Murphy Oil to offload Malaysian oil and gas assets to PTTEP in $2.1bn deal

Oil and gas industry news : Murphy Oil has signed a deal to divest its Malaysian assets to Thai state-owned company PTT Exploration and Production‘s subsidiary PTTEP HK Offshore in an all-cash deal worth $2.127 billion.

In this connection, the Arkansas-based oil exploration and production company will sell 100% of Murphy Sabah Oil and Murphy Sarawak Oil, its two primary Malaysian subsidiaries, to PTTEP.

Murphy Oil will also be entitled to a bonus payment of $100 million that will be based on results of certain exploratory drilling activities before October 2020.

As per the deal, PTTEP will buy Murphy Oil’s interests in five exploration and production projects, located in the shallow and deep waters off the Sarawak and Sabah coasts in Malaysia. Included in these are the Sabah K project, the SK309 & SK311 project, the Sabah H project, the SK405B project and also the SK314A project.

The Thai oil and gas company will assume the operatorship role for the producing Sabah K project and the SK309 & SK311 project.

Murphy Oil strikes deal to sell Malaysian oil and gas assets to PTTEP. Photo courtesy of PTT Exploration and Production Plc.

On the other hand, the SK314A and SK405B projects are in exploration phase while the Sabah H project is being developed with first gas from it expected to be drawn in H2 2020.

The divested Malaysian assets’ year-end 2018 proved reserves (1P) were 129 barrels of oil equivalent (Mmboe), which is 16% of its overall proved reserves of 816Mmboe.

Over 48,000 barrels of oil equivalent per day (Boepd) were drawn from the divested assets last year as far as Murphy Oil’s share is concerned, which was made up of 62% of liquids.

Murphy Oil intends to use the proceeds from the divestiture for returning cash to shareholders and strengthening its balance sheet to reduce its debt among other priorities.

Roger W. Jenkins – President and CEO of Murphy Oil said: “After 20 years of successful operations in Malaysia, I am pleased to announce this all-cash transaction benefiting our shareholders by fully monetizing our proved and probable reserves. The tactical repositioning of Murphy allows us to simplify our business and focus on our core assets in the Western Hemisphere. The transaction will provide us with greater financial flexibility and allow us to continue returning cash to our shareholders through share repurchases.”

The deal is expected to be closed by the end of Q2 2019 should it get the required regulatory approvals and meet other preceding conditions.

Phongsthorn Thavisin – PTTEP President and CEO said: “PTTEP will fully cooperate with Murphy Oil Corporation to ensure the smooth transition of operatorship and maintain the best practice of these strategic business.

“About 600 Murphy staff are warmly welcomed to join us and we will carry on our duties in promoting national energy security and delivering long term benefits to Malaysia.”

Apart from the acquisition of Murphy Oil’s Malaysian assets, PTTEP, in a separate development, was awarded exploration and production rights from Petroliam Nasional Berhad (PETRONAS) under the Malaysia 2018 Bidding Round of two exploration blocks in Malaysian waters in the form of PM407 and PM415. The two offshore Malaysian blocks are located in shallow waters off Peninsular Malaysia.