Murphy Oil Corp., the El Dorado petroleum exploration and production giant, announced on Wednesday that it has received commitments from its bankers and new lenders for $1.2 billion in revolving credit. The publicly traded company also revealed plans to offer $500 million in debt securities in the form of senior notes scheduled to mature in 2024.
The company (NYSE: MUR), which lowered its quarterly cash stock dividend last week to 25 cents from 35 cents, has been struggling through several years of low crude oil prices. The company said the credit would be in the form of a senior unsecured guaranteed facility and will expire in August 2019. It expects the facility to be undrawn at closing.
“Given market conditions, this new revolving facility reflects the strength of our asset base and confidence the participating banks place in our company, said Roger W. Jenkins, Murphy’s president and CEO. “This credit facility aligns with our structure as an independent exploration and production company and gives us ample liquidity for our long-term strategy.”
As part of the credit agreement, the company will execute at least a $400 million capital markets offering, and under an existing 2011 credit facility, it will retain $630 million of bank commitments until the 2011 credit facility expires in June.
According to a news release, terms for the credit facility make it unsecured, but with guarantees from certain domestic and foreign subsidiaries, along with an automatic reduction of the credit pool to $1 billion if the company sells substantial assets.
Varying interest rates will apply, based on the company’s total leverage ratio, ranging from LIBOR plus 250 basis points to LIBOR plus 450 basis points. Another provision is that beginning in the quarter ending March 31, if the company’s total leverage ratio exceeds 3.25 times the company’s trailing 12-month consolidated adjusted EBITDAX, the credit will be recquired to become secured, subject to limitations set forth in the company’s existing notes.
Murphy plans to use the proceeds from the senior notes for general corporate purposes, including “the repayment, repurchase or redemption of the company’s 2.5 percent notes due in 2017.” Senior notes are bonds that take precedence over other unsecured notes in the event of a bankruptcy or liquidation.
Two weeks ago, Murphy announced a second-quarter profit of $2.9 million on the strength of its sale of interests in Canada. Excluding those sale proceeds, it had a quarterly loss of $62 million for the quarter. Its 2015 annual result was a loss of $2.27 billion, or $13 a share.
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