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Murphy Oil's (MUR) Arm Sells 50% Stake in King's Quay Project

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Murphy Oil Corporation’s MUR unit Murphy Exploration & Production Company – USA, completed the previously announced sale of its 50% interest in the King’s Quay floating production system and the associated export lateral pipeline, which will be constructed in the Gulf of Mexico.

Now, King’s Quay floating production and its associated assets will belong to a joint venture of entities involving Ridgewood Energy Corporation as a party, which in turn, includes ILX Holdings III, LLC.

The transaction will reimburse nearly $270 million worth investments that the company made in these projects. In addition, Murphy Oil plans to repay borrowings under the $1.6-billion senior unsecured credit facility from the sale proceeds and use the rest for general corporate purposes.

By repaying the debt, the company will reduce its capital servicing costs and boost margins. Also, it will enhance its balance sheet position and improve its liquidity.

About King’s Quay FPS

Having been built more than 90%, the project is expected to start production in mid-2022. It is designed to process 80 thousand barrels of oil per day and 100 million cubic feet of natural gas per day, and will handle the anticipated production from the Khaleesi/Mormont and Samurai fields.

Company’s Other Projects in Gulf of Mexico

The projects on the offshore fields, namely Khaleesi, Mormont and Samurai are on track with the first oil production expected in the first half of 2022. After completing the first producer well campaign at St. MaloWaterflood, the company now prepares to drill the second injector well.

CAPEX Plans

Over the past several months, the company has been trying to restructure its portfolio through acquisitions, divestitures and oil-weighted discoveries. Its focus on developing high-margin assets is evident from the production mix. The company is on course to invest $675-$725 million in 2021 to strengthen its existing assets. Over the 2021-2024 time period, it is aiming to spend $600 million annually to further reinforce its existing operations.

Zacks Rank & Price Performance

Murphy Oil currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past month, shares of the company have rallied 26.9%, outperforming the industry’s 14% growth.

Stocks to Consider

A few stocks worth considering from the same sector are Callon Petroleum Company CPE, Diamondback Energy, Inc. FANG and Denbury Inc. DEN, all sporting a Zacks Rank#1 at present.

Callon Petroleum, Diamondback Energy and Denbury pulled off an earnings surprise of 150.1%, 120% and 13.7% each on average, in the last four quarters.

The Zacks Consensus Estimate for 2021 earnings per share of Callon Petroleum, Diamondback Energy and Denbury has moved 78.6%, 46.5% and 86.7% north in the past 60 days, respectively.

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