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Text: Joining us is Roger Jenkins, president and chief executive officer; along with David Looney, executive vice president and chief financial officer; and Eric Hambly, executive vice president, operations.
Throughout today's call, production numbers, reserves and financial amounts are adjusted to exclude non-controlling interest in the Gulf of Mexico.
As such, no assurances can be given that these events will occur or that the projections will be attained.
For further discussions of risk factors, see Murphy's 2019 Annual Report on Form 10-K on file with the SEC.
Before we get started reviewing our 2020 and looking-forward segment of our day to day, I would like to address the recent actions taken by the Biden-Harris administration.
Murphy, like all operators across federal lands in the United States, is disappointed but not at all surprised by recent actions.
Unfortunately, as a matter of public policy, we believe their efforts is misguided.
U.S. emissions peaked over a decade ago in the United States and continue to fall every year.
Growth in the worldwide greenhouse gas emissions comes primarily from the Far East, Southeast Asia and Africa.
These new initiatives will punish domestic producers and workers but will not lower worldwide emissions.
Ironically, any policy that includes the Gulf of Mexico actually hurts the carbon footprint as the deepwater Gulf has the lowest carbon intensity of all of the E&P business.
Last week, the U.S. Department of Interior announced a temporary suspension of delegated authority for 60 days.
It is important to note that this order does not limit existing operations under valid leases and provides a method for obtaining necessary approvals.
There is real potential for delay in consolidation of approval authority.
However, to date, we have been pleased with the progress and are moving forward.
Murphy is well positioned to continue execution of our short-term and long-term projects, including Khaleesi, Mormont, Samurai, and our nonoperated projects based on approvals in hand, discussions with our regulators and progress made in the last week, obtaining actual approvals to conduct ongoing operations on current leases.
We've also seen, in the past two weeks, over 20 approvals given for work in the Gulf of Mexico to not only us, but our peers.
Yesterday the White house announced a pause on new oil and natural gas leasing on federal land and waters, pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.
This action is also not surprising.
Existing and ongoing lease work which was not included in the announcement.
The administration's recent actions have confirmed the viability of our company's strategy and increased the value of our diverse global portfolio.
This includes large-private U.S. onshore acreage, both onshore and offshore Canada assets and a robust international exploration portfolio, including offshore Mexico, Brazil, and Vietnam.
As you can imagine, there are many pieces here moving forward.
We expect once the dust settles that permitting approvals will return to a process we can work with.
It's not in the government's best interest to halt operations in the Gulf for a host of financial and legal reasons.
And again, we have a diverse portfolio, and all these actions are highly likely to increase oil prices, which would be in our favor over time.
Murphy remains steadfast in our strategy despite the turmoil of 2020, maintaining our diverse portfolio while operating in a safe, sustainable, and physically responsible manner.
Our capital discipline leads to a targeted flatter oil production profile with additional free cash flow generation coming from the recently announced Tupper Montney development, along with long-term price recovery scenario.
We remain focused on our shareholders through long-standing dividend, our employees, contractors, and communities by establishing and practicing our successful COVID-19 protocols.
and Canada, which offers many advantages in today's time.
And lastly, Murphy remains a strong company making exploration program on existing acreage in both the Gulf of Mexico and internationally.
Slide 3, following the OPEC price war beginning of the COVID-19 global pandemic last year, we focused on a few primary areas to solidify the company and remain competitive over the long-term with some multi-basin operations.
Murphy completed a significant companywide reorganization, resulting in reduced G&A costs as well as lowered our overall cost structure and capital program.
Our focus on maximizing free cash flow and maintaining liquidity with the support of crude oil hedges and natural gas forward sale contracts led to the sanctioning of the low-risk Tupper Montney development and reduced capital allocation toward growing shale oil production.
Additionally, we have continued to support development plans for both long-term deepwater Gulf projects as well as our international exploration program.
Slide 4, Murphy produced an average of 149,000 barrels of oil equivalent to-date -- per day in the fourth quarter.
These volumes include impacts totaling nearly 4,000 barrels equivalent from two subsea equipment issues with production expected to restart in the first quarter 2021.
The unplanned events in the Gulf of Mexico were partially offset by strong North America onshore performance.
Our cash capex totaled $111 million for the quarter, inclusive of $1 million in NCI spending.
On an accrued basis, capex totaled $130 million net to Murphy, excluding King's Quay.
Prices continued to improve in the fourth quarter with oil realizations at an average of $42, the highest, of course, seen since quarter 1, and natural gas at $2.36 per 1,000 cubic feet, also far ahead of prior quarters.
On Slide 5, our full year 2020 production averaged 164,000 barrels of oil per day.
Its a dynamic year and we experienced a record-breaking hurricane season following historically low prices resulting in industrywide production shut-ins for a short period.
Overall, for the year, we averaged nearly $38 per barrel for realized oil prices with $1.85 per 1,000 cubic feet for natural gas.
Cash capex for the year totaled $760 million, which included $23 million of NCI capex.
On an accrued basis, capex totaled $712 million, excluding King's Quay and NCI spending as per our guidance.
On reserves on Slide 6.
Our proved reserve base remains sizable at year-end 2020, with 697 millions of oil -- barrels of oil equivalent, comprised of 41% liquids and 51% proved developed.
Approved reserve life is maintained at more than 11 years.
Overall, our total approved reserves were 13% lower from the year-end 2019 due to two primary events.
The first was a combination of lower SEC crude oil prices, along with Murphy's shift and focus away from oil shale production growth, which resulted in transfer of Eagle Ford Shale and Kaybob Duvernay PUDs to probable reserves.
The change in capital allocation of the current five-year plan reduced PUDs by over 100 million barrels equivalent.
Separately, the sanction of the Tupper Montney development in the fourth quarter resulted in the conversion of probable reserves and contingent resources to proven undeveloped, totaling nearly 100 million barrels equivalent.
On Page 7, while total proved reserves were lower year over year, our North American onshore proved plus probable resource remained near 2.5 billion barrels of oil equivalent.
We maintain the ability to rebook our onshore shale PUDs with adjusted capital plan in the future if we decide to do so as the reserve transfers we're based on capital timing and not subsurface risk.
As in any resource booking, it would also depend on prices, cost structure at the time and a five-year planning cycle change.
Overall, Murphy continues to hold more than 3,400 undrilled locations across onshore North America.
Further, our U.S. onshore Eagle Ford Shale position is located on private lands.
Slide 8, Murphy recorded a net loss of $172 million or a $1.11 net loss per diluted share for the fourth quarter of 2020.
After-tax adjustments, including, but not limited to, a noncash mark-to-market loss on crude oil derivative contracts and contingent consideration, totaling $159 million resulted in an adjusted net loss of $14 million or a $0.09 adjusted net loss per diluted share.
Slide 9, Improving commodity prices led to further strengthening in revenue for the quarter.
Overall, our net cash provided by continuing operations rose to $225 million in the fourth quarter, including a $13 million cash outflow from our working capital increase.
When combined with property additions and dry hole costs of $135 million, including $38 million for King's Quay, we had positive free cash flow of $90 million in the quarter.
Regarding King's Quay, the producer and owner groups continue to make good progress on the array of legal documents, and we look forward to a closing possibly within the next few weeks.
For full year 2020, our net cash from continuing operations of $803 million included a $39 million outflow from working capital.
Property additions and dry hole costs of $859 million, including King's Quay spending of $113 million, resulted in a negative free cash flow of $56 million for the year.
If we exclude the King's Quay expenditures for the year, we would have some positive free cash flow of more than $55 million.
We continue to maintain a high level of liquidity with $1.7 billion at year-end, including $311 million of cash and equivalents at December 31st.
With our focus on cost reduction measures throughout 2020, we've achieved significantly lower G&A, with an approximately 40% reduction in full year costs from 2019.
Lastly, Murphy continues to protect its future cash flow with the addition of '21 and '22 crude oil hedges as well as fixed price forward sales contracts for a portion of our Tupper Montney production through 2024.
Liquidity remains a key focus for Murphy, and our balance sheet remains strong with $1.4 billion available under our $1.6 billion senior unsecured credit facility as well as $311 million of cash and equivalents as of December 31.
We reiterate our goal of reducing total debt level over time with excess cash flow.
This reduced leverage will give us even more resilience through the inevitable commodity price cycles to come.
As a company, we're responsible to the environment, employees, and our stakeholders.
We have a long history of protecting all in part due to our strong internal governance processes.
I'm particularly proud of how quickly the team established COVID-19 protocols to also maintain safe offshore operations.
We have zero downtime or disruptions due to those efforts.
Murphy achieved another year of low metrics, including 46% reduction year over year in total recordable incidents.
We expanded our internal diversity and inclusion practices and programs, and maintain a program to aid impacted employees in times of need through our Disaster Relief Foundation, which we used this summer with the hurricane relief on the Louisiana Coast.
Our operations team continued their work on minimizing our environmental impact, such as building a new produced water handling system for recycled water in our sanctioned Tupper Montney project as well as utilizing bi-fuel hydraulic frac spreads on all well completions in Canada, which results in considerable CO2 emissions reductions.
While smaller changes individually, they add up to a larger impact over time.
On Slide 13, on sustainability.
Last fall, we released our 2020 sustainability report, which features expanded disclosures and metrics.
A key highlight is our goal of reducing greenhouse gas emissions intensity of about 15% to 20% by 2030 from 2019.
The report also outlines diversity disclosures workforce development, employee engagement programs.
Murphy has also expanded our HSE Board Committee to include oversight of corporate responsibility formed, and we formed an ESG Executive Committee and created a new Director of Sustainability role.
We've taken many steps and we continue to evolve and advance our sustainability efforts.
On Slide 15, on the Eagle Ford Shale business, we produced 31,000 barrels equivalents per day in the fourth quarter, now comprised of 71% oil.
For the full year, production averaged 36,000 barrels equivalent per day, with $197 million of capex, which includes near $50 million for field development as well.
We brought online 25 operated and 10 nonoperated wells earlier in that year.
The team continued their efforts on improving well performance and high grading production enhancing projects, especially, our artificial lift optimization.
Murphy is seeing an average base decline rate of 24% for all wells drilled prior to '21, which, in our view, is very well positioned.
On Slide 16, on the Kaybob Duvernay project, the company produced 10,000 barrels equivalent oil per day in the fourth quarter, comprised of 75% liquids, and averaged 11,000 barrels equivalent per day for the full year.
Overall, Murphy spent $94 million in capex during the year, including Placid Montney, breaking online 16 operated wells in Kaybob and 10 nonoperated wells in Placid.
Also in 2020, Murphy completed its drilling program to hold all acreage, resulting in full discretionary future development.
Most notable in the second quarter in the Kaybob East 15-19 Pad, which is achieving significant results as our best well in Kaybob Duvernay so far, ranking in the top 2% of all Murphy unconventional wells.
Overall, it's competitive with top producing wells in Karnes County in the Eagle Ford Shale.
In the Tupper Montney, we produced 234 million per day in the fourth quarter and averaged 238 million cubic feet per day full year 2020.
Approximately, $14 million of capex was spent during the year to drill four wells with completions planned this year and ongoing.
Additionally, the Tupper Montney plant expansion was completed during the fourth quarter.
Since our last earnings call, Murphy has ended significant fixed price forward sale contracts at AECO Hub through 2024, which, combined with improving basis differentials and higher prices as well as higher EURs, can lead to stronger free cash flow generation.
In the Gulf of Mexico, our assets there produced 63,000 barrels equivalent of oil per day in the fourth quarter, comprised of 78% oil.
Production volumes were impacted by nearly 4,000 barrels of oil equivalent per day on unplanned downtime due to two subsea equipment issues, in addition to previously guided hurricane downtime in the fourth quarter.
Our full-year 2020 production averaged 70,000 barrels equivalent per day.
Short-term projects continued to progress with operated Calliope on schedule for first oil in the second quarter, Nonoperated wells in various stages of completions and tie-ins, and we expect oil to begin flowing in the first half of the year to plan.
In the Gulf of Mexico, Slide 20, on all major projects.
We remain on schedule with King's Quay construction at 90% complete and drilling beginning in the second quarter for Khaleesi, Mormont and Samurai development.
The nonoperated St. Malo Waterflood continues to move forward with completions on the first producer well under way and preparations being made for drilling a second injector well as well as beginning of a producer well workover.
In exploration, we participated in the latest OCS Gulf of Mexico lease sale during the fourth quarter, and we were awarded and fully awarded 8 blocks with 5 prospects at a net cost of approximately $5.3 million.
As a result, our Gulf of Mexico interest today totals 126 blocks, spanning to more than 725,000 acres with 54 exploration blocks and 15 key prospects at this time.
On Slide 24 on our capital program.
For 2021, Murphy plans to spend $675 million to $725 million and achieve production of 155, 000 to 165, 000 barrels equivalent per day.
For the first quarter, we forecast production of 149, 000 to 157, 000 barrels of oil equivalent per day.
Approximately 47% of our 2021 capex is allocated to offshore Gulf of Mexico, with nearly all dedicated to the major long-term projects that achieve first oil in 2022.
Another quarter of our 2021 capex is budgeted for the Eagle Ford Shale, with the remainder split between onshore Canada and exploration.
Overall, we continue to focus on high-margin assets in our oil-weighted portfolio, resulting in free cash flow generation after our dividend.
Our North American onshore capital budget is $265 million in 2021 and is also focused on maintaining flat production in the Eagle Ford Shale, with $170 million dedicated to bringing on 19 operated wells and 53 nonoperating wells as well as field development, which is 30% of the total spend.
Approximately $85 million is earmarked for newly sanctioned Tupper Montney development program to bring 14 wells online during the year.
The remaining $10 million of capex supports field development and maintenance in the Kaybob Duvernay and nonoperated Placid.
Of note, our oil-weighted shale assets maintain a long runway of drilling with more than 1,400 locations in the Eagle Ford Shale and more than 600 in the Kaybob Duvernay.
In the Tupper Montney project, we're excited for this opportunity that the development brings to our portfolio.
We're seeking and -- we're seeing lowest basis differentials in five years.
Beyond that, we have continual improvement in Murphy's well economics and EURs in the area, creating sustainable attractive cash margins for an asset that also generates the lowest greenhouse carbon intensity in our portfolio.
Lastly, the macroeconomics have shifted significantly in our favor in the last few years with the additional takeaway capacity, achieving necessary debottlenecking work, both in the West and East ward boundary pipelines as well as some construction beginning on LNG Canada project with the planned in-service date of 2025.
The Tupper Montney asset has been strong proven resource with rising EURs in recent years and ever-improving cost structure, while maintaining very low subsurface risk.
We've recently put in place additional fixed price forward shale contracts in 2024, thereby protecting future revenue for the project and assuming cash flow generation.
The asset generated free cash flow of approximately $50 million in 2020, which is more than sufficient to cover the cash flow requirements in the next 2 years as the development is initiated.
And overall, the current sanction plan requires an average annual capex of $68 million and will generate cumulative free cash flow of approximately $215 million through 2025.
In the fourth quarter, we farmed into an attractive play opening trend for a 10% nonoperated working interest with Chevron as operator.
The first well plan is a Silverback prospect, and we will provide access to -- and we will also be provided access to about 12 blocks through our participation.
On Slide 29, we continue to progress our various exploration projects and are excited with the optionality of the nonoperated position in Sergipe-Alagoas Basin in Brazil provides our company.
Murphy is working with partners to mature our drilling inventory and our partner plans to spud the first Brazil well in the second half of 2021.
In the Salina Basin in Mexico, on Slide 30, continue to advance our position there.
We have many leads and prospects here and target spudding the first exploration well in late '21 or early '22.
Overview of the LRP on Slide 32.
Our long-term strategy of a dynamic plan to maximize cash flow while managing capex after dividend remains unchanged, as is our commitment to a flatter oil production profile.
Our Tupper Montney development leads to an approximately 8% CAGR from '21 through '24, while oil growth remains at 3%.
Through this, Murphy will generate cumulative free cash flow after dividend at our base price scenario with significant cash flow achieved in the mid-50s oil price recovery scenario, which will achieve a sizable debt reduction.
As we began with our announcement in 2020 for a lower capital program, the average annual capex through 2024 is approximately $600 million, with 2022 being the peak year due to finalizing the major Gulf projects along with increased Tupper Montney development.
Of course, we maintain a portion allocated to exploration strategy with a target of drilling three to five wells per year.
Slide 33 is to close out 2020 and lean up to '21.
Murphy is sticking with our priorities of managing capex to support a flatter production profile, when combined with protective hedges, allows for maximum free cash flow generation, strong liquidity and debt reduction, and long-term price recovery as well as consistently paying a dividend to our shareholders.
Lastly, I want to extend my sincere gratitude to all of our employees for their efforts throughout 2020.
And with their dedication and our new plans, we are well positioned heading into '21.

user
q4 adjusted loss per share $0.09 excluding items.
q4 loss per share $1.11.
q4 production averaged 149 thousand barrels of oil equivalent per day (mboepd) with 55 percent oil and 62 percent liquids.
planning 2021 capital expenditures to be in range of $675 to $725 million.
sees fy 2021 production to be in range of 155 to 165 mboepd, comprised of about 52 percent oil & 59 percent total liquids volumes.
production for q1 2021 is estimated to be in range of 149 to 157 mboepd.

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