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Murphy closes deal with Petrobras over Gulf of Mexico assets

Posted on December 4, 2018

Murphy Oil Corporation's subsidiary, Murphy Exploration & Production Company-USA has closed its previously announced joint venture in the deep water of the Gulf of Mexico with Petrobras America Inc., a subsidiary of Petrobras.

Murphy’s net cash consideration, after adjustments provided for in the contract, of approximately $795 million is funded by $470 million of cash-on-hand with the remaining $325 million being drawn on the company’s new senior credit facility.

Under the terms of the transaction, both companies contributed all their current producing Gulf of Mexico assets to the joint venture company, MP Gulf of Mexico, LLC.

MPGOM will be owned 80 percent by Murphy and 20 percent by PAI, with Murphy overseeing the operations. The company expects to account for the PAI share of this transaction as a noncontrolling interest.

Murphy sees these benefits from the transaction:

— Increasing total Gulf of Mexico production to approximately 60,000 net barrels of oil equivalent per day at closing, net to Murphy’s interest.

— Providing high-margin production with Gulf Coast prices.

— Accelerating activity in the oil-weighted Eagle Ford Shale with cash flow generated from new joint venture assets

“We are excited to close this transformational joint venture and form a strategic partnership with Petrobras. Our newly expanded Gulf of Mexico portfolio is consistent with Murphy’s long-term vision of increasing profitable oil-weighted production in an area where we have a long history of success. We plan to allocate a portion of the cash flow generated by the joint venture to accelerate further high-value oil-weighted activity in our Eagle Ford Shale asset,” said Roger W. Jenkins, Murphy Oil president and CEO.

As a result of the transaction and other operational events, Murphy is providing updated fourth quarter and full year production guidance. The company expects fourth quarter production to be approximately 176,000 barrels of oil equivalent per day (BOEPD) and full year production to be approximately 171,000 BOEPD, net to Murphy’s interest.

Following the November 30 closing of the joint venture, average fourth quarter production in the Gulf of Mexico will increase by approximately 13,000 BOEPD, net to Murphy’s interest. Across several of the company’s assets, fourth quarter production was impacted by recent unplanned events, including severe storms in non-operated offshore Canada (2,000 BOEPD); third-party processing, facility de-bottlenecking start-up delays in Malaysia (1,500 BOEPD); and non-operated facility downtime in the Gulf of Mexico (1,500 BOEPD).

In conjunction with the previously announced plan to accelerate activity in the Eagle Ford Shale, full year capital expenditures are being increased by approximately $48 million to $1.23 billion. In order to jump-start activity for 2019, the company plans to drill ten and complete eight additional wells in 2018.