Murphy Oil: A Solid Oil Company For 2020 by Fun Trading

Summary

Murphy Oil posted an excellent third quarter of 2019 that beat analysts' expectations.
Murphy Oil owns one of the best upstream assets among domestic oil and natural gas integrated companies and independent E&P group.
MUR is now trading at resistance, in my opinion. I believe it is time to take some profit off and wait for a retracement below $24.

Image: Murphy well pad site just North of Campbellton Source: Pleasanton express.

Investment Thesis

The Arkansas-based Murphy Oil Corp. (MUR) is an independent oil company that I consider with an excellent long-term oil investment potential. It is particularly true for an investor who wants to invest in the oil & gas exploration with assets concentrated in North America, onshore, and offshore (the Gulf of Mexico primarily). As we can see in the chart below:

About 80.4% of the revenue in the third quarter comes from assets in the USA (Eagle Ford) and Canada (Montney) after the recent divestiture of its Malaysian assets for about $2 billion.

Murphy Oil controls one of the best upstream portfolios among the domestic oil & natural gas integrated companies and is present in the Eagle Ford Basin in the US, which produced 51K Boep/d in Q3 with an 80% oil. (from Presentation)

Further, the company is paying a reasonable dividend that contrasts with a few of its peers like Noble Energy (NBL) or even ConocoPhillips (COP). Below is a chart comparison:

The third-quarter results were impressive and beat expectations, as I will show below.

One takeaway is that Murphy Oil produced 191,668 barrels of oil equivalent per day (boep/d) in the third quarter, which includes 114,376 boep/d of oil, which represents 59.7% of the total output (not including Malaysia).

However, for long-term-oriented shareholders who own a position in the stock, it is essential to trade short term an estimated 30% of your holding due to extreme volatility in oil prices. My experience is that trading short-term volatility gives you an edge and increases your profit significantly.

Quick Presentation Of The Company Projects

Murphy Oil's game plan is quite easy to follow. The company's business model looks promising even with oil prices in the $60s. Besides an excellent producing assets portfolio, the company is active in a few different projects:

Offshore Brazil, with the Sergipe-Alagoas Basin project (5 blocks) where the company owns 20% WI, and recently the Potiguar Basin (3 blocks) with 30% WI. And Offshore Vietnam with the Cuu Long Basin (2 blocks) with 40% WI OP. The company is showing adequate proven oil reserves and has increased proved reserves by 17% year over year, to 816 million barrels oil equivalent, with 67% liquids-weighting.

Furthermore, Murphy Oil is not overspending in CapEx with estimated guidance for 2019 of $1.4 billion (midpoint) while maintaining a healthy oil equivalent production.

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