Murphy Oil Corporation has entered into a definitive agreement to acquire deepwater Gulf of Mexico assets from LLOG for $1.37 billion.

Murphy said on Tuesday that accretive, cash flow providing Gulf of Mexico assets being acquired currently produce approximately 38,000 barrels of oil equivalent per day net (Boepd) and are expected to add approximately 66 million barrels of oil equivalent net (Mmboe) of Proven (1P) reserves and 122 Mmboe of Proven and Probable (2P) reserves to the company.

Murphy will pay a cash consideration of $1.375 billion. Additional contingent consideration payments are based on the following: up to $200 million in the event that revenue from certain properties exceeds certain contractual thresholds between 2019 and 2022; and $50 million following first oil from certain development projects.

The acquired assets will be fully owned by Murphy and not part of MP Gulf of Mexico, LLC (“MP GOM”), the entity which currently owns all of Murphy’s producing Gulf of Mexico assets.

The transaction adds approximately 32,000 to 35,000 net Boepd on an annualized basis for the full year 2019 to Murphy’s Gulf of Mexico production, comprised of approximately 60 percent oil. Total Murphy Gulf of Mexico full-year annualized 2019 production is anticipated to be approximately 85,000 net Boepd, excluding non-controlling interest, Murphy said.

26 blocks

The acquisition will add 26 Gulf of Mexico blocks to Murphy’s portfolio. The deal covers seven producing fields, four development projects with future start-ups, in the Mississippi Canyon and Green Canyon areas.

The deal expands Murphy’s operated production throughout the Gulf of Mexico to 66 percent of daily production, an increase from the current 49 percent, excluding non-controlling interest. Lease operating expense for acquired assets of approximately $10 to $12 per barrel of oil equivalent.

The acquisition adds approximately 66 Mmboe of Proven (1P) reserves and 122 Mmboe of Proven and Probable (2P) reserves1, of which 72 percent is oil.

“This immediately accretive transaction continues to strengthen our Gulf of Mexico portfolio by adding quality assets at a very attractive price. We expect these newly acquired assets to generate meaningful cash flow over the next several years that will provide us with additional flexibility for future capital allocation,” stated Roger W. Jenkins, President, and Chief Executive Officer.

“Since selling our refining business and successfully spinning-out our retail gasoline business over five years ago, we have implemented significant strategic changes in revamping Murphy’s portfolio. Specifically, over the last few months alone we have increased our deepwater, oil-weighted, tax advantaged, Gulf of Mexico assets while we simplified our company by divesting our Malaysian portfolio, again at a very attractive price. What I am most proud of is that through these transactions we have created significant shareholder value.

“As a result, we have increased our ability to generate meaningfully more cash flow in our long term plan as Murphy is now positioned to grow oil production with an overall compound annual growth rate of seven to nine percent, all while maintaining our compelling dividend, repurchasing our stock, and decreasing our debt levels.”