Murphy Oil Corp. on Monday (Dec. 3) closed on its recently announced $795 million deal with Brazil’s multinational oil conglomerate to develop a deepwater Gulf of Mexico project that is expected to bolster the Arkansas oil company’s daily crude oil production by 60,000 barrels.
Murphy Exploration & Production Company – USA, the Houston-based subsidiary of the El Dorado-based oil company, entered into the joint venture agreement with Petrobras America Inc. (PAI) on Oct. 11. Under the terms of the deal, both companies contributed all their current producing Gulf of Mexico assets to the joint venture company, MP Gulf of Mexico LLC (MPCOM).
The joint venture will be owned 80% by Murphy, which will oversee the project, and a 20% non-controlling stake held by Petrobras. Murphy will fund a portion of the deal, about $470 million with cash on hand. The remaining $325 million will be drawn on the company’s new senior credit facility, officials said.
“We are excited to close this transformational joint venture and form a strategic partnership with Petrobras. 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,” said Murphy Oil President and CEO Roger Jenkins. “We plan to allocate a portion of the cash flow generated by the joint venture to accelerate further high-value oil-weighted activity in our Eagle Ford Shale asset.”
As a result of the deal and other operation events, Murphy said it now expects fourth quarter production to be approximately 176,000 barrels of oil equivalent per day (BOEPD) and full year output at nearly 171,000 BOEPD. In the company’s Gulf of Mexico acreage, average fourth quarter production in the Gulf of Mexico will spike by nearly 13,000 BOEPD.
Alternately, Murphy also announced today the closing of its new $1.6 billion five-year senior unsecured revolving credit facility, effective Nov. 28. The company new credit line replaces an earlier $1.1 billion unsecured facility, and will be used for working capital purposes, capital expenditures, acquisitions, the issuance of letters of credit and general corporate purposes.
“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. The attractive pricing and relaxed covenants place Murphy in a position of significant strength with increased liquidity following the closing of our Gulf of Mexico joint venture,” said Jenkins.
REUTERS: MURPHY’S DEEPWATER MALAYSIAN ASSETS FOR SALE
Murphy’s improved financial flexibility comes amid speculation that the El Dorado-based oil and gas explorer is in talks to sell its deepwater Malaysian oil and gas assets for an unsolicited bid that could fetch between $2 billion to $3 billion, according to Reuters.
Based on confidential sources, Reuters said Murphy Oil has tapped several banks for the potential sale of its majority takes in eight separate offshore production sharing contracts in Malaysia. Murphy, which has been in offshore Malaysia since 1999, could agree on a deal in a couple of weeks, those sources said.
In the third quarter, the Arkansas oil independent returned to profitability with earnings of nearly $94 million, mainly due to averaged realized crude oil prices of $69 per barrel. However, U.S. crude oil prices plunged below $50 a barrel on Friday (Nov. 30) after bloated U.S. crude oil stockpiles rose for 10 straight weeks.
In trading Monday, U.S. and international crude prices were moving higher ahead of Thursday’s meeting of the Organization of Petroleum Exporting Countries (OPEC), where the Saudi Arabia-led oil cartel is expected to cut production by 1 million to 1.5 million barrels per day.
In London, international Brent crude futures were up $2.89 per barrel, or 4.9%, at $62.35 a barrel. U.S. benchmark crude, West Texas Intermediate, was up also up 4.9%, or $2.48 at $53.41 per barrel on the New York Mercantile Exchange.