MUR – Base Case CDS 298bps, Base Case iCDS 122bps, Negative Case iCDS 170bps, 2027 5.875% Bond YTW of 6.440%, iYTW of 4.880%, Ba2 Rating from S&P, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
December 21, 2022
- Credit markets are materially overstating MUR’s credit risk with a YTW of 6.440% and a CDS of 298bps, relative to an Intrinsic YTW of 4.880% and an Intrinsic CDS of 122bps. Furthermore, Moody’s is overstating MUR’s fundamental credit risk with its highly speculative Ba2 credit rating three notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. MUR’s compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. Moreover, most management members are material owners of MUR equity relative to their average annual compensation, indicating that they are well-aligned with shareholders to pursue long-term value creation for the company.
- Earnings Call Forensics™ of MUR’s Q3 2022 call highlights that management is confident they will see strong performance and production from their offshore business in the near-term and that they will begin drilling at two operated wells in the fourth quarter. Moreover, they are confident Occidental has been a great partner in the Gulf of Mexico and that there has been positive progress made with Occidental at the Lucius well.
