Murphy Oil Corp. has agreed to acquire from LLOG Exploration Offshore LLC and LLOG Bluewater Holdings LLC assets in 26 Gulf of Mexico blocks containing seven producing fields and four development projects with future start-ups in the Mississippi Canyon and Green Canyon areas for $1.375 billion cash.
Murphy Exploration & Production Co. USA signed a definitive agreement for the deepwater assets, to be owned by Murphy and not part of MP Gulf of Mexico LOC, the entity which currently owns Murphy’s producing Gulf of Mexico assets. Adding 32,000-35,000 net boed on an annualized basis for full year 2019 to Murphy’s Gulf of Mexico production (60% oil), Murphy expects the company’s total Gulf of Mexico full year annualized 2019 production to be 85,000 net boed, excluding non-controlling interest. The deal expands operated production throughout the Gulf of Mexico to 66% of daily production from the current 49%, excluding non-controlling interest. Lease operating expense for the acquired assets is expected to be $10-$12/boe.
The deal includes additional contingent consideration payments based on the following: up to $200 million in the event that revenue from certain properties exceeds certain contractual thresholds between 2019 and 2022; and $50 million following first oil from certain development projects.
Murphy will use a combination of cash on hand and availability under its $1.6 billion revolving credit facility to fund the deal. Total outstanding borrowings under the revolving credit facility are expected to be repaid following closing of the company’s $2.127 billion divestiture of its Malaysian assets (OGJ Online, Mar. 21, 2019).
Since selling its refining business and spinning-out its retail gasoline business, said Roger W. Jenkins, Murphy president and chief executive officer in a press statement, the company has “implemented significant strategic changes in revamping Murphy’s portfolio,” specifically increasing its deepwater, oil-weighted, tax advantaged, Gulf of Mexico assets.
The company is positioned to “grow oil production with an overall compound annual growth rate of seven to nine percent, all while maintaining our compelling dividend, repurchasing our stock, and decreasing our debt levels,” he said.
Subject to closing adjustments, the deal will have an effective date of Jan. 1 and is expected to close in this year’s second quarter.