Murphy Oil Futures: How Spinning Off Retail Could Bring Joy to Shareholders

by Mark Friedman  on Monday, Nov. 26, 2012 12:00 am  

Murphy Oil is spinning off its new retail company, Murphy USA Inc., which includes 1,154 gasoline stations, mainly in the parking lots of Wal-Mart Supercenters. (Photo by Mike Pirnique)

When ConocoPhillips of Houston spun off its gas station division, ConocoPhillips shareholders received one share of Phillips 66 for every two shares of ConocoPhillips shares held. Phillips 66 started trading on April 12 at $33.25 and had improved to $45.34 by Nov. 15.

Meanwhile, ConocoPhillips paid a special dividend of $17.025 per share on May 1, and its stock immediately dropped from the $71 range to about $55. It was trading at $54.59 on Nov. 15.

Shareholders of Marathon Oil also received one share of the new Marathon Petroleum Corp. of Findlay, Ohio, for every two shares of Marathon Oil they owned.

Marathon Petroleum opened on June 24, 2011, at $38.75. It closed at $54.06 on Nov. 15.

Marathon Oil was trading at $49.55 on June 24, 2011, but as a result of the spinoff, the stock price dropped to $32.95 on July 1, 2011. It closed at $30.53 on Nov. 15, 2011.

The Future

The benefits of the Murphy USA spinoff “clearly outweigh the costs in this case,” said Raymond James analyst Molchanov. “The downside is that the retail business does provide relatively a more stable source of cash flow than E&P.”

And the subsidiary acts as a hedge. When oil prices rise, the retail margins fall, he said. “But then the opposite is true when oil prices fall,” Molchanov said.

Other unanswered questions include the future plans of Murphy USA President Tom McKinlay and whether he or someone else will run Murphy Oil USA when it becomes its own company.

“I don’t want to comment on personalities,” Molchanov said.



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