On Wednesday, Barclays (LON:BARC) initiated coverage on Murphy Oil Corporation (NYSE:MUR), assigning the stock an Equalweight rating and establishing a price target of $54. The firm recognized Murphy Oil's distinctive focus on offshore exploration and development as a key element of its business model.
The company's portfolio is nearly half invested in offshore ventures, primarily in the Gulf of Mexico, with additional investments in Canadian dry gas and Eagle Ford (NYSE:F) assets, offering a diversified range of geographical locations and types of resources.
Murphy Oil's current operations span conventional and unconventional assets, and the firm is at the beginning of a significant offshore development and exploration program in Vietnam. This initiative is anticipated to elevate Murphy Oil's oil and total production to levels not seen since 2015 within the next four years.
Despite these prospects for growth, Barclays noted that the scale of Murphy Oil's operations in each of its global operating regions is considered sub-scale.
The company's offshore assets, as of the end of 2023, have a reserve life of approximately five years, based on proven reserves of around 160 million barrels of oil equivalent, excluding a recent booking from the Lac Da Vang field. Barclays suggested that Murphy Oil has the potential to extend its resource life through exploitation and the strategic acquisition of offshore assets.
Barclays highlighted the importance of solid execution on existing assets and success in development and exploration, particularly in Vietnam, to de-risk the company's strategy.
The $54 price target set by Barclays is derived from a blended target multiple, applying 4.5 times the estimated 2025 enterprise value to EBITDAX (earnings before interest, taxes, depreciation, amortization, and exploration expenses) and 1 times the net asset value.
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