EL DORADO, Ark. -- Following a trend among integrated oil companies such as Marathon and ConocoPhillips, Murphy Oil Corp. may spin off its retail business from its upstream operations this year, president and CEO David Wood said during the company's fourth-quarter 2011 conference call yesterday. It is already selling off its refineries.
"2011 saw some significant achievements for us, as we establish the framework and began executing on our plans to reposition Murphy Oil as an independent E&P company," he said. "We successfully closed on the sale of the two U.S. refineries at the end of the third quarter and are now focused on the disposition of the U.K. refinery. We are also evaluating the potential to separate our retail business and to unlock its value, which we believe is unrealized in the current corporate structure."
Asked if the retail separation is it going to take the form of a spinoff , sale or even an initial public offering (IPO), Wood said, "Those are all things we're looking at right now. And as we go forward, we've got to look at the impact on the corporation, as we are now. All of those things are on the table. ... It's a valuable business; I don't think it's valued within [Murphy Oil]. I'm convinced it's not, so we're going to look at what we should do going forward."
Concerning the time frame for any type of separation, he added, "We're going to talk with our board in the first half of the year, so I would suspect that some time by the middle of the year we would know what we're going to do and what the timeline is."
Murphy USA, a unit of El Dorado, Ark.-based Murphy Oil that operates more than 1,120 retail outlets in 23 states, declined a CSP Daily News request for comment.
Murphy USA's sites are high-volume, low-cost retail outlets, primarily in the parking areas of Wal-Mart Supercenters. It also operates a network of 12 company-owned terminals. These terminals, along with numerous third-party terminals, provide fuel supply to retail and branded wholesale stations.
Murphy Oil announced fourth-quarter 2011 loss of $113.9 million, compared to net income of $174.1 million in fourth-quarter 2010. Its exploration and production operations reported a loss of $139.9 million in the quarter, compared to income of $154.1 million in the same quarter of 2010. The company's refining and marketing business generated a quarterly profit from continuing operations of $61 million in the fourth quarter, compared to a profit of $19.8 million in the 2010 fourth quarter. The company sold its two U.S. refineries and certain associated marketing assets near the end of third-quarter 2011.
The U.S. R&M segment now includes retail marketing operations, two ethanol production facilities and wholesale marketing and trading operations retained after the sale of U.S. refining operations. U.S. R&M continuing operations generated earnings of $50.7 million in fourth-quarter 2011 compared to earnings of $30.1 million in the 2010 quarter.
The earnings increase for this business in 2011 was principally a result of stronger retail marketing margins compared to the prior year. U.S. retail marketing margins averaged 13 cents per gallon in the 2011 quarter compared to 7.4 cents per gallon in the 2010 quarter.
Murphy Oil's E&P operations earned $625.7 million for full-year 2011, compared to $806.9 million in 2010. Its R&M continuing operations generated a profit of $190.3 million in the year of 2011 compared to a profit of $130.6 million in 2010. U.S. profits from continuing operations were $223.6 million in 2011 compared to $165.3 million in 2010. Operating results for the U.S. R&M business improved in 2011 versus the prior year due to better retail marketing margins. Per-gallon margins for retail operations were 15.6 cents in 2011 compared to 11.4 cents in 2010.
Houston-based ConocoPhillips is in the process of spinning off its downstream segment as Phillips 66. "We expect to complete our repositioning into two independent companies in the second quarter of 2012," Jim Mulva, chairman and CEO, said in the company's fourth-quarter 2011 earnings release.
During the earnings call, Jeff Sheets, senior vice president of finance and CFO, added that it could be completed "possibly as early as May."
And Findlay, Ohio-based Marathon Petroleum Corp. completed its separation from Marathon Oil Corp., Houston, in July 2011.
See Related Content below for previous CSP Daily News coverage of oil-company spinoffs.
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