Accretive Cash Flow Generating Acquisition
that Increases Operatorship in the Region
Murphy Continues Strategic Multi-Year
Transformation
Murphy Oil Corporation (NYSE: MUR) announced today that its
wholly owned subsidiary, Murphy Exploration & Production
Company – USA (“Murphy”), has entered into a definitive agreement
to acquire deep water Gulf of Mexico assets from LLOG Exploration
Offshore, L.L.C. and LLOG Bluewater Holdings, L.L.C., (“LLOG”). The
accretive, cash flow providing Gulf of Mexico assets currently
produce approximately 38,000 barrels of oil equivalent per day net
(Boepd) and are expected to add approximately 66 million barrels of
oil equivalent net (Mmboe) of Proven (1P) reserves and 122 Mmboe of
Proven and Probable (2P) reserves1. The transaction will have an
effective date of January 1, 2019 and is expected to close in the
second quarter, subject to normal closing adjustments.
Murphy will pay a cash consideration of $1.375 billion.
Additional contingent consideration payments are based on the
following: up to $200 million in the event that revenue from
certain properties exceeds certain contractual thresholds between
2019 and 2022; and $50 million following first oil from certain
development projects.
The acquisition will be funded by a combination of cash on hand
and availability under the company’s $1.6 billion revolving credit
facility. Total outstanding borrowings under the revolving credit
facility, including the current balance of $325 million, are
expected to be fully repaid immediately following the closing of
the previously announced $2.127 billion divestiture of Murphy’s
Malaysian assets. The company still intends to execute the
previously announced $500 million share repurchase program,
expiring on December 31, 2020, of which $300 million is planned in
the first tranche, with the remaining $200 million expected in the
second tranche. The previously announced $750 million debt
repayment has been revised to only include the $325 million that
was drawn on the revolving credit facility as the company will no
longer plan to repurchase or redeem outstanding senior notes at
this time.
TRANSACTION HIGHLIGHTS
The acquired assets will be fully owned by Murphy and not part
of MP Gulf of Mexico, LLC (“MP GOM”), the entity which currently
owns all of Murphy’s producing Gulf of Mexico assets.
- Adds approximately 32,000 to 35,000 net
Boepd on an annualized basis for full year 2019 to Murphy’s Gulf of
Mexico production, comprised of approximately 60 percent oil
- Total Murphy Gulf of Mexico full year
annualized 2019 production is anticipated to be approximately
85,000 net Boepd, excluding non-controlling interest
- Increases deep water offshore footprint
with the addition of 26 Gulf of Mexico blocks containing seven
producing fields, four development projects with future start-ups,
in the Mississippi Canyon and Green Canyon areas
- Expands operated production throughout
the Gulf of Mexico to 66 percent of daily production, an increase
from the current 49 percent, excluding non-controlling
interest
- Lease operating expense for acquired
assets of approximately $10 to $12 per barrel of oil
equivalent
- Adds approximately 66 Mmboe of Proven
(1P) reserves and 122 Mmboe of Proven and Probable (2P) reserves1,
of which 72 percent is oil
“This immediately accretive transaction continues to strengthen
our Gulf of Mexico portfolio by adding quality assets at a very
attractive price. We expect these newly acquired assets to generate
meaningful cash flow over the next several years that will provide
us with additional flexibility for future capital allocation,”
stated Roger W. Jenkins, President and Chief Executive Officer.
“Since selling our refining business and successfully spinning-out
our retail gasoline business over five years ago, we have
implemented significant strategic changes in revamping Murphy’s
portfolio. Specifically, over the last few months alone we have
increased our deepwater, oil-weighted, tax advantaged, Gulf of
Mexico assets while we simplified our company by divesting our
Malaysian portfolio, again at a very attractive price. What I am
most proud of is that through these transactions we have created
significant shareholder value. As a result, we have increased our
ability to generate meaningfully more cash flow in our long term
plan as Murphy is now positioned to grow oil production with an
overall compound annual growth rate of seven to nine percent, all
while maintaining our compelling dividend, repurchasing our stock,
and decreasing our debt levels.”
ATTRACTIVE ACQUISITION METRICS
The acquisition cost of the acquired asset is approximately
$20.75 per barrel of oil equivalent (BOE) for the estimated Proven
(1P) reserves and approximately $11.25 per BOE for estimated Proven
and Probable (2P) reserves. The implied cost per flowing barrel of
oil equivalent, based on current production, is approximately
$36,200 per BOE.
An investor presentation is available on the company’s website
at www.murphyoilcorp.com.
CONFERENCE CALL AND WEBCAST SCHEDULED FOR APRIL 23
2019
Murphy will host a conference call and webcast to discuss the
transaction on April 23, 2019, at 9:00 a.m. (EDT). The call can be
accessed either via the Internet through the Investor Relations
section of Murphy’s website at http://ir.murphyoilcorp.com or via
the telephone by dialing toll free 1-888-396-8049, reservation
number 37858321.
Scotia Capital (USA) Inc. and Baker Botts L.L.P. are serving as
advisors to Murphy on the transaction.
Barclays is serving as exclusive financial advisor and Jones
Walker LLP, Gieger, Laborde, & Laperouse, LLC and Kirkland
& Ellis LLP are serving as legal advisors to LLOG on the
transaction.
1Transaction reserves are based on internal engineering
estimates as of January 1, 2019, using strip prices in effect on
April 3, 2019.
ABOUT MURPHY OIL CORPORATION
Murphy Oil Corporation is a global independent oil and natural
gas exploration and production company. The company’s diverse
resource base includes production from North America onshore plays
in the Eagle Ford Shale, Kaybob Duvernay, Tupper Montney and Placid
Montney, as well as offshore Gulf of Mexico, Canada and Southeast
Asia. Additional information is available on the company’s website
www.murphyoilcorp.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are generally identified through the
inclusion of words such as “aim”, “anticipate”, “believe”, “drive”,
“estimate”, “expect”, “expressed confidence”, “forecast”, “future”,
“goal”, “guidance”, “intend”, “may”, “objective”, “outlook”,
“plan”, “position”, “potential”, “project”, “seek”, “should”,
“strategy”, “target”, “will” or variations of such words and other
similar expressions. These statements, which express management’s
current views concerning future events or results, are subject to
inherent risks and uncertainties. Factors that could cause one or
more of these future events or results not to occur as implied by
any forward-looking statement include, but are not limited to: our
ability to complete the acquisition of the Gulf of Mexico assets or
the Malaysia divestiture due to the failure to obtain regulatory
approvals, the failure of the respective counterparties to perform
their obligations under the relevant transaction agreements, the
failure to satisfy all closing conditions, or otherwise, increased
volatility or deterioration in the success rate of our exploration
programs or in our ability to maintain production rates and replace
reserves; reduced customer demand for our products due to
environmental, regulatory, technological or other reasons; adverse
foreign exchange movements; political and regulatory instability in
the markets where we do business; natural hazards impacting our
operations; any other deterioration in our business, markets or
prospects; any failure to obtain necessary regulatory approvals;
any inability to service or refinance our outstanding debt or to
access debt markets at acceptable prices; and adverse developments
in the U.S. or global capital markets, credit markets or economies
in general. For further discussion of factors that could cause one
or more of these future events or results not to occur as implied
by any forward-looking statement, see “Risk Factors” in our most
recent Annual Report on Form 10-K filed with the U.S. Securities
and Exchange Commission (“SEC”) and any subsequent Quarterly Report
on Form 10-Q or Current Report on Form 8-K that we file, available
from the SEC’s website and from Murphy Oil Corporation’s website at
http://ir.murphyoilcorp.com. Murphy Oil Corporation undertakes no
duty to publicly update or revise any forward-looking
statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190423005499/en/
Murphy Investor Contacts:Kelly Whitley,
kelly_whitley@murphyoilcorp.com, 281-675-9107Bryan Arciero,
bryan_arciero@murphyoilcorp.com, 832-319-5374
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