How Investors Weigh the Murphy Oil Split

Arkansas Business' Luke Jones had reported throughout the year that Murphy Oil Corp. of El Dorado was considering another spin off, this time eyeing is promising retail gas station operation that's sprung up in Wal-Mart parking lots throughout the country.

Now it's happening. So what's an investor to make of it? It's Murphy Oil more valuable for the move, and is the new Murphy Oil USA Inc. gas station company worth a buy?

Investment pundits already pontificating, citing positive precedents set by Phillips 66 and Marathon Petroleum, both of which made similar moves recently.

And while the spinoff should strengthen Murphy Oil Corp. as a standalone exploration and production firm, the future is more hazy for the new gas station company:

For Murphy Oil shareholders, the spin-off seems like a no-brainer. The firm will be a strong independent E&P firm with some quality assets, especially those in the Eagle Ford shale. Production there continues to be swift , with strong across both dry gas and natural gas liquids. In the first six months of this year, Murphy’s E&P business had net income of $552 million. Not too shabby.

The Murphy USA spin-off, however, might be a little more difficult to value.

The unit currently owns and operates 140 stand-alone retail locations as well as 1,000 mini-service plazas at Wal-Mart (NYSE: WMT) stores. Second-quarter earnings for the segment showed problems in the division as margins and volumes remain depressed.

The second issue is, unlike MPC and PSX, Murphy Oil has no refineries. There’s plenty of pipelines and few terminals to be had, but zero actual crude “crackers.” Investors won’t be getting exactly the same thing that the Conoco and Marathon deals offered.

The new company is set to debut in early 2013.