Petrobras and Murphy Sign Exploration Agreement in the Gulf of Mexico

The American Oil Company Murphy Oil Announced It Will Form A Joint Venture With Petrobras America, A U.S. Subsidiary Of Petrobras

Petrobras and Murphy signed a definitive agreement to create a joint company composed of all the assets of both companies in the Gulf of Mexico. Murphy will be overseeing operations. The joint venture will be 80% owned by Murphy and 20% by Petrobras. Murphy stated that the transaction would add approximately 41,000 barrels of liquid equivalent oil per day to Murphy’s production in the Gulf of Mexico, of which 97% is oil.

The JV is expected to have an estimated average production of approximately 75,000 barrels of oil equivalent per day in the fourth quarter of 2018 and, according to Petrobras, will have the following assets:

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Deepwater Fields: Cascata, Chinook, St. Malo, Lucius and Hadrian North, Cottonwood, Hadrian South, Dalmatian, Front Runner, Clipper, Habanero, Kodiak, Medusa and Thunder Hawk.

Shallow Water Fields: South Marsh Island, 280, Garden Banks, 200/201 and Tahoe.

The transaction does not cover the exploration blocks of both companies, except for the Petrobras blocks that hold deep exploration rights.

Murphy will pay US $900 million in cash to Petrobras, subject to normal closing adjustments. In addition, Petrobras will receive additional contingent compensation of up to US $150 million if certain price and production thresholds are exceeded from 2019 to 2025.

Additionally, Murphy will carry US $50 million of Petrobras’s costs in the St. Malo Field if certain oil recovery projects are undertaken. Following the closing, Murphy expects to finance the transaction through a combination of cash on hand and the company’s senior credit line.

Murphy’s President and CEO, Roger W. Jenkins, stated: “We are very pleased to partner with Petrobras, a global leader in deepwater projects, in our new joint venture in the Gulf of Mexico. We believe that the combined strengths of Petrobras and Murphy will yield significant long-term value for both companies. The addition of high-quality, oil-weighted assets such as the St. Malo Field complements our existing portfolio in the Gulf of Mexico. We expect that the production from this joint venture will generate meaningful and incremental free cash flow that will provide us with options for future capital allocation.”