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Analyst Blog

On Dec 6, 2013, we have reiterated our Neutral recommendation on petroleum company Murphy Oil Corporation (MUR - Analyst Report). The company currently has a Zacks Rank #3 (Hold).

Why the Reiteration?

In the third quarter of 2013, Murphy Oil’s earnings per share and revenues missed the Zacks Consensus Estimate. On a year-over-year basis, the company’s top and bottom line were boosted primarily on the back of an improvement in the Exploration and Production and Corporate segments’ performances. In addition, an increase in crude oil production levels at the Eagle Ford Shale also positively impacted the company’s quarterly results.

Murphy Oil is presently taking several initiatives to streamline its existing operations while focusing more on exploration and production activities.

The company had spin-off its U.S. retail marketing division, Murphy Oil USA, Inc. Currently, Murphy Oil USA is trading on the New York Stock Exchange under the name of Murphy USA Inc. (MUSA - Snapshot Report). The spin-off is expected to support both the entities to utilize resources as per their preferences and market conditions.

In addition, Murphy Oil is in the middle of divesting its U.K. downstream business and this process is still continuing in 2013. The transaction will allow the company to focus more on its existing properties while adding prospective assets.

On the flip side, prices of Murphy Oil’s primary products are often quite volatile. An economic slowdown can impact the worldwide demand for energy commodities, resulting in reduction of oil prices, natural gas and refined products. The volatility in commodity prices can considerably affect the company’s operating results.

Other Stocks to Consider

Stocks in the sector that are currently performing well include Abraxas Petroleum Corp. (AXAS - Snapshot Report) and Bonanza Creek Energy, Inc. (BCEI - Snapshot Report), each with a Zacks Rank #1 (Strong Buy).

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