With King's Quay online, Murphy Oil turns attention to future Gulf of Mexico projects

Murphy Oil is bulking up its US Gulf of Mexico portfolio with larger stakes in existing fields and making deals for both operated and non-operated wells to be drilled this year and in 2023, following the debut of its King's Quay producing hub in April, its top executives said Aug. 4.

King's Quay, which initially will be a seven-well program, is currently flowing 70,000 b/d of equivalent oil, 87% crude oil, with 18,000 b/d of oil equivalent net to Murphy, company CEO Roger Jenkins said in webcast remarks during a second-quarter earnings conference call.

"Our Gulf of Mexico assets continue to be a home run" for the company's production profile and asset portfolio, Jenkins said.

King's Quay, which produces from the Samurai, Khaleesi and Mormont fields, has a nameplate capacity of 100,000 boe/d. At the end of Q2, four wells were flowing into King's Quay.

"Results continue to be above expectations ... with 97% uptime," Eric Hambly, executive vice president for operations, said. "King's Quay is setting us apart in execution offshore."

"Toward year-end we expect to approach 85,000 boe/d of nameplate capacity" from the facility, Hambly said. "If we continue to see outperformance of our wells, we think we can very easily get to 100,000 boe/d capacity from the facility with minor adjustments, so we're excited about the remaining wells as we come to the end of the year."

Completions advance on 5th well

Completions are now progressing on the fifth well, Jenkins said, with two well completions remaining. That is the last Khaleesi/Mormont well, after which the rig will move to the Samurai field for the final two wells.

Recently, Murphy took steps to expand its holdings in the US Gulf where it has around 650,000 total gross acres across 69 exploration blocks.

The company estimates its acreage holds 1 billion barrels of oil equivalent resource potential over which it has identified more than 20 key prospects, Jenkins said.

In Q2, the company acquired an additional 11% working interest in the non-operated Kodiak field for $47 million, bringing its stake in that field to 59.3%,

"We forecast investment recovery within a year," Hambly said.

Murphy also recently signed an agreement to acquire an additional 3.4% working interest in the Lucius field, operated by Occidental Petroleum, for $77 million, he said. That deal is expected to close in Q3.

The company should recoup its investment in the additional interest, which brings its share of the field to 16.1%, within two years, Hambly said.

Additionally, Murphy divested its 50% of working interest in the operated Thunder Hawk field, in the prolific Mississippi Canyon area that is near BP's giant Thunder Horse field. The field, which Murphy discovered in 2004 and is sited in 5,700 feet of water, currently produces 800 boe/d net to Murphy.

Murphy not only received $16 million for its Thunder Hawk stake less adjustments, but its liabilities were reduced by $37 million, the company said in a statement.

Exploration in 2023

Murphy won't drill any US Gulf wildcats in 2022, but it is targeting a two-well exploration program in the region for 2023.

The Oso #1 well, in the deepwater Atwater Valley area, will be drilled with partner Ridgewood Energy, a small private company. Murphy holds 50% and will operate the well, which targets a gross resource potential of 130 million-275 million boe, the company said in a Q2 presentation.

Moreover, "we're finalizing a second well with a partner," Jenkins said but did not immediately identify the other company.

Meanwhile in Q3, the company is drilling the Dalmatian #1 development well at DeSoto Canyon Block 90 offshore Louisiana, which is projected to be online in 2023.

Also in Q3, Murphy is participating in two non-operated drills for subsea tiebacks. One involves the Lucius #10 and Lucius #4 wells at Keathley Canyon 918-919 operated by Occidental Petroleum. The wells should be online in Q4.

The other non-operated subsea tieback is at the Kosmos Energy-operated Kodiak #3 well at Mississippi Canyon 727, which should be online in Q3.

"Both Kodiak and Lucius have rig programs ongoing today, leading to total incremental estimated production of 1,500 boe/d annualized for 2022, with total incremental production of 4,100 boe/d forecast for 2023," Jenkins said.