Murphy Oil Expands Acreage – Analyst Blog

In a process to enhance its resource acreage, oil and gas company Murphy Oil Corporation (MUR) announced that its subsidiary, Murphy Oil Company Ltd., has entered into an agreement with Kainaiwa Resources Inc., a corporation wholly owned by the Blood Tribe First Nation. The agreement entails the acquisition of 129,280 acres of prospective oil and gas properties located within the Blood Tribe Reserve in southern Alberta, Canada.

 

As per the lease agreement, Murphy will have drilling rights on the property for 5 years with a minimum of 16 wells to be drilled during this time. Murphy will make a lease bonus payment of $38 million for the drilling rights.

 

This new drilling rights in the Blood Tribe Reserve will further strengthen the company’s presence in North America, as it has already been operating in Seal Lake, Montney and Eagle Ford resource plays.

 

The total production of the company during the second quarter 2010 was 189,951 barrels of oil equivalents per day (Boe/d), while the company expects to produce 180,000 Boe/d in third-quarter 2010. The sequential decline in production estimate is the fallout of an unplanned downtime at Kikeh in Malaysia and continued delays in bringing on new wells at the Azurite development in the Republic of Congo.

 

Murphy lowered its total production forecast for 2010 to 194,000 Boe/d from the previous expectation of 200,000 Boe/d taking into account the decline in production expected in the third quarter. We believe the addition of the new acreage would boost total production ahead. 

 

Adjusted earnings of Murphy at the end of the second quarter of 2010 were $1.41 per share compared with a net loss of 90 cents per share in the year-ago comparable period. The Zacks Consensus Estimates for third quarter 2010, fiscal year 2010 and fiscal year 2011 are $1.16 per share, $4.55 per share and $5.77 per share, respectively.

 

Murphy currently retains a Zacks #3 Rank (short-term Hold rating). Given the volatile commodity environment, concerns on the moratorium-related issues in the Gulf of Mexico and the cautious intermediate-term outlook on the refining industry, we maintain a Neutral rating on the stock.

 

Based in El Dorado, Arkansas, Murphy Oil Corporation engages in the exploration and production of oil and gas properties worldwide. The company is also involved in refining and marketing crude oil and other feed stocks into petroleum products such as gasoline and distillates.