Rumors tie Murphy Oil to Canadian company

Although the rumors abound about a possible deal between El Dorado-based Murphy Oil Corp. and Calgary, Alberta-based Husky Energy, there is no clear information about a possible deal, and both companies remain quiet ahead of their July 27 quarterly earnings reports.

Both companies are on record about selling portions of their assets or raising money for growth plans. Last year, Murphy Oil said it would divest its refinery assets about a year ago. In June, Husky announced a plan to raise $1.2 billion through the sale of 36.968 million shares. Husky officials said the money “will provide additional financial flexibility to advance its growth strategy.”

Eyebrows also were raised earlier in the month when calls for Murphy shares substantially increased. Writing for “Seeking Alpha,” reporter Frederic Ruffy on July 14 noted: “Bullish flow detected in Murphy Oil (MUR), with 4,248 calls trading, or 5x the recent average daily call volume in the name.”

Speculation increased with today’s (July 21) reporting from the Dow Jones Newswires about the “fit” between Murphy and Husky.

From DJN:
A possible merger between Husky Energy and Murphy Oil would make sense from a portfolio point of view as both energy firms have operations in Southeast Asia, overlapping interest in the refining-and-marketing realm and a presence in Canada heavy oil sands, says an analyst firm, Macquerie Group. However, it notes a takeover wouldn’t be for Husky, which has significant capital commitments ahead to fund its oil-sands projects and downstream business.

Whatever may be in the works — if anything is — it has certainly fueled speculation. Murphy Oil shares spiked on Wednesday with 4.3 million shares trading hands, nearly 3 times its Tuesday activity. The price also rose about 5% on Wednesday and is trading higher today in heavier-than-normal trading activity.

However, Murphy share prices do not indicate a premium surge that would suggest the market anticipates a buyout. Volume did rise to 4.291 million shares traded on Wednesday (July 20), but the share price closed the day at $68.44, still well below a 52-week trading high of $78.16.

In early Thursday morning (July 21) trading, the volume continued to be strong, but the share price fell more than 40 cents.

With a $24 billion market capitalization, Husky is of sufficient size to acquire takeover Murphy ($13.3 billion market cap. Not only would it be a boost to the Canadian oil and gas sector, but it would potentially create a vast network of gas stations and refineries. It would also create a company with impressive oil production operations in Canada and the Canadian sands, U.S., the United KingdomAfrica and Southeast Asia.

Husky operates more than 500 gas stations, travel centers and bulk distribution centers in Canada, and Murphy has more than 1,100 gas stations — many co-located with a Wal-Mart store — in 20 U.S. states.