Murphy Oil Corporation is dialing back its expenditures for 2020 as a result of the impact coronavirus has had on the oil market.
Murphy has changed its 2020 budget to $950 million for 2020. This represents a roughly 35 percent reduction in its original expenditure projections for the current year.
In January, the El Dorado-based company announced that its planned expenditures would be in the $1.4 to $1.5 billion range with an expected production output of 190 to 202 thousand barrels of oil equivalents per day (MBOEPD).
“Under current conditions, we believe this capital reduction program allows for financial flexibility and preservation of our longstanding dividend. As always, we will not sacrifice safety in our efforts to reduce costs across all our assets, as it remains a core value within Murphy,” CEO and president Roger W. Jenkins, said in a statement.
The oil market has experienced significant volatility in the wake of coronavirus’ global impact. Demand for oil has fallen precariously, as with China, the world’s largest consumer of oil, has been hit with COVID-19. The volatility has been exacerbated by an ongoing price war between Russian and Saudi Arabia, after Russia refused to cut oil production.
According to reporting from the Financial Times, Organization of the Petroleum Exporting Countries (OPEC) ministers were summoned for a meeting in Vienna last Thursday to discuss the response to the falling demand for oil. The oil cartel had announced its intention to cut oil production by 1.5 million barrels per day for the coming three months to stem the glut of oil.
However Russian oil ministers declined to agree to the production cuts. Asa a result, Saudi Arabia immediately initiated new plans to increase its own oil production, triggering a price war.
Oil prices have experienced their biggest drop since the 2008 global recession, according to Reuters, with Brent crude LCOc1 selling at $34.46/barrel on Friday morning. Reuters also reports that the U.S. West Texas Intermediate crude CLc1 was selling at $32.77/barrel.
This has had significant impacts in the United States, including in Arkansas. On Friday, March 6, Murphy Oil Co. closed out its trading with a stock price of $15.86 per share. By Monday, its stock had plummeted to $9.12 per share. It increased slightly on Tuesday to $9.33/share but fell even further on Wednesday and Thursday to $7.50 and $6.42, respectively.
As of 10:20 p.m. on Friday, March 13, Murphy Oil’s stock is hovering around $6.54 per share, up roughly 1.87 percent from yesterday.
Jenkins struck a reassuring note in his statement, saying that Murphy had endured “multiple commodity price cycles” during its company history and was working to protect its business interests.
“We have persevered through multiple commodity price cycles in our 70 years of corporate history, and want to provide reassurance that we are focused on a strategy that protects the business, the balance sheet and our liquidity, while maintaining optionality for additional adjustments given the unstable environment,” Jenkins said. “Murphy has an ample liquidity position as of year-end 2019 between its undrawn $1.6 billion senior unsecured credit facility due November 2023 plus cash on hand, along with other sources of liquidity arising in the normal course of business. Further, we have no debt maturities until June 2022.”
Some of the actions that Murphy plans to take include delaying U.S. Gulf of Mexico projects and development wells, postponing the spud timing of two operated exploration wells, releasing operated rigs and frac crews in the Eagle Ford Shale, and deferring well completions in the Tupper Montney.
In the original expenditure assessment, Murphy Oil had planned to spend $680 million in the Eagle Ford Shale, a 13 percent increase from what it spent in 2019. It had also allocated $35 million to the Tupper Montney to bring five operated wells online.
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