Some oil companies like to stick with what works, and others like to diversify. Through diversification, even if one project hits a road bump there are other assets there to compensate. With both onshore and offshore projects Murphy Oil (MUR 0.13%) can make the best of both worlds and shield investors from "one trick ponies."

Both on and offshore
Murphy Oil is investing in various plays from around the world, from the Eagle Ford to Malaysia. 

Murphy Oil sees its Malaysian shallow water production rising from ~10,000 boe/d in the beginning of 2013 to ~19,000 boe/d. This is going to be achieved through the Patricia, South Acis, and Permas projects coming online in the next few months.

Murphy Oil is also investing in deeper Malaysian waters, with the Kapap and Siakap North/Petai projects expected to push up production by ~15,000 boe/d in the first year of production.

Combined, that is an additional ~22,000 boe/d in production coming online soon. This is a product of Murphy spending 42% of its $3.6 billion in development capex on Malaysia to push up production. Murphy expects production to hit just under 200,000 boe/d in 2013, so Malaysia alone would allow Murphy to surpass its 11% CAGR guidance (from 2007 to 2016) in 2014.

But Murphy sees production jumping in 2014 and going above 250,000 boe/d by 2015-2016. What's even better is that in that time period liquid production will be 85% of its production mix versus 78% now.

Higher output levels combined with higher margins means significantly more free cash flow to invest in new projects. Murphy has one eye on offshore developments and another focused on the Eagle Ford.

Everyone loves Texas
It seems that almost every E&P player with a market cap north of $10 billion has a stake in the Eagle Ford or Permian Basin. Murphy is no different, with aggressive growth plans for its 158,660 net acres in the area, which is 90% oil and condensates.

Murphy Oil has seven rigs with two frack crews in the play and has plans to increase production from ~40,000 boe/d to over 70,000 boe/d by 2016.

Murphy Oil's guidance for both its production mix and output is dependent on Malaysia and the Eagle Ford. These two plays make up 80% of Murphy Oil's $3.6 billion development capital in 2013. Murphy's bets already look like they're paying off, but just wait until 2014 when growth really kicks in.

Another E&P players utilizing both onshore and offshore plays is Hess (HES 1.40%).

Less capex but higher production
Hess is spending ~$1.3 billion less in capex on the Bakken this year yet sees production growing. For 2013 Hess wants to produce 64-70,000 boe/d, which is expected to almost double by 2016 to 120,000 boe/d.

To achieve that growth Hess has been heavily divesting noncore assets to focus on the Utica, the Bakken, and several offshore plays from the Gulf of Mexico to West Africa. In the past year Hess has sold off $3.5 billion in assets with plans to complete the sale of its Energy Marketing unit for $1.025 billion in the forth quarter of 2013.

Hess operates 14 rigs in the Bakken with ~2,500 locations to drill with over 1 billion barrels of potentially recoverable resources. The Bakken is going to contribute to most of Hess' growth over the next few years, and with the asset divestments Hess will be able to increase its rig count in the area. Hess expects to be producing free cash flow in the area around 2015.

Hess, like Murphy, isn't just betting on unconventional plays to find growth it also has the sea. This diversification allows Hess to see output growth even if the Bakken is hit with a harsh winter.

Gulf of Mexico
The Tubular Bells is expected to come online in the third quarter with Hess seeing production hitting 25,000 boe/d. The Tubular Bells is an ongoing project in the Gulf of Mexico that will help Hess maintain its estimated average of ~70,000 boe/d through 2017. Once the Tubular Bells project comes online production will be at ~75,000 boe/d.

Hess is guiding for flat to a slight decline in Gulf of Mexico production over the next few years until the Stampede project comes online post 2017. The Gulf won't be a source of growth for Hess, but it will provide it with cash flow to expand production in the area later. Hess also has the potential to find new reserves in the area and alluded to exploration upside.

Oil-linked gas
Hess has other offshore investments, with the North Malay Basin offering profitable natural gas production. In North America natural gas is sometimes frowned upon because it is less profitable, but in Asia gas can turn quite the profit.

Hess has discovered nine low risk fields in the area with plans to drill for natural gas. 40 mmcf/d of natural gas production is expected to come online in the fourth quarter, which will be increased to 165 mmcf/d by 2017 and beyond. The gas that is pumped out of the Basin, which is close to Malaysia and Thailand, will be linked to oil prices and will thus carry decent margins. Hess will start producing free cash flow from the play by 2017 when production levels go up.

Final thoughts
Companies like to diversify their portfolio so they aren't dependent on just source of cash flow. If a hurricane shuts down Gulf of Mexico operations there is nothing the company can do but own assets elsewhere and ramp up production in those plays until the hurricane passes. If bad weather in North Dakota and Texas halts drilling plans for a few months, in order to compensate companies need other areas to invest in. Diversification is a way to mitigate risk and protect shareholders, and these are two E&P players doing just that through onshore and offshore drilling around the world.