Murphy Oil Cuts Capital Budget 15%
Murphy Oil Corp., which announced it would pull out of Western Canada to concentrate on more deepwater development, on Tuesday announced its capital expenditures will be 15% less than in 2003. Nearly 77% of the $843 million budget will be allocated to the upstream.
The El Dorado, AR-based producer expects exploration expenses to tally $225 million, which will be allocated to fund its deepwater Gulf of Mexico (GOM) drilling, an exploratory well off the East Coast of Canada, an extensive drilling program in Malaysia and another exploratory well off Congo's coast.
Murphy announced in December it would sell some of its conventional oil and gas properties in Western Canada to free up cash for projects in growth areas (see Daily GPI, Dec. 9, 2003).
"The capital spending program for 2004 reflects a significant decrease over 2003's projections due to the expected sale of most of our Western Canada exploration and production business, the completion of several large deepwater Gulf of Mexico developments and the clean fuels project at Meraux," said CEO Claiborne Deming.
He said the new budget would position Murphy financially to "more easily develop" recent deepwater discoveries. "Our focus on higher growth frontier areas is reflected in the exploration program emphasis on deepwater Malaysia, deepwater Gulf of Mexico and offshore Congo."
Development expenses are set at $426 million, representing a 23% drop from last year. Murphy said in a statement that the reduced spending has resulted from its completion of deepwater developments at the Medusa project in GOM's Mississippi Canyon area and Habanero, both of which were placed onstream in the fourth quarter. The 2004 budget will be spent to complete Murphy's Front Runner development in GOM's Green Canyon, Phase II development at West Patricia in shallow water Malaysia and continued Phase III expansion of Syncrude.
Despite the drop in spending, production volumes are expected to rise to reflect the ramp-up at Medusa and Habanero, and first production at Front Runner, which is expected during the third quarter.
Along with its upstream reduction, capital expenditures for refining and marketing operations are budgeted at $184 million in 2004, a decrease of about 17% from 2003 levels. Among other things, Murphy said the new budget reflects a sharp decrease in refinery expenditures following completion of the clean fuels project at the company's refinery in Meraux, LA. and expected marketing expenditures in its Murphy USA program at Wal-Mart stores.
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