Murphy Oil Corp. on Monday (June 3) closed on a key $1.2 billion Gulf of Mexico acquisition amid the El Dorado oil and gas giant’s strategic turn to broaden its North American operations as benchmark crude prices continue their steady rise.
Ahead of today’s opening bell, Murphy Exploration & Production Co., USA announced that it had closed on the company’s previously announced agreement on April 23 to acquire deep water premium Gulf of Mexico assets from LLOG Exploration Offshore LLC and LLOG Bluewater Holdings LLC. Those two privately held partnerships are part of Covington, La.-based LLOG Exploration Company LLC, one of the nation’s largest exploration and production companies with a long history in the Gulf of Mexico.
After closing adjustments, Murphy Oil will pay $1.227 billion to LLOG, funded primarily through the company’s $1.6 billion revolving line of credit and other sources of liquidity, officials said. The deal has an effective date of Jan. 1, 2019, whereby Murphy’s Gulf of Mexico exploration and production subsidiary will take over full ownerships of the assets.
“We are excited to close another accretive Gulf of Mexico transaction as we continue to transform the company. After our third-party reserve engineers audited these newly acquired assets, we were able to increase the proved reserve volumes by 13% to 73 million barrels of oil equivalent (mmboe) which further enhances the attractive acquisition metrics,” said Murphy Oil President and CEO Roger Jenkins. “Our newly expanded Gulf of Mexico portfolio is consistent with Murphy’s long-term vision of increasing high-margin, oil-weighted production in an area where we have a long history of operational success.”
During the month of June, after a planned curtailment from a third-party pipeline outage, Murphy said the average net production for the new Gulf of Mexico assets is expected to be nearly 22,000 to 24,000 barrels of oil equivalent per day (boepd). Once the pipeline is back in operation, Murphy Oil anticipates production in the second half of 2019 to be 31,000 to 33,000 boepd, in line with previous estimates of 32,000 to 35,000 boepd.
The acquired assets will be fully owned by Murphy Oil and not part of MP Gulf of Mexico LLC, the company’s partnership with Brazil’s Petrobras America Inc. that owns the company’s other producing assets in the deep-water basin largely surrounded by Mexico and several Gulf Coast states. In December, Murphy and Petrobras agreed to an $800 million joint venture to develop another Gulf of Mexico project with nearly 60,000 barrels of daily oil production.
The LLOG deal closed today comes after Murphy’s two primary Malaysian subsidiaries, Murphy Sabah Oil Company Ltd. and Murphy Sarawak Oil Company Ltd., announced plans earlier this year to exit the company’s legacy-building deep-water play in the Southeast Asian country to a subsidiary of Bangkok, Thailand-based PTT Exploration and Production Public Company Limited, or PTTEP.
PTTEP will pay Murphy $2.13 billion, plus up to a $100 million bonus payment based on future exploratory drilling results prior to October 2020. That all-cash deal is expected to close by the end of this month, ending the El Dorado oil firm’s long relationship with the country of Malaysia. The expected gain on the sale of those assets is estimated to be between $900 million to $1 billion, company officials said.
MURPHY OIL EXECUTIVE CHANGES
To prepare for the company’s strategic transition with two Gulf of Mexico deals and the exit from Malaysia, Jenkins has also reshuffled the company’s executive bench to prepare for changes to the company’s asset portfolio.
In early February, longtime Murphy executive Eugene Coleman, who is largely credited with the company’s decade-long success in Malaysia and other global offshore plays, retired from his position as executive vice president (EVP) of exploration and business development.
Murphy Oil named Michael McFadyen to assume Coleman’s roles as EVP of Murphy’s exploration business to go along with his current role leading the company’s offshore operations. Murphy CFO David Looney assumed Coleman’s responsibilities as EVP of business development. Earlier in February 2018, Looney was first hired as Murphy’s top financial officer, replacing longtime CEO John Eckart who retired after 28 years with the El Dorado oil and gas concern.
In Monday’s midday session on the New York Stock Exchange, Murphy shares were down 41 cents at $24.43. Murphy’s shares have fallen nearly 6% since the publicly-traded Arkansas oil company reported in late April that first quarter profits of $40 million, or 23 cents per share, were off 76% from $168.2 million, or 96 cents per share, a year ago.