After closely tracking its industry over the past several years, shares of Murphy Oil (NYSE: MUR) have weakened lately, underperforming the energy sector throughout 2011.

The reasons aren't hard to identify. Murphy's ambitious exploration and development group -- the Arkansas company's flagship operation and principal growth driver -- recently reported disappointing preliminary test-drilling results at South American fields previously considered to have potential. And executives have warned that second-quarter profits won't meet forecasts, because Murphy's daily oil production -- hampered by a variety of transient factors -- has come up a bit short. Meanwhile, a plan to tighten the company's focus by selling off its refining assets, originally announced last summer, has dragged on months longer than expected (there's a lot of refineries on the market just now), and the delay is making stockholders uneasy.

That explains why, despite an oil-price run-up that has carried most energy stocks to near-top-of-the-cycle levels, Murphy shares remain reasonably priced. The question for value-oriented investors is whether the issues weighing down Murphy shares are just passing problems that make Murphy an economical entry point into a high-priced sector. Historically, Murphy's multiple has been more volatile than the PEs of super-major rivals like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX), and a bit more sensitive to oil-price movements.

Because of its modest size, Murphy isn't always a straight bet on oil prices the way the giants often are: with less than one-thirtieth the market cap of industry colossus ExxonMobil, Murphy is still small enough to see profits surge meaningfully when a major oilfield discovery comes on line. Or vice versa if a field turns up only dry holes, of course, though it's worth noting that Murphy's exploration group has long enjoyed a strong reputation.

YCharts Pro rates Murphy shares "attractive," based on the company's solid fundamentals and conservative balance sheet. Murphy remains a solid global player, with an attractive portfolio of promising projects in Malaysia, West Africa, western Canada, the Gulf of Mexico and the continental U.S. Also, though the company is shedding its downstream refining operations, Murphy is retaining its large and fast-growing U.S. retail operation. (Under an arrangement with Wal-Mart, it is locating many of its discount Murphy USA brand gas stations in Wal-Mart parking lots, gaining instant access to high-volume, low-margin sales.)

With only modest debt, (and despite an admittedly unimpressive free cash flow) the company's in good shape to pursue its ambitious expansion plans, which call for Murphy to boost current daily output 50% by 2015.

The truth is, few people seem to doubt there's significant upside in Murphy's long-term future. Wall Street just seems to be waiting for more clarity on questions like how much longer post-BP-oil-spill regulatory restrictions will hinder Murphy's Gulf drilling, or just how extensive the promising strike in Kurdistan will prove to be. S&P meanwhile, fretting the refinery sale will increase exposure to oil-price swings, is reviewing Murphy debt for possible downgrade.

Not everybody's gone to the sidelines: Oilman T. Boone Pickens' BP Capital Management energy investing group almost quadrupled its Murphy holding early this year, going from 48,561 shares at year-end to 186,400 at March 31. We imagine Pickens is focused more on Murphy's growth potential than on its modest 1.6 percent dividend yield.

Value investors -- those who don't mind riding out a bit of occasional turbulence, anyway -- may want to take a closer look at Murphy.

James P. Miller is an editor for the YCharts Pro Investor Service.

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