Murphy Oil (NYSE:MUR) is one of a dwindling number of integrated oil and gas companies left in the United States and still operates a refining and marketing operation here and in Europe.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
Murphy Oil is struggling to make this business profitable and reported a net loss of $4.2 million in the refining and marketing segment in the first quarter of 2012. The company has been rationalizing this business over the past two years and has started to divest underperforming assets in this business.
The company sold its two refineries in the U.S. in the third quarter of 2011 and is looking for a buyer of its downstream operations in the United Kingdom. It sold the 125,000 barrel per day refinery in Meraux, Louisiana to Valero (NYSE:VLO) for $585 million, and the 45,000 barrel per day refinery in Superior, Wisconsin, for $442 million to Calumet Specialty Products Partners (Nasdaq:CLMT). The acquirers also received substantial inventories of oil associated with both refineries.
SEE: Oil And Gas Industry Primer
Murphy Oil entered the marketing business in 1996 and operates more than 1,100 retail marketing outlets in 23 states. The company is growing this business and plans to have 1,175 outlets by the end of 2012. It sells merchandise as well as gasoline at these locations. In 2011, reported merchandise sales was $2.2 billion, up 10% from 2010. The growth came from increased sales of cigarettes, beverages and beer.
The company is closely associated with Wal-Mart (NYSE:WMT) in this business and has hundreds of its outlets located in Wal-Mart Supercenters across its footprint. It is planning to leverage this part of its footprint with larger size locations to increase sales.
It reported EBITDA of $363 million from its U.S. Retail operations in 2011, up sharply from $156 million in 2006. The average store in its network generated EBITDA of $333,000 in 2011.
SEE: What Determines Oil Prices?
Murphy Oil competes against large national chains owned by some of the largest oil and gas companies in the U.S. The company also goes up against smaller companies that operate only in the retail segment.
Susser Holdings Corporation (Nasdaq:SUSS) has 541 retail locations spread across several states in the Southwestern region of the U.S. The company expects to open between 25 and 30 stores in 2012 and generates approximately two thirds of its gross profit from the sale of non-fuel items at these locations.
Casey's General Store (Nasdaq:CASY) is also involved in retail marketing in the U.S. and has 1,686 locations as of Jan. 31, 2012. The company's goal is to increase its store base by 4 to 6% annually.
SEE: A Guide To Investing In Oil Markets
The Bottom Line
Murphy Oil is correctly rationalizing its non-upstream businesses and has embarked on a series of divestitures of non-core assets here. The company plans to grow its U.S. retail marketing business due to the high returns generated here.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
Chart AdvisorRare earth metals are used in many of today's products and many investors are wondering if consumer demand is enough to offset the global economic slowdown. We'll take a look at how they are ...
Stock AnalysisJ.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
Stock AnalysisWal-Mart is the largest company in the world, with a sterling track-record of profits and dividends. So why has its stock fallen sharply in 2015?
Stock AnalysisA summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
Investing BasicsHeld onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
InvestingThe Black Friday creep may have hit a wall as some stores are shutting their doors on Thanksgiving and even Black Friday to give employees the day off.
EconomicsWill remaining calm and staying long present significant risks to your investment health?
Stock AnalysisIs DKS a bargain here?
Investing NewsA third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>