US oil & gas operator splashes millions on BW Offshore FPSO to unlock cost savings

Houston-based oil and gas player Murphy Oil Corporation has set the wheels in motion to buy a floating production, storage, and offloading (FPSO), which is working at its asset in the Gulf of America, formerly the U.S. Gulf of Mexico. The U.S. firm will keep Norway’s FPSO operator BW Offshore in charge of the vessel’s operations and maintenance services.

Murphy Oil claims that the acquisition of the FPSO BW Pioneer is a strategic one, paving the way for a reduction in annual operating costs by approximately $60 million. The purchase and sale agreement with BW Offshore enables the U.S. player to acquire the unit for the gross purchase price of $125 million, subject to customary closing adjustments. This deal includes an initial $100 million payment upon delivery by the end of the first quarter of 2025.

The company explains that the remaining balance will be due when certain contractual obligations are out of the way, which is expected by the end of the second quarter of 2025. Murphy has also reaffirmed its 2025 capital expenditure (CAPEX) guidance range of $1.14 billion to $1.29 billion, with first-quarter CAPEX reaffirmed at $425 million.

Eric M. Hambly, President and Chief Executive Officer (CEO), commented: “By acquiring the FPSO and restructuring our contract, we will achieve a material reduction in operating costs of nearly $60 million annually with a payback of about two years independent of oil price, while enhancing returns for future infield development and exploration and increasing net proved developed reserves by approximately 8 million barrels of oil equivalent.

“It is also important to note that the purchase price was included in our 2025 capital expenditure guidance range of $1,135 million to $1,285 million. Further, the FPSO is located in the prolific Wilcox trend, allowing for operated and non-operated exploration prospects to tie back to a cost-advantaged facility.”

Upon the completion of the acquisition, the FPSO BW Pioneer will remain at its current location, supporting operations at the Cascade field in Walker Ridge 206 and 250 and Chinook field in Walker Ridge 469 and 425 within the Gulf of America. However, BW Offshore will continue to provide operations and maintenance (O&M) services under a new five-year reimbursable contract.

With a storage capacity of approximately 600,000 barrels of oil and a processing capacity of around 80,000 barrels of oil per day, the FPSO BW Pioneer has been in service since its conversion in 2009. BW Offshore also confirmed the duo’s plan to sign a five-year reimbursable O&M contract ahead of March 18, under which the Norwegian firm will continue to provide operations and maintenance services for five years.

BW Offshore completed the conversion of the BW Pioneer at Keppel Shipyard. On March 18, 2020, the firm secured a five-year contract extension for the unit. A few months later, the vessel executed its first-ever disconnect operation in August 2020 to evade an oncoming hurricane, showcasing its safety features and adaptability to extreme weather conditions.

Marco Beenen, CEO of BW Offshore, highlighted: “The divestment is in line with our strategy of capturing value from the existing FPSO fleet. We are pleased to ensure continuity for BW Pioneer and our experienced team, while also meeting our client’s need for a more flexible operating model.

“The transaction strengthens our financial position and supports execution of our long-term growth strategy of developing floating production infrastructure projects and energy transition solutions.”

BW Offshore recently held a naming ceremony for its newbuild FPSO scheduled to start work at a field off the coast of Australia in 2025. This unit comes with energy-efficient technologies that slash CO2 emissions. The vessel’s combined-cycle gas turbines with waste heat recovery curb energy consumption to maximize efficiency and environmental performance.

On the other hand, Murphy Oil is also busy with its oil and gas assets outside the United States, as confirmed by a recent oil discovery in the Cuu Long Basin offshore Vietnam. The firm put a joint venture between PTSC and Yinson Production in charge of the provision, charter, operation, and maintenance of a floating storage and offloading (FSO) unit destined to work in this country.