Murphy Oil CEO: Company Has Not Been Approached By Suitor

Murphy Oil Corp. President and CEO Roger Jenkins shared in a recent interview with a Wall Street analyst that the El Dorado-based Fortune 500 company has not been approached by a larger integrated oil conglomerate or suitor as market rumors persist that the Arkansas oil giant is a takeover target.

Jenkins shared his varied views on Murphy’s future prospects and other topics during a wide-ranging “fireside” chat and webcast interview at the recent Sanford C. Bernstein Strategic Decisions Conference on May 31 in New York City.

Over the past year, Murphy’s stock has dropped nearly 31% as the “pure play” Arkansas oil and gas explorer has completed the successful spin-off of downstream refining and retail business in the United Kingdom. In 2012, Murphy spun off its retail subsidiary that now separately trades on the Nasdaq stock exchange as Murphy USA.

In his interview, Jenkins sat down with Bernstein’s oil and gas analyst Bob Brackett to offer a few nuggets about the Arkansas company’s current strategy, operational portfolio, earnings and financial performance, and decision to cut its 2015 capital spending by $2.3 billion in 2015.

One of the more interesting parts of the interviews was Jenkins’ take on oil prices, which have fallen precipitously in the past year. In one exchange, he explained that Murphy’s financials are not based on the lower-priced West Texas Intermediate (WTI), the benchmark U.S. crude oil, but the higher-priced international Brent crude.

“One of the advantages that we bring is we are not really a WTI player. And we see WTI trade and talked about all day long; we’re really a Brent player,” Jenkins said. “And earlier in the year, we were probably greatly hurt in our financials as those … prices laid on top of each other. Now we are starting to see that $5 and $6 separation, which is a big advantage for Murphy in our cash flow ability.”

Later, Jenkins joked about the collapse in international crude oil prices and said he expects to see WTI prices approach between $65 and $70 in 2016 and 2017.

“We, like everyone, just have a view of oil price,” Jenkins said of the price collapse. “If I’d known … I would’ve hedged it. I’d be a superstar here. I would have more people here today.

“So we are a $65, $66 company in 2016. WTI, even though we don’t have a lot of WTI, $68 WTI in 2017, I don’t think that would be outlandish,” he said.

But the most interesting part of Jenkins’ interview was his exchange with Brackett at the end of the 53-minute interview. Here’s a snapshot:

Bob Brackett, Bernstein:

We’ve got a couple minutes left. We’ve seen corporate acquisitions – we saw Talisman who had a somewhat similar footprint to you taken out at a fairly significant premium to its 90-day trading price. We saw BG, which again has a somewhat similar footprint. What is your appetite if a large integrated or a large buyer approaches you and says we would like you to join our corporation?

Roger Jenkins, Murphy Oil Corp. – President and CEO:

Well, I mean everybody is for sale every day in the New York Stock Exchange and we are a company that – (what) would you like me to say, Bob? I’m not interested in doing that at all? What do you want me to say? So typically, I would say we react to those things as they come forward.

Brackett:

Have they come forward?

Jenkins:

They have not.

You can see a partial transcript of Jenkins interview at the Bernstein conference here. Link to the full webcast here.

In early trading on Wednesday, Murphy shares were off 40 cents at $42.52. The Arkansas oil company has traded in the range of $42.19 and $68.43 for the year.

Wall Street analyst Fadel Gheit at New York City-based Oppenheimer & Co., told Talk Business & Politics that Murphy is “highly leveraged to oil prices.” In trading Monday on the New York Mercantile Exchange, Brent futures closed up 1% at $65.49 a barrel ahead of this week’s OPEC meeting. WTI prices were up in early trading at $60.70 a barrel.

“A rebound in oil prices should boost Murphy stock price,” Gheit said. “The poor stock performance (of Murphy) relative to other independent oil and gas producers can be attributed to poor exploration results, despite a new management team and new business strategy.”

Gheit added that Murphy’s stock is trading at lower earnings and cash flow multiples than its peers, despite having one of the highest dividend yields when compared to other oil and gas companies of its size. Still, he said, “the company has a strong balance sheet with a net debt ratio of 14% compared with 25% on average for the peers.”