Murphy Oil Corporation has announced that its wholly owned subsidiary, Murphy Exploration & Production Company – USA (‘Murphy’), has entered into a definitive agreement to acquire deepwater 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 boe/d and are expected to add approximately 66 million boe of Proven (1P) reserves and 122 million boe of Proven and Probable (2P) reserves. 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 US$1.375 billion. Additional contingent consideration payments are based on the following: up to US$200 million in the event that revenue from certain properties exceeds certain contractual thresholds between 2019 and 2022; and US$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 US$325 million, are expected to be fully repaid immediately following the closing of the previously announced US$2.127 billion divestiture of Murphy’s Malaysian assets. The company still intends to execute the previously announced US$500 million share repurchase program, expiring on December 31 2020, of which US$300 million is planned in the first tranche, with the remaining US$200 million expected in the second tranche. The previously announced US$750 million debt repayment has been revised to only include the US$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.
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 boe/d on an annualised basis for full year 2019 to Murphy’s Gulf of Mexico production, comprised of approximately 60% oil.
- Total Murphy Gulf of Mexico full year annualised 2019 production is anticipated to be approximately 85 000 net boe/d, 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% of daily production, an increase from the current 49%, excluding non-controlling interest.
- Lease operating expense for acquired assets of approximately US$10 to US$12 per barrel of oil equivalent.
- Adds approximately 66 million boe of Proven (1P) reserves and 122 million boe of Proven and Probable (2P) reserves, of which 72% 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.”
Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/23042019/murphy-oil-corporation-announces-strategic-deepwater-oil-weighted-gulf-of-mexico-acquisition/
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