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Murphy Oil's Focus on High-Margin Liquid Assets Bodes Well

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Murphy Oil Corporation’s (MUR - Free Report) stable financial position, cost-saving initiatives and low-cost asset development are expected to boost its performance.

For 2019, earnings estimates moved up 23.5% to $1.05 per share in the past 30 days. Additionally, the company delivered an average four-quarter positive earnings surprise of 37.39%.

Year to date, shares of the company have returned 3.9% against the industry’s decline of 22.2%.



What’s Driving the Stock?

Murphy Oil possesses one of the best upstream portfolios among domestic oil and natural gas integrated companies and independent E&P group. The company is pursuing steady E&P and development activities in the United States and other international locations.

Murphy Oil projects 2019 capital expenditure in the range of $1.35-$1.45 billion and production in the band of 174-178 thousand barrels of oil equivalent per day (MBOEPD). In the first nine months ended Sep 30, 2019, the company’s capital expenditures amounted to $2,329.1 million, up from $803.4 million in the year-ago period. Increased capital expenditure reflects higher development drilling activities.

The company has a long history of boosting shareholders’ value, courtesy of steady cash flows. In the past 10 years, Murphy Oil returned $4.4 billion to its shareholders through buybacks and dividend payouts. The company’s consistent performance enabled it to reward shareholders through regular dividend payouts.

Murphy Oil’s focus to develop high-margin liquid assets is evident from the production mix. Of the expected total production in 2019, liquids will be 67%. The company is expected to benefit from higher volumes in the Gulf of Mexico, due to the acquisition of assets related to the MP GOM transaction and the LLOG acquisition as well as from pricing and diversification strategy, going forward.

However, the company’s businesses operate in highly competitive environments, which is likely to affect its profitability and hinder future developments. Since Murphy Oil has operations outside the United States, it is subject to changes in foreign currency conversion rates. This may dent earnings from these oilfields.

Zacks Rank & VGM Score

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Murphy Oil has an impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with a favorable VGM Score of A or B coupled with a bullish Zacks Rank are the best investment options.

Stocks to Consider

Some better-ranked stocks from the same sector are World Fuel Services Corporation , Murphy USA Inc (MUSA - Free Report) and Halcon Resources Corporation . All the three stocks hold a Zacks Rank #2 (Buy).

Long-term earnings growth of World Fuel Services, Murphy USA and Halcon Resources is pegged at 5%, 4% and 20.57%, respectively.

World Fuel Services, Murphy USA and Halcon Resources delivered an average positive earnings surprise of 16.2%,  29.86% and 54.38% in the last four quarters, respectively.

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