Murphy Oil Balances 2026 Dip With Vietnam Upside
Murphy Oil ((MUR)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Murphy Oil’s latest earnings call struck a distinctly constructive tone, highlighting strong operational execution, disciplined cost control, and standout exploration results that management believes can underpin growth well into the next decade. While executives acknowledged a modest production dip ahead in 2026, a dry hole in Côte d’Ivoire, and higher royalties on Canadian gas, they emphasized that these near-term headwinds are manageable against a backdrop of robust liquidity, resilient reserves, and a potentially transformative oil discovery offshore Vietnam.
Strong Exploration and Appraisal Results
Murphy’s exploration program was a clear bright spot, with management citing an impressive 80% success rate in 2025 and four exploration and appraisal wells advanced across three continents during the fourth quarter. The standout is the Hai Su Vang (Golden Sea Lion) appraisal offshore Vietnam, where the company logged 429 feet of net oil pay in the main reservoir and observed no oil-water contact — a combination that suggests resources meaningfully above the original midpoint estimate of 170 million barrels of oil equivalent. The Hai Su Vang-2X well flow-tested two separate intervals at roughly 6,000 barrels per day each, for a combined 12,000 barrels per day without facility constraints. That level of productivity is roughly six times the typical 2,000 barrels per day well performance in the Cuu Long basin, underscoring the commercial potential of this emerging asset.
Vietnam Growth Opportunity
Building on these results, Murphy framed Vietnam as its most important long-term growth engine. Management expects the Hai Su Vang project to evolve into a material new business that could ultimately exceed the scale of its current Eagle Ford operations by the early 2030s. The company is targeting a final investment decision around 2027, with first oil currently guided for around 2031, and the potential for an earlier start in late 2030. Peak production is envisioned around 2033. Meanwhile, the Lac Da Vang (Golden Camel) field reached first oil in the fourth quarter of 2025 and is expected to ramp toward a net peak of 10,000–15,000 barrels per day in late 2027 or early 2028. Together, these projects position Vietnam as a multi-year growth corridor, even if the full impact will not be felt in production figures for several years.
Operational Execution and Cost Discipline
Operationally, the company delivered better-than-expected results in both the fourth quarter and full-year 2025, with production topping guidance and costs moving in the right direction. Lease operating expenses were cut by 20% year over year, and management reiterated confidence in holding LOE within the $10–$12 per barrel range going forward. The Eagle Ford Shale remains a core cash-flow engine, but Murphy plans to keep production flat there in 2026 while reducing capital spending on the program by about 25%. This strategy underscores the company’s focus on capital efficiency and freeing up funds for higher-impact opportunities without sacrificing near-term volumes.
Balance Sheet Strength and Liquidity
Murphy stressed the health of its balance sheet as a strategic advantage in a volatile commodity environment. The company reported low leverage and more than $2 billion of available liquidity, giving it room to adjust capital spending if oil and gas prices weaken. This financial flexibility supports continued investment in high-return projects like Hai Su Vang and Gulf of America exploration while preserving the ability to pull back quickly if the macro backdrop deteriorates. For investors, the balance sheet story provides an important buffer against cyclical risk.
Reserve Replacement and Long-Term Resource Base
Despite some near-term noise in the reserve profile, Murphy’s overall resource base remains intact. Proved reserve replacement for the period was approximately 103%, indicating that the company added more reserves than it produced, and total reserves remain around 700 million barrels of oil equivalent. This suggests that Murphy is maintaining its long-term inventory even as it navigates portfolio shifts and capital discipline. While proved developed reserves came under pressure, the broader reserve base and exploration success lend support to the company’s long-term production outlook.
Gulf of America and Chinook Upside
In the Gulf of America, Murphy continues to build an attractive pipeline of opportunities. The company has recently expanded its footprint with seven new blocks and is the apparent high bidder on another seven, broadening its exploration inventory in a prolific basin. A key near-term catalyst is the Chinook 8 development well, which targets a previously producing reservoir and is expected to be a high-rate producer at roughly 15,000 barrels per day gross. With relatively low subsurface uncertainty, management sees Chinook 8 as a material contributor in the second half of 2026, helping support the company’s exit-rate production profile even as total annual volumes dip.
Low-Cost New Entrants and Portfolio Optionality
Murphy is also quietly building future optionality through selective, low-cost entries into new regions. The company has taken acreage offshore Morocco under terms that limit upfront expenditure to an estimated $5 million over three years, while offering attractive fiscal terms if exploration is successful. Combined with the additional Gulf of America exploration blocks, this approach gives Murphy a broader set of options for future growth without committing substantial capital today. Investors gain exposure to exploration upside with relatively modest near-term financial risk.
Civette Dry Hole in Côte d’Ivoire
Not all exploration efforts have yielded commercial results. The Civette well in Côte d’Ivoire encountered oil pay in multiple reservoirs but failed to deliver volumes sufficient for commercial development and has been classified as a dry hole from a commerciality perspective. Management is continuing technical analysis of the data, but stressed that Civette’s disappointing outcome does not materially alter their view on two other independent prospects in the area — Caracal and Bubale. While this setback underlines the inherent risk in frontier exploration, the company’s diversified exploration portfolio helps mitigate the impact.
2026 Production Decline
Murphy guided to a modest production decline in 2026, with net volumes expected to average about 171,000 barrels of oil equivalent per day, down from 182,000 in 2025 — a drop of roughly 6%. The bulk of the decrease stems from Tupper Montney natural gas volumes, where stronger realized gas prices are driving higher royalties and, in turn, reducing net reported volumes. Management framed this as a largely arithmetic effect rather than a fundamental deterioration in asset performance, but it will still show up as lower production on headline metrics in the near term.
Proved Developed Reserve Decline
A softer point in the narrative was the decline in proved developed reserves, which fell around 7% year over year, with proved developed oil reserves down roughly 13%. This creates some near-term headwinds for the reserve profile, particularly for investors focused on de-risked, producing volumes. However, management argued that overall proved reserve replacement of about 103%, coupled with successful exploration in Vietnam and the Gulf of America, demonstrates that the company is replenishing and upgrading its longer-term inventory even as mature assets naturally decline.
Commodity Price and Market Risk
Management was candid about the risks posed by a softening commodity price environment and broader market uncertainty. The company outlined a plan to tighten capital spending if conditions worsen, indicating it could trim about 10% of 2026 capital expenditures and, in a more severe low-price scenario, scale back spending by as much as 30–40% in 2027. This flexible approach to capital allocation is intended to protect the balance sheet and shareholder value, even if it means delaying some growth projects in a downturn.
Higher Royalties Impacting Net Gas Volumes
Higher royalties in the Tupper Montney gas play are another factor weighing on near-term metrics. The royalty rate there is expected to rise from 4.6% in 2025 to around 8.4% in 2026, an increase of about 3.8 percentage points. While management does not expect a major impact on overall cash flow, the higher take by the royalty owner will reduce reported net gas volumes and contribute to short-term variability in both production and revenue reporting from this asset.
Planned Downtime and Weather Risk
Operational planning for 2026 also incorporates a number of temporary constraints. Murphy flagged planned downtime, including additional non-operated facility shutdowns, as well as a provision for about 1,500 barrels per day of weather-related downtime. These factors will contribute to a softer oil production profile in 2026 versus 2025. While such interruptions are not unusual in offshore and onshore operations, they add another layer of pressure to headline volumes in a year when production is already slated to decline modestly.
Long Lead Time to Realize Vietnam Upside
Despite the exceptional appraisal results at Hai Su Vang, investors will need patience before the project’s full impact is felt. The development timeline is measured in years: continued appraisal through mid-2026, a final investment decision targeted around 2027, and first oil currently expected around 2031, with peak output not until roughly 2033. This long lead time means that while Vietnam is central to Murphy’s growth story, it will not meaningfully offset declines in the existing portfolio in the immediate term. The upside is significant, but firmly in the medium- to long-term horizon.
Guidance and Outlook
Looking ahead, Murphy’s 2026 guidance points to net production of about 171,000 BOE per day, down from 182,000 in 2025, with Eagle Ford volumes held flat even as capital spending in that play is reduced by roughly 25%. Lease operating expenses are expected to remain within the $10–$12 per barrel range following a 20% reduction in 2025, underscoring the company’s emphasis on cost discipline. The outlook incorporates roughly 1,500 barrels per day of weather-related downtime and continued flexibility to trim capital — around 10% in 2026 under modest price pressure, and up to 30–40% in a more severe downturn — supported by low leverage and more than $2 billion of liquidity. Key operational milestones for investors to watch include two additional Hai Su Vang appraisal wells, ongoing Côte d’Ivoire exploration, Lac Da Vang ramping toward a 10,000–15,000 barrel per day peak by late 2027/early 2028, and the Chinook development well, which targets around 15,000 barrels per day gross in the second half of 2026.
Murphy Oil’s earnings call painted a picture of a company balancing near-term production and reserve challenges with compelling long-term growth options and a solid financial foundation. While 2026 will feature lower volumes, higher royalties, and some reserve pressure, the combination of standout Vietnam appraisal results, expanding Gulf of America opportunities, disciplined spending, and strong liquidity gives the company room to navigate volatility and invest for future growth. For investors, the story is less about immediate volume gains and more about the emerging pipeline of high-quality projects that could reshape Murphy’s production profile in the next decade.
