Murphy Oil Shares Plummet on Barclays Downgrade: Is the Stock a Buy or Sell?

Murphy Oil Corporation (NYSE:MUR) saw its stock price drop sharply in early 2025, falling 31.96% year-to-date to close at $20.59 by late March. The decline accelerated after Barclays downgraded the company to “Underweight” from “Equal Weight” in late April, reducing its price target to $24 from $32. This decision, rooted in concerns over operational challenges and the company’s high oil price breakeven point, has sparked debate among investors about whether the stock is a contrarian opportunity or a risky bet in a volatile energy sector.

Why Did Barclays Downgrade Murphy Oil?

Barclays cited two primary factors in its decision:
1. High Breakeven Oil Price: Murphy Oil requires a $60 per barrel (bbl) WTI crude price to cover its capital expenditures (capex), the highest breakeven point among companies in Barclays’ coverage universe. This makes the firm uniquely vulnerable to falling oil prices.
2. Operational Struggles: Persistent unplanned downtime has exceeded lowered expectations, depressing production volumes and raising cash costs. Barclays noted these issues could worsen as oil prices weaken, with its revised WTI price forecast of $60–$65/bbl for 2025–2026 compounding financial pressures.

The downgrade also reflects broader sector headwinds, including $57.50/bbl Brent crude price forecasts by Redburn Atlantic due to oversupply and weak demand. Barclays emphasized that Murphy’s “high breakeven and operational underperformance” place it at heightened risk compared to peers.

How Does Murphy Oil Respond to These Challenges?

Despite the downgrade, Murphy Oil has taken steps to stabilize its position:
- Strategic Acquisitions: In early 2025, the company acquired the BW Pioneer FPSO for $125 million, expanding its offshore production capacity in the Gulf of Mexico. This move aligns with its long-term growth strategy, though it requires significant capital outlays.
- Dividend Stability: The company maintained its quarterly dividend of $0.325/share, signaling confidence in cash flow stability.
- Analyst Optimism: While Barclays turned cautious, a median price target of $35.50 from 13 analysts (implying a 70% upside from $20.59) suggests lingering faith in Murphy’s fundamentals. Piper Sandler even raised its target to $35, citing its strong balance sheet and low-cost inventory.

The Broader Market Context

Murphy’s struggles are not isolated. The energy sector faced headwinds in early 2025, with the Nasdaq Composite dropping nearly 3.1% amid inflation fears and Federal Reserve policy uncertainty. Oil prices themselves were under pressure, with WTI averaging $62–$64/bbl in Q1—a level Barclays now sees as the new norm.

However, long-term bullish arguments persist:
- Undervaluation: Murphy Oil trades at a 52.7% discount to its estimated fair value (per Snowflake’s model), suggesting investors may be overreacting to short-term risks.
- Institutional Buying: Three insiders purchased $2.93 million worth of shares in Q1 at an average price of $25.30, indicating confidence in the stock’s undervalued status.

What’s Next for Murphy Oil Investors?

The company’s Q1 2025 earnings report, released on May 7, will be critical. Analysts will scrutinize:
- Cost Management: Whether unplanned downtime has been resolved and cash costs are under control.
- Production Metrics: Results from the BW Pioneer acquisition and Gulf of Mexico operations.
- Debt Levels: The impact of capital expenditures on leverage ratios, with 2025 guidance at $1.135–$1.285 billion.

Conclusion: Buy, Sell, or Hold?

Murphy Oil’s stock faces near-term risks, including its high breakeven oil price, operational setbacks, and a sector-wide downturn. Barclays’ downgrade underscores these concerns, and the stock’s YTD decline reflects investor pessimism.

However, the $35.50 median price target, insider buying, and strategic moves like the BW Pioneer acquisition suggest long-term value. If oil prices stabilize above $60/bbl and Murphy’s operations improve, the stock could rebound sharply.

For investors:
- Bulls should focus on the 52.7% undervaluation discount, dividend stability, and mid-cap agility.
- Bears must monitor oil price forecasts and earnings execution.

The verdict? Murphy Oil presents a high-risk, high-reward opportunity. Those willing to bet on a rebound in oil prices and operational turnarounds may find value at current levels, but the path to recovery hinges on external factors beyond the company’s control.