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

U.S. Retail
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.

Related Articles
  1. Stock Analysis

    Starbucks: Profiting One Cup at a Time (SBUX)

    Starbucks is everywhere. But is it a worthwhile business? Ask the shareholders who've made it one of the world's most successful companies.
  2. Stock Analysis

    How Medtronic Makes Money (MDT)

    Here's the story of an American medical device firm that covers almost every segment in medicine and recently moved to Ireland to pay less in taxes.
  3. Stock Analysis

    3 Volatile U.S. Industries to Exploit in 2016 (VRX, IBB)

    Read about volatile sectors in the stock market that may provide opportunities for investors in 2016, including energy, mining and biotechnology.
  4. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  5. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  6. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  7. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  8. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  9. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  10. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    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 >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    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 >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center