On Mar 19, we issued an updated research report on Murphy Oil CorporationMUR . The company possesses one of the best portfolios of assets and its steady exploration and production (E&P) and development activities allowed it to exit 2014 with a proved reserve replacement ratio of 180%. However, the company's dependence on crude oil and NGL sales and operating in a highly competitive environment could act as headwinds.
Murphy Oil reported operating earnings of 39 cents per share for the fourth quarter of 2014, beating the Zacks Consensus Estimate of 25 cents by 56%. The company's revenues of $1.4 billion were higher than the Zacks Consensus Estimate by 17%. On a year-over-year basis, reported revenues increased 4.4% mainly due to higher E&P revenues from the U.S. operations, and corporate and other sales.
The company is investing steadily to develop its existing assets. In 2014, it achieved first oil at three deepwater fields - one each in Siakap North-Petai and Kakap-Gumusut in Malaysia, and Dalmatian in GoM. However, keeping in mind the free fall in crude oil prices in the second half of 2014, Murphy Oil decided to cut down on its capital expenditure in 2015.
The continued volatility in global oil prices is a concern for operators like Murphy Oil, as its operating results significantly depend on the sale of crude oil. Murphy Oil obtained 84.6% of its 2014 revenues from crude oil and NGL sales. The crude oil prices are expected to remain low for the best part of 2015, which could lower earnings from E&P operations.
Murphy is also working to streamline its operation through asset divestment in order to focus on E&P ventures. The company divested 30% interest in Malaysian oil and gas assets to PT Pertamina Malaysia Eksplorasi Produksi (Pertamina) in two phases for $2 billion.
Murphy Oil faces strong competition from major integrated oil companies, state-owned foreign oil companies, independent producers of oil and natural gas and independent refining companies.
Murphy Oil Corporation currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are WPX Energy, Inc. WPX , PDC Energy, Inc. PDCE and EV Energy Partners LP EVEP . All these stocks carry a Zacks Rank #2 (Buy).
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