Murphy Oil was upgraded to Ba2 from Ba3 by Moody’s on an improvement in credit metrics and expectation that production and free cash flow (FCF) will improve further in 2022. The positive expectations come after new projects in the US Gulf of Mexico have come aboard which will help reverse production declines experienced in 2020 and 2021 and also benefit FCFs. Murphy’s management has stated that it is targeting debt reduction of ~$625mn in 2022 and has the optionality for an additional ~$950mn reduction in 2023. They note that Murphy’s strengthening financial profile will bolster its resilience to withstand the negative credit impacts from carbon transition risks. Its liquidity position is supported by funds from operations, cash balances of $521mn at end-2021 and an undrawn $1.6bn unsecured revolving credit facility. Their credit profile is set to help them continue to repay debt in 2022-2023 and improve leverage metrics further.

Murphy’s 6.375% 2028s were up 0.48 points to 103.78, yielding 5.65%.

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