Murphy Oil Corp. (MUR) PT Lowered to $50 at JPMorgan
JPMorgan analyst Arun Jayaram lowered the price target on Murphy Oil Corp. (NYSE: MUR) to $50.00 (from $53.00) while maintaining a Overweight rating.
The analyst comments "JPM View: In a quarter that saw several of MUR’s oil peers (APA, COP, EOG, DVN, and FANG) raising production outlooks within their overall capex guidance ranges, MUR’s operational update didn’t keep up with the Joneses as we reduced our full-year production forecast by -1.1%, including -2.6% for closely watched oil volumes. That said, we were encouraged on the Board’s decision to accelerate the timing of Murphy 3.0, which will result in more support for the stock through higher buyback activity. Given this mixed update, the near-term prospects of the stock largely hinge on the drillbit with all eyes on Vietnam. The 2Q24 update could best be described as a weaker 2H24 offshore operational outlook offset by the formal shift to Murphy 3.0 of its shareholder return plan a couple of quarters faster than expected at strip pricing. MUR guided to 3Q24 volumes of 185.5 MBoe/d, which trailed pre-call JPMe/STe by -4%, including -6%/-9% lower oil volumes (92 MBo/d vs. JPMe/STe of 97.9 and 100.4 MBo/d). The lower 3Q24 oil guide was driven by 9.4 MBoe/d of downtime, including 3.9 MBoe/d risked for GoM storms (expected) and 5.5 MBoe/d of GoM/U.S. onshore downtime (unexpected). MUR’s 2Q24 workover expense of $68mm was in-line with their 2Q24 guide of $65mm, but the company expects to incur $35mm of workover expense in 3Q24, which was essentially in-line with our modeling. MUR does expect 4Q24 volumes to rise by 8 to 9 MBoe/d sequentially, driven by +4 MBoe/d of incremental output at Neidermeyer, +1.6 MBoe/d from Kodiak, +1.5 MBoe/d from Dalmation, less storm downtime, and some uplift from a high-rate completion at Mormont #3 during 4Q. Management also expects for Terra Nova to average 6 MBo/d net to MUR in 2H24 vs. 4.2 MBo/d in 2Q24. On a 3Q24 and 4Q24 basis, we are modeling 186 MBoe/d (92 MBo/d) and 189 MBoe/d (98 MBo/d) for volumes, which would place full-year volumes at 181 MBoe/d (92 MBo/d). MUR's BoD changed the long-term debt assumption from $1.0bn to $1.3bn to commence Murphy 3.0 of its shareholder returns program, which will result in the return of 50% of adjusted FCF to investors on a go forward basis. Management signaled its intention to exceed this minimum hurdle, with the company repurchasing $56mm of stock in 2Q24 and $44mm QTD in 3Q24. The company is still focused on reducing debt below $1.0bn."