Brazil’s state-owned oil company Petrobras has announced the formation of a joint venture with Murphy Oil for their producing oil and gas assets in the Gulf of Mexico.
The agreement has been signed by Petrobras’ subsidiary Petrobras America and Murphy Exploration & Production Company – USA (Murphy), a wholly owned subsidiary of Murphy Oil.
The two companies will contribute their current producing Gulf of Mexico assets to establish the joint venture.
Murphy, with a stake of 80% in the joint venture, will be responsible for overseeing operations of the assets. The Brazilian company will hold the remaining stake.
Murphy president and chief executive officer Roger Jenkins stated, “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. “
The joint venture company will have an estimated average production of nearly 75 thousand barrels of oil equivalent per day in the fourth quarter 2018.
It will consist of both deepwater fields and shallow water fields in the Gulf of Mexico. The deepwater fields include Cascade, Chinook, St. Malo, Lucius and Hadrian North, Cottonwood, and Hadrian, among others.
Jenkins said: “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.”
For the transaction, Petrobras will receive an amount of up to $ 1.1bn, which includes a cash compensation of $900m.
Exploration blocks of both companies are excluded from the transaction, with the exception to Petrobras’ blocks that hold deep exploration rights.
The transaction, which will be effective from 1 October, is expected to be completed by the end of 2018.
Murphy’s Gulf of Mexico production is expected to increase by 41,000 net barrels of oil equivalent per day through the transaction.