Murphy Oil Corp. said Oct. 11 that its wholly owned subsidiary, Murphy Exploration & Production Company – USA, has entered into a definitive agreement to form a new joint venture company with Petrobras America Inc, a subsidiary of Petróleo Brasileiro SA - Petrobras.

The joint venture will be comprised of all of the current producing assets in the Gulf of Mexico for both companies, and excludes exploration blocks with the exception of Petrobras America Inc.'s blocks that hold deep exploration rights. Murphy will own 80% of the joint-venture and Petrobras America Inc. will own 20%. Murphy will oversee operations.

Murphy will pay cash consideration of $900 million to Petrobras America Inc., subject to normal closing adjustments. Additionally, Petrobras America Inc. will earn an additional contingent consideration up to $150 million if certain price and production thresholds are exceeded beginning in 2019 through 2025. Also, Murphy will carry $50 million of Petrobras America Inc. costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken.

The transaction will have an effective date of Oct. 1 and is expected to close by the year's end. Upon closing, Murphy expects to fund the transaction through a combination of cash-on-hand and the company's senior credit facility.

Tudor Pickering Holt & Co. and Gibson Dunn & Crutcher LLP are serving as advisors to Murphy on the joint venture.