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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION

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To: Dennis Roth who wrote (25)	10/26/2007 8:47:12 AM
From: Dennis Roth	Read Replies (1) of 111

Murphy Oil Corp. (MUR): Growth on-track, exploration heating up, reiterate Buy - Goldman Sachs - 10/25/07 What's changed Murphy Oil reported 3Q 2007 EPS of $1.04, which was ahead of the $0.96 First Call consensus forecast and our $0.85 estimate. The key driver of the positive variance was higher-than-forecast R&M earnings. We have updated our 2007-2012 EPS estimates and raised our 12-month target price to $86 from $81 to reflect risked potential from Malaysia/Brunei Block L. Implications We were encouraged with Murphy’s 3Q 2007 earnings report and progress update. The large Kikeh field in deepwater Malaysia appears to be ramping up as expected and positions the company well to achieve the 40%+ E&P volume growth we expect for 2008. In addition, the company has resumed its high-impact exploration program with the Robusto well currently drilling in the deepwater Gulf of Mexico and the first of two wells on Block H in deepwater Malaysia about to begin. Given our bullish commodity outlook, we see Murphy’s strong production growth, exploration optionality, and downstream restructuring potential (see previous notes) as supportive of our continued Buy rating on its shares. Valuation Our new $86 ($81 before) 12-month target price (based on asset value, cash flow and P/E valuation analyses) now includes a $5 per share risked component for the disputed but highly prospective Block L in deepwater Malaysia. While there is no certainty on when the border dispute between Malaysia and Brunei will be settled, recent press reports indicate resolution may be near; we note that Murphy management has not made any comments on the timing of Block L resolution. Key risks Key risks include sustained lower commodity prices or meaningful shortfalls in its E&P volume growth plans.

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