Murphy Oil Corporation announced that its wholly owned subsidiary, Murphy Exploration & Production Company - USA, has entered into a definitive agreement to form a new joint venture company with Petrobras America (PAI), a subsidiary of Brazil's state-controlled oil company Petroleo Brasileiro SA.
According to the oil and natural gas exploration and production company, the joint venture company will be comprised of Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations. The transaction will have an effective date of October 1, 2018 and is expected to close by year-end 2018.
Both companies will contribute all their current producing Gulf of Mexico assets to the joint venture, which will be owned 80 percent by Murphy and 20 percent by PAI.
The transaction excludes exploration blocks from both companies, with the exception of PAI’s blocks that hold deep exploration rights. Murphy will pay cash consideration of $900 million to PAI, subject to normal closing adjustments.
Additionally, PAI will earn an additional contingent consideration up to $150 million if certain price and production thresholds are exceeded beginning in 2019 through 2025. Also, Murphy will carry $50 million of PAI costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken.
Upon closing, Murphy expects to fund the transaction through a combination of cash-on-hand and the company’s senior credit facility.
Murphy President and Chief Executive Officer Roger W. Jenkins said, “We are very pleased to partner with Petrobras, a global leader in deep water developments, in our new Gulf of Mexico joint venture. We believe the combined strengths of Petrobras and Murphy will yield significant long-term value for both companies."
Roger added: "The addition of high quality, oil-weighted assets, such as the St. Malo Field, complements our existing Gulf of Mexico portfolio. We expect the production from this joint venture to generate meaningful incremental free cash flow that provides us with options for future capital allocation.”
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