We have maintained our Neutral recommendation on
Murphy Oil Corporation
). The reiteration is primarily based on the company's strong
financial position and significant progress in domestic as well
as international offshore drilling activities. However, volatile
commodity pricing and uncertainty associated with drilling
results may to some extent temper these positives. Murphy Oil
currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
Murphy Oil had cash balance of approximately $1.1 billion as of
Mar 31, 2013 and net cash provided by operating activities of
$0.9 billion during the first three months of 2013. Strong
financial condition enables the company to spend $4.3 billion
under the 2013 capital spending program, including $4.1 billion
for exploration and production activities primarily in the U.S.,
Australia, Brunei, Cameroon and Malaysia.
We believe these ventures will play an important role in
boosting the company's forthcoming operational performance while
providing a good production profile.
Murphy Oil is selling its UK upstream businesses and going to
spin-off its U.S. downstream subsidiary, Murphy Oil USA, Inc. to
an independent entity. The divestiture will let the company to
have a deeper focus on its existing assets and add new ones to
drive further value, and the spin-off will enable both the
companies to assign resources and redeploy existing capital as
per their own market conditions and priorities.
However, prices of Murphy Oil's primary products are often quite
volatile. An economic slowdown can largely affect the worldwide
demand for energy commodities, resulting in reduced prices for
oil, natural gas and refined products. The volatility in
commodity prices can significantly affect the company's operating
Other Stocks to Consider
The other stocks in the sector that are worth considering include
Abraxas Petroleum Corp.
) with a Zacks Rank #1 (Strong Buy), and
Anadarko Petroleum Corp.
) with a Zacks Rank #2 (Buy).
ANADARKO PETROL (APC): Free Stock Analysis
ABRAXAS PETE/NV (AXAS): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
MURPHY OIL (MUR): Free Stock Analysis Report
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