Arkansas Co.'s Oil Well Failure Clouds 2023 Outlook

Source: Leo Mariani 01/04/2024

Murphy Oil Corp.’s Oso well was found to be “noncommercial,” however, it may still be a Buy, noted as Roth MKM report.

Murphy Oil Corp. (MUR:NYSE) announced its Oso exploration well in the Gulf of Mexico was non-commercial, leading to an around US$30 million increase in 4Q 2023 exploration expense guidance, reported Roth MKM analyst Leo Mariani in a January 3 research note.

The increase will be from US$53 million to US$83 million.

Still, Mariani maintained a Buy rating on Murphy Oil with a US$53 price target based on a 3.1x multiple of 2024 discounted after-capital free cash flow.

This target implies an over 20% upside from the current US$43 share price.

“We rate Murphy Oil a Buy on its very high free cash flow yield, growing production in 2024, flattish y/y CapEx in 2024, and increasing returns of capital to shareholders over time,” wrote Mariani. However, they expect a “slight negative reaction vs. peers” to the Oso disappointment.

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Disclosures for Roth MKM, Murphy Oil Corp., January 3, 2024

Regulation Analyst Certification (“Reg AC”): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures: The price target and rating history for Murphy Oil Corp. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC.

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( Companies Mentioned: MUR:NYSE, )