline Open Hole $43 7% Cement $36 6% Directional Services $34 5% Drilling Mud $25 4% Bits $15 2% Solids Control $6 1% Cementing Hardware $2 % TOTAL $647 1% MURPHY OIL CORPORATION NYSE: MUR 17

18 Murphy GOM Capex Production / Facilities $MM % Pipeline $77 45% Transportation $25 15% Subsea Facilities $22 13% Surface Facilities $19 11% Artificial Lift $18 11% Other $8 5% TOTAL $169 1% Completion $MM % Hydraulic Fracturing $23 3% Completion Equipment $21 27% Other Completion $17 22% Surface Trees $12 16% Fishing & Rental $4 5% Coiled Tubing Services $1 1% Wireline Cased Hole $ % TOTAL $78 1% MUR - GOM 213 Capex 48% 4% $35 MM 25% 23% Drilling Completion Production/Facilities Other Drilling $MM % Contract Driller $42 49% Other Construction $14 16% OCTG $11 13% Directional Services $5 6% Drilling Mud $5 5% Solids Control $5 5% Wireline Open Hole $4 5% Cement $1 1% Cementing Hardware $ % Bits $ % TOTAL $87 1% MURPHY OIL CORPORATION NYSE: MUR 18

19 EAGLE FORD SHALE MURPHY ACTIVITY MURPHY OIL CORPORATION NYSE: MUR 19

20 MUR Wells Drilled Field Drilling Cost, $MM EFS Continuous Improvement Net, MBOEPD 6 Op Well Count Continued Production Growth Lower D&C Costs; Increasing Drilling Efficiencies 5% Spud-to-TD Improvement Since E 1 Efficiencies Increase Running Room, Long-term Activity Levels, and Number of Economic Locations Oil NGLs Gas Well Count 15 Avg. Cum. Oil by 24 Months, MBO 1 January through June 214 $ $ $26 $24 *All Data from IHS Current to 3/11/214, Operators > 5 Wells; excl. DeWitt County Operators: APC, BHP, COP, CHK, COG, CRK, CRZO, EOG, EP, FCX, DVN, Hunt, Lewis, MRO, NFX, PDX, PVA, RDS, ROSE, SFY, SM, SN, STO, TLM, XCO 2 1 Rigs Wells 1 Rigs 8 Rigs Cost $22 $2 MURPHY OIL CORPORATION NYSE: MUR 2

21 EFS Running Room 1 mi CATARINA NORTH TILDEN KARNES 2 Wells Brought On by Year-End Murphy Acreage TILDEN 1+ Years Drilling Inventory at Current Pace Area Net Acres Lower EFS Op & Non-Op Wells Drilled Lower EFS Spacing (Acres) Lower EFS Wells Remaining Upper EFS Potential Wells Total Well Count (Unrisked) Karnes 12, Tilden 59, ,44 North Tilden 14, Catarina 48, Total 135, , ,786 MURPHY OIL CORPORATION NYSE: MUR 21

22 EFS - Resource Potential MMBOE MMBOE Unrisked Downspacing & Performance 23 U WELLS 56 DS 4 3 Expected 291 O/S 17 1,123 WELLS 17 DS 2 Developed 14 U 1 Proved WELLS 93 Proved + Net Recoverable Resources Undeveloped DS : Downspaced U : Upper O/S : Offsets MURPHY OIL CORPORATION NYSE: MUR 22

23 EFS Typical Day 8 Rigs Running 4 Frac Jobs Ongoing 3 Coil Tubing Units in Operation 6 Service Rigs 8 New Facility Projects Underway 16 Central Production Facilities 75 People Working 24-7 in the Field MURPHY OIL CORPORATION NYSE: MUR 23

24 GULF OF MEXICO MURPHY ACTIVITY MURPHY OIL CORPORATION NYSE: MUR 24

25 MUR Days MUR $MM Global Deepwater Project Execution Ability Average Well Cost Discovery to First Production Industry Avg ~ 8. Years FPSO MUR Avg ~ 4.8 Years MURPHY ~39% FASTER Average Drill Time Discovery to First Production Semi, Spar & TLP Industry Avg ~ 7.2 Years MUR Avg ~ 4.5 Years MURPHY ~37% FASTER Peer Group: APA, APC, BHP, BP, COP, CVX, HES, MRO, NBL, RDS, XOM Source: Wood Mackenzie Upstream Data Tool Source: Offshore Magazine, Internal Data Excluded Data Greater than 15 years. MURPHY OIL CORPORATION NYSE: MUR 25

26 Progressing Growth in Global Offshore Near-term Commitment to GOM Net Risked Exploration 1,15 MMBOE (P MEAN ) 3% of near-term exploration capex 42% of risked exploration growth by 222 Australia 28% Gulf of Mexico 3% S.E. Asia 18% Atlantic Margin 24% 14 Net Risked Exploration, MBOEPD Gulf of Mexico Southeast Asia Atlantic Margin Australia MURPHY OIL CORPORATION NYSE: MUR 26

27 TAKEAWAYS MURPHY OIL CORPORATION NYSE: MUR 27

28 Takeaways The Future is Bright for Both Onshore and Offshore Oil and Gas Production Levels are Highest in 3 Years Unconventionals Driving NA Production Growth Deepwater GOM Activity is Rebounding Offshore Works Cost Control Continues to be a Primary Challenge EFS and GOM Play a Significant Role in Murphy s Current and Future Operations MURPHY OIL CORPORATION NYSE: MUR 28

29 APPENDIX MURPHY OIL CORPORATION NYSE: MUR 29

30 Glossary of Terms DEBT ADJUSTED PER SHARE CALCULATIONS Murphy defines Debt Adjusted Per Share as converting the change in Net Debt into an equivalent amount of equity shares using an average stock price. The equivalent shares are netted with weighted average diluted shares outstanding (diluted) which impacts the per share calculations of production and Cash Flow. Management uses Debt Adjusted Per Share calculations to normalize growth funded through debt. NET DEBT The Company defines Net Debt as total debt less total cash and cash equivalents and invested cash in Canada. Management uses Net Debt as a measure of the Company s outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. FREE CASH FLOW The Company defines Free Cash Flow as Cash Flow less capital expenditures. Management uses Free Cash Flow to demonstrate the Company's ability to internally fund capital expenditures, to service debt, and to issue dividends. MURPHY OIL CORPORATION NYSE: MUR 3

31 Abbreviations 3D: three-dimensional AVO: amplitude versus offset BBL: barrels (equal to 42 US gallons) BBOE: billions of barrels of oil equivalent BCF: billions of cubic feet BO: barrels of oil BOE: barrels of oil equivalent (1 barrel of oil or 6 cubic feet of natural gas) BOEPD: barrels of oil equivalent per day BOPD: barrels of oil per day CAGR: compound annual growth rate Capex: capital expenditures CSS: cyclic steam stimulation D&C: drilling and completions DD&A: depreciation, depletion & amortization EBITDAX: income from continuing operations before taxes, exploration expenses, depreciation, depletion and amortization, and net interest expense EFS: Eagle Ford Shale EOR: enhanced oil recovery EUR: expected ultimate recovery F&D: finding and development FPSO: floating production, storage and offloading vessel GOM: Gulf of Mexico GMR: gross mean resource IOC: international oil company LOE: lease operating expenses LNG: liquefied natural gas MBO: thousands of barrels of oil MBOEPD: thousands of barrels of oil equivalent per day MMBO: millions of barrels of oil MMBOE: millions of barrels of oil equivalent MMCFD: millions of cubic feet per day NA: North America NGL: natural gas liquid NOC: national oil company NPV: net present value PSI: pounds per square inch R/P: ratio of reserves to annual production ROR: rate of return TCF: trillions of cubic feet TD: target depth TLP: tension leg platform WI: working interest WTI: West Texas Intermediate (a grade of Crude oil) MURPHY OIL CORPORATION NYSE: MUR 31