Murphy Oil Stays Neutral - Analyst Blog
08 March 2013 - 4:30AM
Zacks
We have maintained our Neutral recommendation on Murphy
Oil Corporation (MUR). The company currently has a Zacks
Rank #3 (Hold).
Why the Reiteration?
In the fourth quarter and full year of 2012, Murphy Oil’s earnings
per share and revenues surpassed the Zacks Consensus Estimates. The
outperformance was primarily attributable to significant
improvement in the Exploration and Production, and Refining and
Marketing segments, higher crude oil sales volume and a decline in
exploration expenses.
Murphy Oil 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 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.
In addition, we believe that Murphy Oil’s significant progress in
offshore drilling activities in the Eagle Ford Shale and the
signing of a new agreement with Wal-Mart Stores
Inc. (WMT) for new store additions will act as a positive
catalyst for its future growth.
However, uncertainty associated with drilling results and volatile
oil prices could challenge the company’s forthcoming financial
results.
The current Zacks Consensus Estimate for first-quarter 2013 of 90
cents is at the upper end of the company’s earnings guidance of 55
cents to 90 cents. This earnings projection takes into account the
loss of approximately $10 million from downstream operations and
total exploration expense of $70–$140 million.
Other Stocks to Consider
Other stocks in the sector that are presently doing favorable
business include PostRock Energy Corporation
(PSTR) and Range Resources Corporation (RRC). Both
stocks carry a Zacks Rank #1 (Strong Buy).
MURPHY OIL (MUR): Free Stock Analysis Report
POSTROCK ENERGY (PSTR): Free Stock Analysis Report
RANGE RESOURCES (RRC): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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