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Wells Fargo has adjusted its outlook on Murphy Oil Corp . (NYSE: NYSE:MUR), reducing the company's price target to $41 from the previous $47, while keeping an Equal Weight rating on the stock.
The move comes as Murphy Oil revises its Shareholder Returns Framework, entering into what it calls "MUR 3.0." This new phase allows the company to increase its long-term debt threshold from less than $1.0 billion to less than $1.3 billion.
The Board of Directors' revision to the framework means that at least 50% of Murphy Oil's adjusted free cash flow will now be dedicated to share buybacks and dividends. The remaining portion will be allocated to the balance sheet.
Murphy Oil reaffirmed its commitment to attaining $1 billion of long-term debt and maintaining a steadily increasing dividend, emphasizing the buyback focus under MUR 3.0. The company also targets maintaining a cash balance of approximately $325-350 million.
In addition to financial restructuring, Murphy Oil provided an update on its exploration activities. The company has a $120 million exploration budget for 2024, which includes drilling two wells in the Gulf of Mexico in the second quarter and another two in Vietnam during the third and fourth quarters. The estimated total net well cost for its Vietnam exploration program has been revised down to $30 million from the earlier estimate of $40 million.
Murphy Oil continues to target significant gross resource potentials, aiming for 170-430 million barrels of oil equivalent (Mmboe) in the Lower Tertiary horizon and 65-135 Mmboe in other areas. The company is on track for its first oil production in 2026. Additionally, for its offshore operations in Côte d'Ivoire, plans are set to submit a field development plan by the end of 2025, which remains unchanged quarter over quarter.
In other recent news, JPMorgan downgraded Murphy Oil's stock from Overweight to Neutral, reducing the price target to $47 from $50. The decision was influenced by factors such as near-record U.S. oil supply levels and a mixed macroeconomic environment.
Furthermore, Murphy Oil was the only company in JPMorgan's coverage to lower its fiscal year 2024 oil production guidance, with a modest 1% decrease at unchanged capital expenditure.
JPMorgan also revised its price target for Murphy Oil, lowering it to $50.00 while maintaining an Overweight rating. This followed an operational update revealing a slight decrease in production forecasts. Despite this, the advancement of the Murphy 3.0 initiative was noted, which is expected to increase share buyback activities.
In the second quarter of 2024, Murphy Oil exceeded its production guidance, reporting a net income of $128 million and adjusted EBITDA of $396 million. The company also advanced key projects, including its Lac Da Vang field development in Vietnam and a new discovery in the Gulf of Mexico.
InvestingPro Insights
Wells Fargo's recent revision of Murphy Oil Corp.'s price target coincides with significant data points that InvestingPro users have at their fingertips. Murphy Oil's commitment to shareholder returns is underscored by a high shareholder yield, one of the InvestingPro Tips that reflects the company's focus on buybacks and dividends. This aligns with the company's latest strategic moves under the MUR 3.0 framework.
InvestingPro Data indicates that Murphy Oil has a market capitalization of $5.6 billion and a P/E ratio of 9.78, which suggests a valuation that may attract investors looking for potentially undervalued stocks. Moreover, the company's dividend yield stands at 3.21%, a testament to its 54-year track record of consistent dividend payments, another InvestingPro Tip that may be particularly appealing to income-focused investors.
For those considering Murphy Oil as an investment opportunity, InvestingPro offers additional insights, including a total of 10 InvestingPro Tips for a more comprehensive analysis. These tips, along with real-time metrics such as the company's revenue growth and profitability projections, are available on the InvestingPro platform: https://www.investing.com/pro/MUR.
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