On Sep 17, 2013, we have maintained our Neutral recommendation
on petroleum company
Murphy Oil Corp.
). The company currently has a Zacks Rank #3 (Hold).
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Why the Reiteration?
In second-quarter 2013, Murphy Oil reported mixed results with
earnings beating the Zacks Consensus Estimate, while revenues
missing the same. On a year-over-year basis, the top and bottom
line improved primarily based on favorable results from the
Exploration and Production and Corporate segments, partially
offset by a decline in contribution from the Refining and
Murphy Oil has changed its business strategy, focusing more on
E&P activities. Adjustments in the business strategy
propelled the company to spin off its U.S. retail marketing
division, now trading on the New York Stock Exchange under the
Murphy USA Inc.
). The spin-off will enable both the companies to reallocate
their resources efficiently and redeploy existing capital as per
their market conditions and priorities.
Murphy Oil's cash and cash equivalents were $1 billion as of Jun
30, 2013 and net cash provided by operating activities was $0.9
billion during the second quarter of 2013. A solid cash flow
generation capacity and cash balance enabled the company to
invest $1 billion in second-quarter 2013, primarily for
exploration and production (E&P) activities in the U.S.,
Australia, Africa and Asia. These projects will play an important
role in boosting the company's upcoming performance while
improving its reserve level.
However, prices of Murphy Oil's primary products are often quite
volatile. An economic slowdown can affect the worldwide demand
for energy commodities, resulting in reduced prices of oil,
natural gas and refined products. The volatility in commodity
prices can significantly affect the company's operating results.
Other Stocks to Consider
The other stocks in the sector that are worth considering include
), each with a Zacks Rank #2 (Buy).