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On Heels of Malaysia Sale, Murphy Oil Buys Offshore Stake in Gulf

2 min read

When Murphy Oil Corp. sold its Malaysian business to a Thai national petroleum company in March, leaders of the El Dorado exploration and production titan said it would use the $2 billion in proceeds for stock buybacks, debt reduction and “potential acquisitions.”

One resulting acquisition was announced Tuesday morning, a $1.37 billion investment in offshore fields closer to home, the Gulf of Mexico.

Murphy (NYSE: MUR) agreed to purchase deepwater assets from LLOG Exploration Offshore and LLOG BlueWater Holdings. If certain fields exceed production thresholds over the next three years, Murphy may pay up to $200 million more. The deal was funded by cash on hand after its exit from Malaysia, in which it sold its assets to PTT Exploration & Production of Bangkok. At the time, an analysis by JP Research concluded that the success of the sale strategy would depend on “the reinvestment of inflows from the transaction.”

The blocks involved in the deal include seven producing fields generating 38,000 barrel-of-oil equivalents, a company news release said. The company, which has about 1,100 employees, also said that it planned to forge ahead with a $500 million stock buyback program it announced in March.

In mid-morning Tuesday, Murphy stock was trading at $29.06, slightly down from the morning opening. Murphy CEO Roger Jenkins discussed the Gulf acquisition in a company statement. 

“This immediately accretive transaction continues to strengthen our Gulf of Mexico portfolio by adding quality assets at a very attractive price,” he said. “We expect these newly acquired assets to generate meaningful cash flow over the next several years that will provide us with additional flexibility for future capital allocation.”

Jenkins said the purchase reflects a long-term reshaping of the iconic Arkansas oil company. 

“Since selling our refining business and successfully spinning-out our retail gasoline business [now Murphy USA] five years ago, we have implemented significant strategic changes in revamping Murphy’s portfolio,” he said.

Jenkins cited the widening of Murphy’s Gulf footprint and the divestment in Malaysia, saying the strategies had created significant cash flow and value for shareholders. “Murphy is now positioned to grow oil production with an overall compound annual growth rate of seven to nine percent, all while maintaining our compelling dividend, repurchasing our stock, and decreasing our debt levels.”

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