Indian oil firms eyeing Murphy’s assets in Malaysia

India’s oil firms ONGC and Oil India are reportedly interested to buy a stake in Murphy Oil’s assets in Malaysia.

According to Reuters, which quoted sources familiar with the matter, ONGC and Oil India have jointly offered $1.5 billion for a 30 pct share in Murphy’s Malaysian assets. Sources further said that if the bid was successful ONGC would take 20 pct, and Oil India the remaining 10 pct.

Malaysia is Murphy Oil’s main asset base producing more than 40% of the company’s total 2013 net production.

Murphy holds majority interests in seven separate production sharing contracts (PSCs): Block K, Block H, Block P, SK 309, SK 311 and SK 314A, and three gas holding agreements in PM 311. In 2013, Murphy’s Malaysia net production was about 86,000 boepd, and the company booked total proved reserves 125 MMBO and 406 BCF.

Among other suitors interested for the Murphy-owned Malaysian assets, Reuters, citing unnamed sources, lined up Japan’s Mitsubishi, Mitsui and Kuwait Petroleum Corporation.

Profit plunges on high costs

Separately, Murphy Oil today reported its net income was $129.4 million second quarter of 2014, down from $402.6 million in the second quarter 2013.

Adjusted earnings, which exclude both the results of discontinued operations and certain other items that affect comparability of results between periods, in the second quarter of 2014 was $161.7 million.  This was a decrease of $100.0 million ($0.48 per diluted share) compared to the prior year’s quarter.

Adjusted earnings were lower in the 2014 quarter compared to the prior year primarily due to higher exploration expenses, higher extraction costs in Malaysia associated with several new field start ups, lower realized oil and natural gas sales prices for Sarawak production, unfavorable effects in the U.S. from commodity contracts, and higher financing costs.

Realized Sarawak oil and gas prices in the current quarter were unfavorably impacted by larger revenue sharing payments required under the production sharing contracts.

Record production

Murphy, headquartered in El Dorado, Arkansan, said it set a quarterly production record from continuing operations of over 210,000 barrels of oil equivalent per day (boepd), but added the result was 3% below the company’s guidance of 217,000 boepd for the quarter.  Murphy attributed  the shortfall to the global offshore business in Malaysia with lower oil and gas volumes related to a well operational delay on Kikeh field, continued unplanned downtime at a third party methanol plant that processes Kikeh associated gas, a rig mobilization delay at a Sarawak oil platform, and various downtime events at shallow- and deep-water facilities.