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Murphy Formalizes Gulf Joint Venture, Raises Production Estimate

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Murphy Oil Corp., the El Dorado oil exploration and production titan, closed on a joint venture Monday with the Brazilian petroleum conglomerate Petrobras, ushering in a new major partnership in the Gulf of Mexico.

The deal includes a $795 million cash commitment by Murphy, which will own 80 percent of the project. Two months ago, the announcement of the venture gave the company’s stock a significant shot in the arm.

On Monday, Murphy raised its fourth-quarter and fiscal 2018 production guidance, reporting that it expects to produce 176,000 barrels of oil equivalent a day, about 13,000 more daily barrels than it previously predicted. Murphy also said it would jump-start 2019 production by drilling 10 wells and completing eight others this month.

The deal, involving subsidiaries Murphy Exploration & Production USA and Petrobras America Inc., relies on $470 million cash-on-hand and $325 million from Murphy’s new senior credit facility, according to a company news release.

“We are excited to close this transformational joint venture and form a strategic partnership with Petrobras,” Murphy President and CEO Roger W. Jenkins said in a statement. “Our newly expanded Gulf of Mexico portfolio is consistent with Murphy’s long-term vision of increasing profitable oil-weighted production in an area where we have a long history of success.”

He said the company would apply some of the cash flow created by the joint venture to invest in its Eagle Ford Shale operations in Texas.

“In conjunction with the previously announced plan to accelerate activity in the Eagle Ford Shale, full-year capital expenditures are being increased by approximately $48 million to $1.23 billion,” the company release said.

The new credit facility is a $1.6 billion five-year senior unsecured arrangement that the company says is more consistent with investment-grade-rated companies. JPMorgan Chase Bank is the administrative agent of the amended credit facility, which replaces a previous unsecured $1.1 billion credit line.

“The new credit facility allows for additional financial flexibility should we need to access capital as we execute on our business plan through the commodity price cycles,” Jenkins said in his statement. “The attractive pricing and relaxed covenants place Murphy is a position of significant strength with increased liquidity following the closing of our Gulf of Mexico joint venture.”

Murphy stock was trading on Monday at near $32 a share, up from $29.46 in mid-August.

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