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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION
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To: Dennis Roth who wrote (101)6/12/2008 10:15:32 AM
From: Dennis Roth   of 111
 
Murphy Oil Corp. (MUR) - Credit Suisse - Underperform - Thursday, June 12, 2008

Lowering Estimates and TP to $93 (from $100) on Faster Kikeh Payout, Exploration Programs Restarting - J. Wolff

· Kikeh Cost Recovery Nearing an End: W ith oil prices nearing $140 per Bbl and averaging $108 per Bbl year-to-date, MUR is quickly approaching the end of the cost recovery phase for investments made within its production sharing contract (PSC) for the Kikeh field (Block K offshore Malaysia, MUR 80% W I). While MUR can recover costs on other Block K projects outside of Kikeh (Kakap, Buntal), such spending is unlikely to be large enough to offset the Kikeh cost barrels being lost to higher prices. In addition, MUR's Kikeh PSC contains a revenue sharing on profit barrels (basically they share 50/50 on oil prices above $36 per barrel with a rolling escalator). Revenue sharing has an increasingly negative impact on realizations as cost recovery nears an end and more barrels are characterized as profit barrels. As a result of higher prices, we are now assuming cost recovery terminates at year-end 2008 and likewise reducing our EPS and net asset value estimates on MUR.

· Reduce EPS Estimates: We are reducing our 2008 EPS estimate by 9% to $9.05 from $9.96 and lowering our 2009 EPS by 28% to $7.50 from $10.39 to reflect lower production volumes (due to accelerated cost recovery) and lower realizations (due to revenue sharing losses on profit barrels). Our cash flow per share estimates fall a respective 7% and 20% for 2008 and 2009.

· Lower NAV and Target Price: Our NAV estimate falls to $103 from $111 due to our revised assumptions on the Kikeh PSC. W e are likewise reducing our target price to $93 from $100, which is based on a 10% NAV discount.

Much more in Full Report - file-62.pdf
bigfileswapper.com
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