Executive Summary / Key Takeaways

• Murphy Oil is executing a multi-basin strategy focused on operational excellence, balance sheet strength, high-impact exploration, and robust shareholder returns, positioning it for oil-weighted growth.
• Recent Q1 2025 performance reflects lower revenue driven by commodity prices and temporary operational downtime, partially offset by cost reductions and strategic asset acquisitions like the BW Pioneer FPSO, which enhances future operational efficiency and development potential.
• The company's differentiated technology in onshore drilling (longer laterals, optimized completions) and offshore seismic imaging is driving improved capital efficiency, well performance, and resource identification, providing a competitive edge against peers.
• Key catalysts include the Lac Da Vang development reaching first oil in late 2026, the Hai Su Vang appraisal well in Q3 2025, and the high-impact Côte d'Ivoire exploration program commencing in Q4 2025, which collectively test significant unrisked resource potential.
• With a strengthened balance sheet, a clear capital allocation framework targeting debt reduction and minimum 50% adjusted free cash flow to shareholders, Murphy Oil balances disciplined investment in its diverse portfolio with rewarding investors, while remaining prepared to adjust spending in response to commodity price volatility.

Setting the Scene: A Century of Evolution and a Multi-Basin Strategy

Murphy Oil Corporation ($MUR) stands as an independent oil and natural gas exploration and production (E&P) company with a history spanning more than a century. Its journey has seen significant strategic shifts, notably the divestiture of U.S. refining and marketing operations in the early 2010s, focusing the company squarely on upstream activities. This evolution has shaped a business model centered on a diverse, multi-basin portfolio designed to deliver oil-weighted growth and generate substantial free cash flow.

The company operates across key geographic areas, including onshore assets in the U.S. Eagle Ford Shale and Canada's Tupper Montney and Kaybob Duvernay, as well as offshore positions in the Gulf of Mexico, Canada, Vietnam, and Côte d'Ivoire. This geographic and geological diversification provides inherent flexibility, allowing Murphy to allocate capital to the highest-returning opportunities across different market cycles and mitigate regional risks.

In the competitive E&P landscape, Murphy competes with a range of independent and larger integrated energy companies. While lacking the sheer scale of giants like ConocoPhillips (COP) or Occidental Petroleum (OXY), Murphy strategically positions itself by focusing on operational excellence, capital efficiency, and leveraging its international experience, particularly in underexplored or complex basins. Compared to peers like Marathon Oil (MRO) or EOG Resources (EOG), Murphy emphasizes a balance between developing its extensive discovered resource base and pursuing high-impact exploration, which management views as a key differentiator and long-term value creator. While some peers may demonstrate lower operating costs per barrel through scale or specific basin advantages, Murphy aims to offset this through targeted operational improvements and superior capital efficiency in its core areas.

A critical component of Murphy's strategy and competitive positioning is its commitment to technological differentiation and innovation. The company is actively implementing advanced techniques across its portfolio to enhance performance and reduce costs. Onshore, this includes drilling increasingly longer laterals, exemplified by records set in the Eagle Ford Shale (13,976 feet, an 8% increase from the previous record) and Tupper Montney (over 13,600 feet, a nearly 4% increase). These longer laterals allow for more reservoir contact per well, improving resource recovery and capital efficiency. Furthermore, Murphy is testing new completion styles, such as enhanced proppant loading in the Tupper Montney, which has shown promising early results with over a 30% increase in initial production rates compared to historical performance. Optimized development plans in the Eagle Ford and Kaybob Duvernay involve increasing lateral lengths and adjusting well spacing, aiming for approximately 6% lower capital to develop remaining resource in the Eagle Ford and a 20% enhancement in capital efficiency in the Kaybob Duvernay. Offshore, the company is utilizing ocean bottom node seismic surveys to gain enhanced imaging for better reservoir understanding and future development/exploration planning. These technological advancements are not merely incremental improvements; they are designed to directly impact the bottom line by lowering costs per completed lateral foot (a 34% decrease since 2023 in the Eagle Ford), improving well productivity, and increasing the efficiency of capital deployment, thereby strengthening Murphy's competitive standing and contributing to its long-term growth objectives.

Performance with Perspective: Navigating Q1 2025 Dynamics

Murphy Oil's financial performance in the first quarter of 2025 reflected the prevailing commodity price environment and temporary operational factors. Net income attributable to Murphy was $73 million, or $0.50 per diluted share, a decrease compared to $90 million, or $0.59 per diluted share, in the first quarter of 2024. This decline was primarily driven by a $121.9 million decrease in revenue from production, stemming from lower crude oil prices and reduced production volumes in the U.S. (Gulf of Mexico and Eagle Ford Shale). These U.S. volume decreases were attributed to workover and turnaround-related downtime, well performance, natural decline, and impacts from winter weather.

Partially offsetting the revenue decline were lower costs and expenses. Lease operating expenses decreased by $29.2 million, mainly due to lower sales volumes in the U.S. and reduced operating costs at the non-operated Terra Nova field in Canada (which had higher restart costs in Q1 2024). Exploration expenses saw a significant decrease of $29.9 million, as Q1 2024 included higher dry hole and previously suspended exploration costs in the Gulf of Mexico. Impairment of assets was zero in Q1 2025, compared to $34.5 million in Q1 2024 related to the Calliope field. Depreciation, depletion, and amortization also decreased, influenced by lower U.S. sales volumes and lower rates in Canada Offshore.

Total hydrocarbon production in Q1 2025 averaged 163,374 barrels of oil equivalent per day (BOEPD), an 8% decrease from Q1 2024. This was principally due to lower production in the U.S., partially offset by higher production in Canada. Gulf of Mexico volumes were impacted by downtime and well performance, while Eagle Ford Shale saw effects from natural decline, workovers, and weather. Canada's increase was primarily driven by the non-operated Terra Nova field's production build-up following its asset life extension project completion.

Beyond the financials, Q1 2025 saw significant operational and strategic progress. The company drilled an oil discovery at the Lac Da Hong 1X (Pink Camel) exploration well in offshore Vietnam, encountering 106 net feet of oil pay. This discovery, located near existing infrastructure, enhances the value of Murphy's growing Vietnam business. A key strategic move was the acquisition of the BW Pioneer FPSO in the Gulf of Mexico for a gross purchase price of $125 million. This acquisition is expected to reduce annual net operating expenses by approximately $50 million, offering a roughly two-year payback and unlocking further development and exploration opportunities around the vessel. Onshore, the company successfully drilled its longest laterals in company history in both the Eagle Ford Shale and Tupper Montney, demonstrating continued execution on its efficiency initiatives. Early in Q2 2025, the Tupper Montney asset reached its Tupper West plant capacity, producing nearly 500 million cubic feet per day, a testament to the strong performance of new wells utilizing optimized completion designs.

Financially, Murphy maintains a strong balance sheet, a key focus since 2020, which has seen total debt reduced by approximately 60%.

As of March 31, 2025, liquidity stood at approximately $1.5 billion, comprising $392.9 million in cash and cash equivalents and $1,149.6 million available under its $1.35 billion revolving credit facility. Net cash provided by continuing operations was lower in Q1 2025 ($300.7 million) compared to Q1 2024 ($398.8 million), reflecting the lower revenue. Investing activities required more cash ($369.8 million in Q1 2025 vs $249.1 million in Q1 2024), primarily due to the FPSO acquisition payment and higher development drilling. Financing activities provided cash ($38.2 million in Q1 2025 vs requiring $144.2 million in Q1 2024), driven by net borrowings on the RCF, partially offset by shareholder returns.

The company repurchased $100 million of common stock and paid $47 million in cash dividends in Q1 2025, aligning with its Murphy 3.0 capital allocation framework, which targets a minimum of 50% of adjusted free cash flow for shareholder returns.

Outlook, Guidance, and Future Catalysts

Murphy Oil's outlook for the remainder of 2025 and beyond is anchored in its strategic priorities and a portfolio designed for both near-term execution and long-term growth. For the second quarter of 2025, the company forecasts production averaging between 177.0 MBOEPD and 185.0 MBOEPD, a significant sequential increase from Q1, driven by new onshore wells coming online and the resolution of some offshore downtime. Accrued capital expenditure for Q2 2025 is forecast at $300 million.

The full-year 2025 accrued CapEx guidance is reaffirmed at $1,135 million to $1,285 million, which includes the $104 million net acquisition cost for the BW Pioneer FPSO. Full-year production guidance is maintained at 174.5 MBOEPD to 182.5 MBOEPD, although management anticipates production will be toward the lower end of this range due to the operational impacts experienced in Q1.

Murphy's strategy over the next two years remains focused on delivering low single-digit production growth from its existing assets. This includes executing high-returning oil-weighted offshore projects, maintaining production levels in the capital-efficient Eagle Ford Shale and Tupper Montney assets, and achieving organic growth from the Lac Da Vang development in Vietnam.

Key future catalysts are expected to drive value creation. The Lac Da Vang (Golden Camel) field development project in Vietnam is progressing, with platform construction underway and development drilling scheduled for the second half of 2025, targeting first oil in late 2026. The recent Hai Su Vang (Golden Sea Lion) discovery (370 net feet of oil pay, 10,000 bbl/day facility-constrained flow rate) is highly promising, and an appraisal well is planned for Q3 2025 to better define its resource potential (pre-drill mean-upward range of 170M-430M BOE). The newly discovered Lac Da Hong (Pink Camel), located near Lac Da Vang, is expected to be developed efficiently by tying into the Lac Da Vang infrastructure, potentially accelerating its path to production. Collectively, success in Vietnam could lead to a sizable business producing 30,000 to 50,000 barrels per day by the end of the decade, with estimated development costs of $5-10 per barrel and operating costs of $5-10 per barrel.

In the Gulf of Mexico, Murphy plans to drill two operated exploration wells (Cello #1 and Banjo #1) in the second half of 2025, targeting lower-risk opportunities near existing infrastructure. The acquisition of the BW Pioneer FPSO also opens up further development and potential third-party tieback opportunities, including the Chinook development well planned for 2026.

A significant high-impact opportunity lies in Côte d'Ivoire, where Murphy plans a three-well exploration program starting in Q4 2025 with the Civette well. This well targets a mean to upward gross resource potential of 440 million to 1 billion barrels of oil equivalent at a relatively low cost ($50-60 million gross per well). Subsequent wells in 2026 (Kobus and Caracol) will test other potentially sizable resources. The fiscal terms in Côte d'Ivoire are noted as very strong, comparable to the U.S. With success, there is significant running room on other prospects.

Management notes that while the current CapEx guide supports existing plans, a major discovery in Côte d'Ivoire would likely require capital expenditure beyond the current $1.1 billion to $1.3 billion range, potentially funded by cash accumulated on the balance sheet.

Risks and Challenges

Like all E&P companies, Murphy Oil is exposed to the inherent volatility of global commodity prices, which directly impacts revenue, profitability, and operating cash flows. Geopolitical uncertainties, trade policies, and tariffs can further influence demand and costs. Management acknowledges these risks and monitors the environment closely, noting that sustained lower prices could necessitate capital spending reductions, although high-value exploration and development projects are less likely to be cut.

Operational execution risk exists, particularly in complex offshore environments and with the integration of new technologies onshore. While management views recent operational issues (GoM downtime, workovers, Terra Nova performance) as temporary and resolving, unexpected downtime or project delays can impact production and costs.

Regulatory and environmental risks, including evolving climate change regulations and potential litigation, could impose additional costs or restrictions on operations. While current environmental liabilities are not expected to be material, future requirements could change.

Conclusion

Murphy Oil is strategically positioned as a multi-basin E&P company balancing disciplined capital allocation with compelling growth opportunities. The company has made significant strides in strengthening its balance sheet, providing a solid foundation for its Murphy 3.0 framework focused on returning a minimum of 50% of adjusted free cash flow to shareholders, primarily through buybacks.

While Q1 2025 results reflected the impact of lower commodity prices and temporary operational setbacks, the underlying strategic narrative remains intact. Operational improvements through technological adoption onshore are enhancing capital efficiency and well performance. The strategic acquisition of the BW Pioneer FPSO is set to improve offshore operating costs and unlock future development potential. The portfolio holds exciting catalysts in Vietnam, with the Lac Da Vang development on track for first oil in late 2026 and recent discoveries offering significant appraisal and development upside. The planned high-impact exploration program in Côte d'Ivoire commencing in late 2025 presents material unrisked resource potential that could transform the company's long-term growth trajectory.

Investors should monitor commodity price trends, the results of the upcoming exploration and appraisal wells, and the company's continued progress on debt reduction and shareholder returns. Murphy's blend of a fortified balance sheet, operational focus, and high-impact exploration optionality provides a compelling investment thesis for those seeking exposure to an E&P company with both near-term execution drivers and significant long-term value creation potential.