Murphy Oil (MUR) will benefit from acquisitions and investments

Murphy’s oil MUR is well positioned to benefit from petroleum-related acquisitions, divestitures and discoveries. Low asset costs and a multi-basin portfolio will drive its performance.

MUR – which currently carries a Zacks Rank #3 (Hold) – operates in a highly competitive environment and is susceptible to rising interest rates and changes in federal and state laws.

Tailwinds

Murphy Oil has one of the best production portfolios among national integrated oil and gas companies and independent exploration and production groups. It covers onshore and offshore assets, providing additional flexibility to reduce risk in the face of price fluctuations. The company has entered into fixed-price hedges and forward put contracts through 2024 to address commodity price volatility and protect free cash flow.

Over the past few months, MUR has been trying to transform itself through acquisitions, divestitures and oil-dependent discoveries. It has acquired operating interests in two unproduced, high-return fields in the Gulf of Mexico that are expected to provide significant production growth. Murphy Oil currently expects to invest between $875 million and $1,025 million in 2023 to further strengthen the business. With proper company cost management initiatives, overall costs and expenses are likely to decrease.

The focus on developing high-margin liquid assets is visible in the production mix. In the second quarter of 2023, the company plans to launch 17 operating wells in the Eagle Ford Shale and further increase production in the region. Thanks to its existing multi-basin assets, the company expects production in 2023 in the range of 175.5-183.5 MBOEPD, of which 55% will be oil.

Headwinds

Murphy Oil’s business operates in a highly competitive environment. It is subject to fluctuations in global commodity prices, political turmoil, rising interest rates, stringent government regulations and unfavorable currency exchange rates.

Stocks to consider

Some companies in the same sector have a better position in the rankings Weatherford International RDOŚ, Archrock AROC i DrilQuip DRQ. Weatherford International is currently sporting a Zacks Rank of #1 (Strong Buy), while Archrock and DrilQuip are currently sporting a Zacks Rank of #2 (Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

The Zacks Consensus Estimate for Weatherford International, Archrock, and DrilQuip projects 2023 earnings per share to be up 466.3%, 110.7%, and 82.1%, respectively.

Weatherford International, Archrock, and DrilQuip have surprised with average earnings of 0.5%, 8.3%, and 119.8%, respectively, over the trailing four quarters.

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