KeyBanc Bullish On Murphy Oil, Cites Dividend Yield And Balance Sheet

Although Murphy Oil Corporation MUR offers above-average dividend yield and has a strong balance sheet and the ability to generate healthy free cash flows, its stock trades at a discount to peers, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Leo Mariani initiated coverage of Murphy Oil with an Overweight rating and a price target of $24.

The Thesis

Murphy Oil gives investors exposure to a large offshore-focused asset base and decently sized onshore acreage in Canada, with high oil cut and its oil commanding premium pricing, Mariani said in the initiation note.

Although this asset base is “currently out of favor with investors,” Murphy Oil would be a defensive play if commodity markets weaken, the analyst mentioned, citing the stock’s low valuation and the company’s solid balance sheet.

He added that, at 5.2%, Murphy Oil offers a dividend yield that is significantly higher than the industry average.

Although there are concerns around the company’s long-term production prospects, there are “significant exploration potential that would increase inventory if success were achieved in Mexico or Brazil,” Mariani wrote.

Moreover, the company has solid liquidity, with $1.6 billion in undrawn revolver capacity and $900 million in cash.

Price Action

Shares of Murphy Oil were up 4.39% to $20.22 at the time of publishing.

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