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Murphy Oil: Oh, When That Cash Comes Marching In

Mar. 02, 2020 6:52 AM ETMurphy Oil Corporation (MUR)7 Comments


  • Portfolio rearrangements have enabled management to rake in about $5 billion.
  • The latest sale of Malaysian properties while purchasing Gulf of Mexico properties increased production about 31 KBOED (mostly oil).
  • Management bought back about $500 million of common stock while retiring some debt.
  • The unconventional Eagle Ford operations are still lowering costs while increasing production.
  • The most significant potential future upside potential is represented by the joint venture with Exxon Mobil in Brazil offshore.
  • This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. Get started today »

Murphy Oil (NYSE:MUR) had announced the sale of the Malaysia operations. That sale brought in about $2 billion in cash during the fiscal year. This sale also generated a gain in the $1 billion value range. In addition continuing operations generated another $1.4 billion. Anytime a company the size of Murphy generates that much cash in one year, then shareholders can just bet that management will be going shopping.

There are a lot of great deals to be had out there under current conditions. All that is needed is cash and this management was one of the few out there with the cash. The joint venture with Petrobas was definitely a step in that direction. For the cost of $900 million, the company picked up about 41K BOED of mostly offshore oil production sold at a premium.

There was a second purchase after the Malaysian sale closed for another $1.375 billion that added another 38,000 BOED of production. Basically, Murphy sold about 48,000 BOED of production that was 60% oil but was expected to decline to 40% oil over the next few years. In the two Gulf transactions (one closed before the Malaysian sale and one after the Malaysian sale), Murphy picked up nearly 80,000 BOED of Gulf Of Mexico production that should remain much more oil-weighted than the production sold. Those three transactions would be a major coup for many managements.

Current And Future Shareholder Benefits

This whole process allowed management to reduce long-term debt overall while redeeming and retiring common stock. The stock repurchase program totaled $500 million in the current fiscal year.

Source: Murphy Oil Fourth Quarter 2019 Earnings Conference Call Presentation Slides

Management has been careful to acquire production that is usually sold at a premium to the appropriate oil price guideline in the area. This gives

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This article was written by

Long Player profile picture
I am a high school teacher for a decade. I am now retired.  Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland. I have a high school teaching credential and an MA in Math Education

Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research

Occassionally write articles on Tag Oil for the Panick High Yield Report


Analyst’s Disclosure: I am/we are long MUR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications.

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Comments (7)

thank you. will MUR survive oil crash on 3/9?
Long Player profile picture
You are talking one of the better balance sheets in the business along with some very low costs. Survival here is not a question.
Cue Ball profile picture
One problem is that the insider are always selling MUR stock . Not large amounts but every time they get some options to exercise , they sell . Another problem is MUR's investor relations will NEVER return your call or emails .

Book value is accurate....no write downs at this point .
Krypto profile picture
The market cap looks to be about half of book value?

Is the market discounting the value of the assets or expecting a write-down?
Long Player profile picture
I would not know why. They just sold Malaysia for a small fortune and got into the Gulf for a song. That is just what you want to see too. They booked a decent gain from the sale last year too.
I think oilcos are just that ignored/hated right now. Sooner or later, the pendulum will swing.
Long Player profile picture
This is one of the better ones out there. Good solid balance sheet too.
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