Pertamina’s $2 Billion Murphy Deal May Signal Further Purchases

PT Pertamina’s purchase of a stake in Murphy Oil Corp.’s oil and natural gas assets in Malaysia for $2 billion may lead to more overseas deals for Indonesia’s state-owned energy company as it struggles to bolster domestic reserves.

“This could be the start of further steps overseas,” Tony Regan, an energy consultant at Singapore-based Tri-Zen International Inc., said today by phone. “The acquisition may be a realization that they can’t rely on their own resources or on importing LNG.”

More overseas deals would mirror the progress of fellow state-owned oil company Petroliam Nasional Bhd., or Petronas, of Malaysia, said Regan. Petronas has increased output with foreign purchases from Africa to the Americas. With the exception of an Algerian asset bought in 2012, Pertamina’s acquisitions have been within Asia. Petronas has outspent Pertamina by almost four to one, according to data compiled by Bloomberg.

Pertamina earlier this year expanded an agreement to buy liquefied natural gas from Cheniere Energy Inc.’s U.S. project. Company spokesman Ali Mundakir wasn’t immediately available to comment.

Indonesia’s declining oil production and surging domestic demand has led to higher levels of petroleum imports, according to a March report from the U.S. Energy Information Administration. Energy consumption in Indonesia, formerly a net oil exporter in the Organization of Petroleum Exporting Countries, grew 44 percent between 2002 and 2012, the study found.

First Phase

The first phase of Pertamina’s acquisition is expected to be completed this year and the second in the first quarter of 2015, the El Dorado, Arkansas-based Murphy said yesterday in a statement. Murphy, which entered Malaysia in 1999, will remain operator of the assets.

Proceeds from the sale may be used for drilling in the oil-rich Eagle Ford Shale area of Texas, acquisitions, debt reduction and share buybacks, Roger Jenkins, chief executive officer of Murphy, said in the statement. The company wants to complement its riskier offshore oil and gas businesses by developing onshore fields in North America, according to its website.

“The sales price is on the upper end of our expectations,” said Roger Read, a Houston-based analyst for Wells Fargo Securities. He rates the shares a buy and owns none. “A high percentage of these proceeds can be redeployed toward positive growth opportunities and other shareholder friendly efforts.”

The deal is subject to approval from Petronas, Murphy spokesman Barry Jeffery said in an e-mail. Petronas is both a partner in the Murphy assets and oversees Malaysia’s oil reserves.

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