Murphy Oil Corp. has begun producing oil from a new deepwater Gulf of Mexico project, months ahead of schedule.
The offshore and shale oil producer on Tuesday said its King’s Quay floating production platform started generating oil from the first two wells in the Khaleesi, Mormont and Samurai fields off the coast of Louisiana. The company is working to complete the remaining five wells in the project.
When fully operational, the project — scheduled for completion by the end of this year — is forecast to produce as much as 85,000 barrels of oil per day and 100 million cubic feet per day of natural gas, a company release said. Murphy Oil was expected to reach first oil by the first half of this year, according to Leo Mariani, an analyst at KeyBanc Capital Markets Inc.
King’s Quay is the latest in a wave of new Gulf of Mexico production platforms slated to start pumping in the coming years at a time when crude prices have soared to 14-year highs in the wake of Russia’s invasion of Ukraine. The facilities include BP Plc’s Argos and Shell Plc’s Vito, both expected to begin production this year, as well as Chevron Corp.’s Anchor and Shell’s Whale platforms planned in 2024.
These new platforms land as the offshore sector is slowly recovering from recent back-to-back oil busts. In the past half decade or so, drillers laid off thousands of workers and scrapped scores of offshore rigs. The sector also has been challenged by the Biden administration’s efforts to curb leasing and drilling permitting in federal waters.
“The production coming online is forecast to generate significant free cash flow, which will allow us to continue to delever with $600 to $650 million of targeted debt reduction this year and the optionality of up to $1 billion in 2023, while simultaneously reviewing our dividend,” Murphy Oil Chief Executive Officer Roger Jenkins said in a statement. The guidance assumes West Texas Intermediate crude futures trading at $85 a barrel in fiscal year 2022 and $75 a barrel in 2023.
Murphy Oil is the fifth-largest producer in the Gulf of Mexico, generating 61,000 barrels of oil equivalent per day in the fourth quarter of 2021. The company reiterated in an email that it plans to maintain Gulf of Mexico and Canada average offshore oil output of 80,000 barrels a day over the next three years.
Murphy Oil has a 34% stake in the Khaleesi and Mormont fields, along with other partners including Red Willow Offshore LLC (22.5%), Ridgewood (17%) and ILX Prospect (11.33%). Murphy and Ridgewood have a 50-50 ownership stake in the Samurai field, which was discovered in 2009.
Murphy Oil shares rallied as much as 5.4% on Tuesday. The stock is up almost 56% this year.