Murphy Oil Corporation announced that its wholly owned subsidiary, Murphy Exploration & Production Company - USA, has entered into a definitive agreement to form a new joint venture company with Petrobras America Inc. (“PAI”), a subsidiary of Petrobras. The joint venture company will be comprised of Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations. The transaction will have an effective date of October 1, 2018 and is expected to close by year-end 2018.
Both companies will contribute all their current producing Gulf of Mexico assets to the joint venture, which will be owned 80 percent by Murphy and 20 percent by PAI. The transaction excludes exploration blocks from both companies, with the exception of PAI’s blocks that hold deep exploration rights. Murphy will pay cash consideration of $900 million to PAI, subject to normal closing adjustments. Additionally, PAI will earn an additional contingent consideration up to $150 million if certain price and production thresholds are exceeded beginning in 2019 through 2025. Also, Murphy will carry $50 million of PAI costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken. Upon closing, Murphy expects to fund the transaction through a combination of cash-on-hand and the company’s senior credit facility.
- Adds approximately 41,000 net barrels of oil equivalent per day to Murphy’s Gulf of Mexico production, of which 97 percent is oil
- Total Murphy Gulf of Mexico production is anticipated to be approximately 60,000 net barrels of oil equivalent per day, post-closing
- Provides high-margin production with Gulf Coast prices and expected lease operating expense of approximately $10 to $12 per barrel of oil equivalent
- Increases Murphy’s corporate oil-weighted production by approximately nine percentage points to 61 percent, post-closing
- Adds approximately 60 million barrels of oil equivalent of Proven (1P) reserves and 86 million barrels of oil equivalent of Proven and Probable (2P) reserves, of which 97% is oil
- Allocating a portion of the incremental free cash flow to increase oil-weighted Eagle Ford Shale production