On May 20, 2013, the shares of
Murphy Oil Corporation
) climbed to its 52-week high of $65.68 primarily due to the
company's strong financial position and significant progress in
offshore drilling activities in the Eagle Ford Shale. We believe
these catalysts will likely enhance its future performance.
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Murphy Oil primarily owns upstream focused properties. Though the
company's asset base clearly has a sizable refining footprint, we
believe its future growth will also be driven by robust
exploration program. Murphy Oil's exploration line up has
provided it with a good production profile, which translates into
solid future growth opportunities.
The company plans to sell its UK upstream businesses and spin-off
its U.S. downstream subsidiary, Murphy Oil USA, Inc. to an
independent entity. The divestiture will let Murphy Oil to have a
deeper focus on its existing assets and add new ones to drive
further value. The spin-off will enable both the companies to
assign resources and redeploy existing capital as per their own
market conditions and priorities.
Murphy Oil's cash balance as of Mar 31, 2013 was $1.1 billion and
net cash provided by operating activities during the first three
months of 2013 was $0.9 billion. Strong financial position
enables the company to invest $4.3 billion in 2013 for several
Apart from investment in growth projects, Murphy Oil's strong
liquidity also allows it to improve shareholder value through
regular dividend payments and share buyback. Currently, the
company has share repurchase authorization of up to $1 billion.
Murphy Oil's second-quarter 2013 earnings guidance ranges from
$1.50 to $1.65 per share. In the year ago, the company's earnings
per share were $1.52. The Zacks Consensus Estimate for
second-quarter is $1.45 per share. We expect the company's
long-term earnings growth to be 11.5%.
Murphy Oil currently has a Zacks Rank #3 (Hold). Apart from the
company, other stocks in the sector that are worth considering
EPL Oil & Gas, Inc.
Sandridge Mississippian Trust II
) with a Zacks Rank #1 (Strong Buy) and
) with a Zacks Rank #2 (Buy).