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. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  4. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  5. Professionals

    What to do During a Market Correction

    The market has what? Here's what you should consider rather than panicking.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  7. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  8. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  9. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  10. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  1. Fast Fashion

    Definition of "fast fashion."
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!