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Murphy Oil’s Production Guidance and Management Strategies

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Jan. 23 2017, Updated 7:38 a.m. ET

Murphy Oil’s production guidance for 4Q16

For 4Q16, Murphy Oil (MUR) expects total production of 162 Mboe (thousand barrels of oil equivalent) per day–164 Mboe per day. On a year-over-year basis, the mid-point of Murphy Oil’s 4Q16 production guidance is ~19% lower compared to 4Q15.

Sequentially, Murphy Oil’s 4Q16 production guidance is ~4% lower compared to 3Q16.

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4Q16 production mix

For 4Q16, Murphy Oil expects liquids production of ~99.5 thousand barrels per day and natural gas production of ~384 million cubic feet per day. Murphy Oil is expecting ~61% liquids in its 4Q16 production mix. Its peers like Marathon Oil (MRO), ConocoPhillips (COP), and PDC Energy (PDCE) have ~67%, ~60%, and ~63% liquids in their production mix, respectively.

For 4Q16, Murphy Oil expects the majority of crude oil (USO) production to come from the Eagle Ford Shale in the US and Block K and Sarawak in Malaysia. The majority of its natural gas (UNG) production is expected to come from Montney in Canada and Sarawak in Malaysia.

Reasons for lower production in 4Q16

On a YoY basis, Wall Street analysts expect Murphy Oil to spend much less on capital expenditures. Wall Street analysts expect Murphy Oil to spend ~173 million on capital expenditure in 4Q16—compared to ~$574 million in 4Q15. It will result in reduced drilling and completion activities and lower production in 4Q16.

For fiscal 2016, Murphy Oil’s capital expenditure guidance remains at ~$620 million. The guidance excludes $206.7 million associated with the acquisition cost of the Kaybob Duvernay and Placid Montney joint venture closed earlier this year.

Fiscal 2016 production guidance

In October 2016, Murphy Oil tightened its fiscal 2016 production guidance range to 174 Mboe per day–175 Mboe per day from its original production guidance range of 173 Mboe per day–177 Mboe per day. Murphy Oil’s production guidance includes the effects of asset divestitures and purchases in 2016. In 2016, Murphy Oil completed the divestiture of its Syncrude assets and purchased Kaybob Duvernay and Placid Montney assets.

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