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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (96)	6/9/2008 11:48:58 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 111

Murphy Oil Corp. (MUR) Buy: Adding Murphy Oil to Americas Buy List - Goldman Sachs - June 09, 2008 Source of opportunity We are adding Murphy Oil to the Americas Buy List, with 24% total return upside potential to our revised $115 ($105 before) 12-month target price; the shares were previously Neutral rated. We believe Murphy shares will be major beneficiaries of our bullish crude oil view, as the company is also in the midst of a major E&P volume ramp-up at the Kikeh field in deepwater Malaysia. Finally, a revamped exploration program that is just kicking off provides additional upside optionality. We have updated our 2008-2012 EPS estimate for Murphy. Catalyst Key catalysts include: (1) rising consensus EPS revisions, as the Street raises its oil price outlook; (2) continued successful ramp-up at the Kikeh field and execution of other development projects (e.g., Horn River Basin, Sarawak gas); (3) exploration drilling news starting with the important Buntal prospect on Block K in deepwater Malaysia (news likely in July). Valuation Murphy shares trade at 5.8X 2009E EV/DACF, essentially in line with its domestic integrated oil peers, despite having far superior growth over the next few years and competitive ROCE. Our $115 12-month target price corresponds to a 7.1X 2009E EV/DACF valuation and is based on the combination of asset value, cash flow and P/E valuation analyses incorporating our base-case WTI spot crude oil price deck of $108, $110, $120, $120, and $75 per barrel for 2008-2012 normalized, respectively. Notably, using current 5-year strip commodity prices into perpetuity results in a potential upside valuation of ~$180 for Murphy. Key risks Key risks include sustained lower oil prices, reservoir problems at Kikeh, and unsuccessful exploration.