On May 16, we have issued an updated research report on Murphy Oil Corporation (NYSE: MUR). The oil and gas company continues with its systematic investments in exploration and production activities besides streamlining existing operations. However, volatile commodity prices and stringent drilling regulations might challenge the company's future performance.
Murphy Oil, a Zacks Rank #3 (Hold) stock, reported mixed result in the first quarter of 2014. Quarterly earnings were in line with the Zacks Consensus Estimate and decreased from the year-ago figure, primarily due to higher exploration and depreciation expenses. On the other side, the company's revenues surpassed the estimates.
We view Murphy Oil as an organization, which has reserves across different mineral rich regions. The company strongly pursues a steady exploration and production program. During first-quarter 2014, Murphy Oil spent $0.89 billion as capital expenditure. In addition to expanding operations in the Eagle Ford Shale area, in the deepwater Gulf of Mexico, Malaysia and Canada, the company is also entering into new regions like Namibia in West Africa. These initiatives will enable the company to improve its future reserves.
Murphy Oil is currently in the middle of an asset streamline program. After spinning-off its U.S. retail marketing division and selling its U.K.-based oil and gas assets, the company plans to sale the U.K. refining and marketing businesses. These initiatives will enable Murphy Oil to utilize resources as per its preferences.
In addition to following the aforesaid strategies, Murphy Oil also follows an effective share repurchase program and maintains a steady dividend payment record. On May 14, 2014, the board of directors of the company approved a share repurchase program worth up to $125 million. Moreover, the company distributed $56.1 million during first-quarter 2014 to its shareholders as dividend.
On the flip side, the prices of Murphy Oil's primary products, including oil, natural gas and refined products, are often quite volatile. An economic slowdown can impact the worldwide demand for energy commodities, resulting in commodity price reductions. The volatility in commodity prices can significantly affect the company's results.
Key Picks from the Sector
Some better-ranked stocks in the oil and gas sector include Athlon Energy Inc. (NYSE: ATHL), Encana Corporation (NYSE: ECA) and Marathon Oil Corporation (NYSE: MRO). Athlon Energy and Encana hold a Zacks Rank #1 (Strong Buy), while Marathon Oil carries a Zacks Rank #2 (Buy).
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