PETALING JAYA: Murphy Oil Corp has signed a sale and purchase agreement to divest the fully issued share capital of its two primary Malaysian subsidiaries, Murphy Sabah Oil Co Ltd and Murphy Sarawak Oil Co Ltd, to a subsidiary of PTT Exploration and Production Public Co Ltd (PTTEP).



In a statement, Murphy Oil said PTTEP will pay Murphy US$2.127bil in an all-cash transaction, payable upon closing and subject to customary closing adjustments, plus up to a US$100mil bonus payment contingent upon certain future exploratory drilling results prior to October 2020.



The transaction has an effective economic valuation date of Jan 1, 2019, with the closing expected to occur by the end of the second quarter 2019. Closing of the transaction is subject to customary conditions precedent including, among other things, necessary regulatory approvals. Under the terms of the transaction, Murphy will exit Malaysia.



Murphy Oil said the year-end 2018 proved reserves (1P) net to Murphy were 816 million barrels of oil equivalent (Mmboe) of which 16 percent or 129 Mmboe were attributable to Malaysia.



“Of the 129 Mmboe of proved reserves, 70 Mmboe are characterised as proved undeveloped. The proved reserves are comprised of 468 billion cubic feet (Bcf) of natural gas and 51 million barrels (Mmbbl) of liquids.



“Total production net to Murphy in 2018 for the properties to be divested was over 48,000 barrel of oil equivalent per day (Boepd), comprised of 62 percent liquids,” it said.



Murphy intends to allocate the proceeds from the transaction to advance its strategic priorities, including returning cash to shareholders through share repurchases and strengthening the company’s balance sheet by reducing debt.



Murphy expects to record a book gain on the sale between US$900mil to US$1bil, and plans to repatriate essentially all of the cash proceeds to the United States.



“After 20 years of successful operations in Malaysia, I am pleased to announce this all-cash transaction benefiting our shareholders by fully monetizing our proved and probable reserves. The tactical repositioning of Murphy allows us to simplify our business and focus on our core assets in the Western Hemisphere.



“The transaction will provide us with greater financial flexibility and allow us to continue returning cash to our shareholders through share repurchases,” president and chief executive officer Roger W. Jenkins said.



“We would like to congratulate PTTEP on their purchase and we will support them in a smooth business transition over the coming months.



“I would like to thank our long-term partners in Malaysia, Petronas, Petronas Carigali and Pertamina. Most importantly, I would like to thank our committed Malaysian staff for their hard work and endless dedication to our company and we look forward to their successful transition to PTTEP,” Jenkins added.



Jefferies is the sole financial adviser to PTTEP on its US$2.127bil acquisition of Murphy Oil’s Malaysian upstream oil and gas business.

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