Murphy Oil Corporation (MUR) Q3 2026 earnings review
Murphy Oil raises its production plan, but spending eats cash
Murphy Oil started its new offshore projects early and beat its production target, while heavy drilling costs ate into cash flow. Third-quarter production reached 186,495 barrels of oil equivalent per day, beating the company's plan by 7% even as total output fell 7% from a year ago. Higher oil prices and lower well-repair costs lifted profit, so chief executive Eric M. Hambly raised the full-year production outlook.
| Total net production | 186,495 BOEPD -6.9% from a year ago (above 171k–179k plan) |
|---|---|
| Production revenue | $849.2M +17.8% from a year ago |
| Profit per share, excluding one-offs | $1.08 $0.41 a year ago |
| Full-year production outlook | Raised 6,000 BOEPD middle of the range: 177,000 BOEPD (-2.9% vs 2025) |
⚖️ Verdict: 🟢 Bullish
The story got better because Murphy took the execution and dry-hole risk out of its second-half drilling campaign. The oil producer brought its Vietnam field and Gulf of America well online ahead of schedule, and found oil in both third-quarter exploration wells in Vietnam and Côte d'Ivoire. One caution: capital spending more than doubled from a year ago to $422 million, leaving free cash flow after dividends negative and keeping share buybacks at zero for a sixth quarter.
The question now is whether these new fields will grow total company output or just offset natural declines at older offshore wells. Even after this quarter's raise, the full-year production plan sits 3% below last year's level while capital spending is 34% higher. The 2027 production and spending plan in January will settle whether output finally turns upward.
🐂 Bull Case
New Offshore Projects Started Ahead of Schedule
Murphy Oil, an independent oil and gas producer, brought two major offshore projects online in the third quarter instead of the fourth. The company achieved first oil at its Lac Da Vang field in Vietnam and started the Chinook #8 well in the Gulf of America, which reached a peak gross rate of 15,000 barrels of oil equivalent per day (BOEPD, a combined measure of oil and gas volume).
Onshore teams also pulled six Eagle Ford Shale wells forward from the fourth quarter and achieved a "26 percent reduction in well cost per lateral foot compared to 2025 and some of the best performing wells in Company history", chief executive Eric M. Hambly said. Total production reached 186,495 BOEPD, beating the company's plan by 6.6% at the middle of the range.
That early execution allowed Murphy to raise its full-year production plan by 6,000 BOEPD. By our math, the new fourth-quarter outlook of 174,000 to 182,000 BOEPD sits 7.4% above what the previous full-year target implied, even after Hurricane Isaias cut fourth-quarter volume by about 3,700 BOEPD.
What to watch: Eagle Ford production in the first quarter of 2027, when Murphy brings its next batch of wells online after a fourth-quarter pause. A rate above 40,000 BOEPD would show the onshore business can sustain its higher target while offshore projects ramp up.
Exploration Finds Oil in Vietnam and Africa
Murphy's frontier drilling campaign found oil in both of its third-quarter wells after writing off $87 million in dry holes during the first nine months of the year. Offshore Côte d'Ivoire, the Bubale West-1X appraisal well hit 88 feet of net oil pay eight miles west of the original discovery, which Hambly said will "extend the known footprint of the Turonian accumulation, introduce an additional reservoir, and reinforce the case for continued appraisal".
Offshore Vietnam, the Lac Da Trang North-1X exploration well found 131 feet of net oil pay near the newly producing Lac Da Vang platform. Hambly noted that connecting this find to the existing platform will "offer a path to efficient capital deployment, earlier production, and stronger project economics". Because both wells succeeded, Murphy capitalized their costs rather than expensing them as dry holes, so third-quarter exploration expense landed at $33.0 million against a $135 million plan.
What to watch: the 2027 exploration budget and Bubale appraisal schedule in the fourth-quarter release. The number of planned appraisal wells will show how much capital Côte d'Ivoire will consume next year.
Lower Operating Costs Lifted the Profit Margin
Operating profit rose from $5.8 million a year ago to $256.5 million, lifting the operating margin by 29.2 percentage points to 30.0% of total revenue. Even excluding last year's $115.0 million asset write-down in the Gulf of America, the operating margin expanded by 13.5 percentage points by our math.
Two expense lines drove the improvement alongside higher oil prices. Lease operating expenses (the daily cost of running producing wells) dropped by 7.7 percentage points of revenue, while depreciation, depletion and amortization (the accounting cost of past drilling) fell by 6.9 percentage points. On a unit basis, lease operating expense fell 12.7% from a year ago to $8.20 per barrel of oil equivalent because the offshore business avoided last year's heavy well-repair work.
What to watch: fourth-quarter lease operating expense per barrel. Hambly expects a step-up from "proactive offshore workover activity in the Gulf of America and start-up costs at Lac Da Vang", which will test whether full-year costs stay near the bottom of the $10 to $12 target.
🐻 Bear Case
Production Still Shrinks From Last Year
"The results we delivered this quarter reflect our ability to create value at every stage of the asset life cycle," Hambly said. While Murphy beat its own quarterly target, total net production still fell 6.9% from a year ago, and oil output dropped 10.5% to 84,164 barrels per day.
- Gulf of America production: 53,900 BOEPD, down 13.1% from 62,000 a year ago
- Eagle Ford Shale production: 43,600 BOEPD, down 11.0% from 49,000 a year ago
- Full-year 2026 production plan: 177,000 BOEPD at the middle of the range, down 2.9% from 2025's 182,294 BOEPD
The company is spending 34.0% more capital this year at the middle of its budget, yet annual output is still shrinking because natural declines at older offshore fields are eating up the new wells. Even Lac Da Vang in Vietnam will add only 3,000 to 5,000 BOEPD in 2027 before reaching 10,000 to 15,000 BOEPD in 2028 or 2029.
What to watch: full-year 2027 production plans in January. If 2027 output does not pass 2025's 182,294 BOEPD despite higher spending, new projects are still only replacing field declines.
Heavy Drilling Spend Eats Free Cash Flow
Murphy is leaning on its cash flow and balance sheet to fund its offshore discoveries, which bulls view as a way to build long-term oil reserves without buying rivals. In the third quarter, however, capital expenditures more than doubled from a year ago to $422.2 million, cutting free cash flow by 78.0% to $48.2 million.
After paying $50.2 million in dividends and $5.1 million for property acquisitions, Murphy's own measure of adjusted free cash flow was negative $8.4 million in the quarter and negative $32.2 million over the first nine months. Consequently, the producer bought back no stock for a sixth straight quarter, and total debt rose $80 million from last quarter to $1.63 billion as it added a finance lease for its Vietnam storage vessel.
What to watch: fourth-quarter share repurchases and free cash flow. With capital spending planned to drop to $190 million in the fourth quarter, another quarter without buybacks would confirm that offshore development has sidelined stock repurchases.
Oil Prices Pulled Back From Q2 Peak
Murphy does not hedge its oil production, so its revenue moves directly with commodity markets. In the third quarter, the company's average realized oil price rose 35.0% from a year ago to $89.35 per barrel, but fell 9.9% from the second quarter's $99.14 peak, pulling production revenue down 8.3% from last quarter to $849.2 million.
In Canada, oversupply in the local AECO gas market held Murphy's natural gas price to $1.63 per thousand cubic feet. While lower royalties helped Tupper Montney volumes in the third quarter, Hambly warned that fourth-quarter production will dip as seasonal gas prices trigger higher royalty rates, reducing the barrels Murphy keeps.
What to watch: realized oil prices in the fourth quarter against Hambly's $80 Brent benchmark. Murphy estimates that Lac Da Vang and Chinook will generate $1 billion of free cash flow over five years at $80 Brent, so a drop below that level would squeeze its funding plan.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no update in the third-quarter release or stockholder letter.
- Bubale commerciality: Murphy reported oil pay at Bubale West-1X, but gave no resource size estimate or minimum volume needed for a standalone development; the 10-Q filing may add detail.
- Stalled Paon gas field: the release did not mention the status of gas-pricing talks in Côte d'Ivoire, where $150.3 million of well costs sat capitalized last quarter; the 10-Q footnotes will update the balance.
- Long-term targets: management did not address the unmentioned 210,000–220,000 BOEPD production goal or the $1.0 billion debt target while debt sits at $1.63 billion.
- Joint-venture dispute: the release did not explain the $28.6 million in other operating expense, following last quarter's $16.0 million legal provision; the 10-Q will provide the breakdown.
💲 Other KPIs
Canadian exploration and production revenue jumped 56.9% from a year ago to $169.5 million, turning a $6.1 million year-ago loss into $20.9 million of segment profit. Eight new wells at Tupper Montney and higher offshore Canada oil prices ($108.21 per barrel vs $69.42 a year ago) drove the gain.
Cash generated from operations before working-capital swings rose 40.0% from a year ago to $515.0 million, but declined 12.5% from the second quarter's $588.4 million as oil prices cooled. Over the first nine months, this cash flow reached $1.53 billion, covering the $1.33 billion spent on property additions and dry holes.
The diluted share count rose 2.4% from a year ago (146.1 million vs 142.7 million). Stock-based compensation added shares while the company kept buybacks at zero for a sixth quarter, and last year's GAAP loss excluded dilutive stock awards from the year-ago count.
🔮 Guidance
Raised against the prior implied remainder. The plan points to 178,000 BOEPD at the middle of the range, down 4.6% from the third quarter and down 1.9% from a year ago. Natural gas accounts for 70% of the sequential drop because Murphy will bring no new onshore wells online in the fourth quarter and faces higher Canadian royalties, while Hurricane Isaias trimmed 3,700 BOEPD.
Raised. Murphy lifted the middle of its full-year target by 6,000 BOEPD after holding it at 171,000 BOEPD for three quarters. Even with the increase, the 177,000 BOEPD middle of the range sits 2.9% below 2025's 182,294 BOEPD.
Unchanged against the prior implied remainder. Fourth-quarter spending drops 55.0% from the third quarter's $422.2 million and 44.2% from a year ago because the 2026 exploration drilling campaign is finished and no new onshore wells are scheduled to come online.
Unchanged. The $1.55 billion middle of the range remains 34.0% above 2025's $1.16 billion following last quarter's $300 million budget expansion. Hambly said completing the offshore wells has "materially reduced the execution risk embedded in our second-half 2026 development program".
Cut against the prior implied remainder. The $40 million forecast covers geological and geophysical studies with no dry-hole costs assumed, up slightly from $33.0 million in the third quarter.
Cut by $105 million. Because the third-quarter wells in Côte d'Ivoire and Vietnam found oil, Murphy capitalized their drilling costs instead of recording the $100 million dry-hole charge it had budgeted. Full-year expense still rises 74.6% from 2025's $111.7 million due to $90 million of first-half dry holes.
❓ Key Questions
What resource size makes Bubale commercial on its own?
Bubale West-1X found oil eight miles from the discovery well, but Murphy has not shared a recoverable resource estimate or the volume needed to justify a standalone platform in Côte d'Ivoire.
What is the status of the stalled Paon gas project?
Murphy had $150.3 million of well costs capitalized in Côte d'Ivoire at mid-year while gas-pricing talks with the government stalled, and the third-quarter release gave no update on those negotiations.
What drove the $28.6 million in other operating expense?
Other operating expense jumped from $5.9 million a year ago to $28.6 million in the third quarter, following a $16.0 million joint-venture dispute charge in the second quarter that management never detailed.
What will the 2027 capital budget look like?
With 2026 capital spending up 34% to $1.55 billion and adjusted free cash flow negative for the year to date, investors need to know how much appraisal and Eagle Ford spending will carry into 2027.