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Murphy's First Oil from SNP, Malaysia

Zacks Equity Research

Murphy Oil Corporation (MUR) announced that it has commenced oil production from the Siakap North-Petai (SNP) development field. The field is located in a water depth of 4,429 feet at Block K, offshore Sabah in Malaysia.

Murphy Oil is the major operator in the SNP development field, owning 32% working interest. Other partners are PETRONAS Carigali, Royal Dutch Shell plc (RDS.A) and ConocoPhillips (COP). Royal Dutch Shell and ConocoPhillips carry 21% interest each.

Discovered in 2009, the SNP development field comprises eight producing wells and five water injection wells built as a subsea tie-back to the Kikeh Floating Production Storage and Offloading (:FPSO) vessel. The field joins the discoveries at Siakap North in Block K with Petai in the adjacent Block G.

In the first phase of the development program, production started from four oil wells. By mid 2014, peak gross production from the SNP development field is expected to touch 35,000 barrels of oil (boe) per day.

Apart from Siakap North-Petai, Murphy Oil has operations in the Gumusut-Kakap field, offshore Malaysia.

As of Dec 31, 2013, total proved reserves booked in Block K were 102 million boe and 75 billion cubic feet of natural gas. Murphy Oil invested $214.6 million in 2013 as capital expenditure at Siakap North-Petai.

As per Malaysia Petroleum Resources Corporation’s report, Malaysia has oil reserves of around 28.35 billion barrel of oil equivalent and roughly 83 trillion cubic feet of natural gas reserves to date.

We note that many upstream players are strengthening their presence in the fossil fuel rich regions of Malaysia. In Feb 2014, another energy player Exxon Mobil Corporation (XOM) produced its first gas from the Damar field, off the east coast of Peninsular Malaysia.

Apart from expansion at the Eagle Ford shale in the U.S., Murphy Oil is also currently focusing on exploration and production activities in Australia and the Gulf of Mexico. The successful completion of these projects will enable the company to increase and meet its future production goals.

Murphy Oil currently has a Zacks Rank #3 (Hold).

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