Separate Murphy Entities Allow Tight Focus for Both

by Luke Jones  on Monday, Sep. 23, 2013 12:00 am  

It’s been a pivotal year for El Dorado’s Murphy Oil Corp. The company — which in 2012 had revenue of $28.6 billion and income of $970 million — after many months of planning and pressure from investors, finally spun off its retail arm into a separate, publicly traded company.

Here’s a rundown of what happened on Aug. 30 when the spinoff, Murphy Oil USA Inc., was created:

  • The new company was listed on the New York Stock Exchange under the symbol MUSA.
  • Shareholders in Murphy Oil as of Aug. 21 received one Murphy USA share for every four Murphy Oil shares they owned.
  • Murphy Oil CEO Steven Cossé retired and was replaced by Roger Jenkins, whose succession was announced previously.

The company was tossing around the possibility of a spinoff since at least January 2012, when former CEO David Wood said he was discussing it with the company's board.

Before the spinoff, Murphy USA was generating about half of Murphy Oil’s revenue.

So how have the two companies fared since?

Pretty well, according to Fadel Gheit, a managing director and senior analyst at Oppenheimer & Co. Inc. in New York.

Gheit said he’s recommending stock in both Murphy companies. The spinoff, he said, has so far created the promised shareholder value.

“So investors’ long wait was worth it,” he said. “It’s a unique business model. The fact that they are in Walmart parking lots is a very unique feature and gives them a competitive advantage.”

That’s high praise from Gheit. Last year he told Arkansas Business that Murphy’s exploration sector wasn’t showing promise — something Jenkins has recently admitted — and that its refinery business was costing too much.

Now, he’s saying the spinoff should strengthen both companies.

“I think both will be more successful because they are more focused,” he said. “They will basically do what is best for the individual company.”

One strength, he noted, is that Murphy USA won’t have to worry about refining. Some other fuel industry spinoffs, such as Marathon Petroleum Co., wrapped the refining segment into the retail business. Murphy Oil held onto its refineries in the spinoff, but it has been attempting to exit that business for at least two years.

Murphy USA, then, won’t have to worry about that issue and can instead focus entirely on sales and marketing.

Not all analysts are as positive as Gheit. Zacks Investment Research rates Murphy Oil stock as “hold,” lauding the spinoff but warning investors about the volatility of prices on fuel products.


Murphy USA, Gheit said, will be able to grow much faster than it could as part of Murphy Oil, but the retail network was growing anyway.

A spokeswoman for Murphy USA said the company has 1,179 retail stores across the country as of June 30. That’s 25 more than in December, when the company announced a plan to add 200 more stations at Wal-Mart stores.

The company broke ground for a new “flagship” store in El Dorado on Sept. 9.

Also, in May, Clyde told shareholders that the company was working on adding 40 new Murphy Express locations, which are stand-alone fueling stations not connected to Wal-Mart stores.

The spokeswoman declined to comment on the progress of both of these expansion plans.

Murphy Oil’s stock value has crept up through the summer. It had a low of $45.57 in April and is trading above $62 last week.

Murphy USA stocks closed at $37.51 at the end of the first day of trading after Labor Day. The stock initially fell to a low of $36.12, but has since climbed above $40.



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