Murphy Oil supports moratorium on Gulf drilling

A Memorial Day moratorium on deepwater drilling in the Gulf of Mexico could slow oil and production in the region, but Murphy Oil Corp. officials say they support a move by the Obama administration to investigate the massive oil spill off the coast of Louisiana.

The El Dorado based energy exploration and distribution company has a $20 million investment in the Gulf of Mexico.

"Murphy supports the Presidential Commission to investigate the spill, as we need to fully understand the causes so the industry can learn from it," Murphy Oil spokeswoman Mindy West said in an email. "At the same time, we urge a careful approach to future policies with no rush to judgment."

West continued, "Producing the energy America needs is our job, but it is also our job to do so safely. Murphy takes safety in operations very seriously as do our industry peers. However, this tragedy in the Gulf demonstrates that we all need to do better. And we will."

Under President Obama’s guidance, the U.S. Department of the Interior Secretary Salazar issued a directive ahead of the Memorial Day weekend for a six-month halt to deepwater drilling on the Outer Continental Shelf of the Gulf of Mexico.

According to the Interior Department, the ban affects more than 30 exploratory wells at depths of more than 500 feet in the Gulf, and also bans any new drilling in the area for six months.

The move is in response to the oil spill following the April 20 explosion aboard the Deepwater Horizon drilling rig. London-based BP said June 1 it has spent nearly $1 billion on the oil spill cleanup and several failed attempts to plug the underwater oil leak, located about 40 miles from New Orleans.

West said Murphy Oil is a partner in the Deep Blue exploratory well development, which has suspended production until the drilling ban is lifted. To date, the Murphy Oil has spent approximately $20 million for its 9.375% working interest in the well.

Houston-based Noble Energy serves as operator and owns a 33.5% stake in the Deep Blue well, which was recently drilled in the Green Canyon region of the Gulf of Mexico at a depth of nearly 33,000 feet.

Murphy has seven deepwater developments across the globe. The company’s Gulf of Mexico production is approximately 50 million cubic feet of natural gas and 20,000 barrels of oil per day.

"None of our production, thus far, has been impacted by the moratorium, but could potentially be as certain production optimization work may have to be postponed," West added.

Besides Murphy and Noble, several other oil and gas operators such as ExxonMobil, Marathon Oil and Anadarko Petroleum have halted or postponed deepwater drilling in the Gulf of Mexico until the ban is lifted.

Several oil analysts warned that the Obama administration’s ban could also cause oil and natural gas prices to spike if the moratorium continues longer than six months. In 2009, Gulf of Mexico exploration and production accounted for 29% of America’s oil production and 11% of its natural gas output, according to the federal Energy Information Administration.

The spill and subsequent moratorium have put downward pressure on the stock prices of many energy companies. Murphy Oil is no exception. Murphy shares (NYSE: MUR) closed Tuesday (June 1) at $51.08, down $2.30. During the past 52 weeks, the share price has ranged from a $65.12 high to a $49 low.