Murphy Oil to spin off US downstream unit, divest UK downstream assets

Murphy Oil Corp. announced plans to spin off its US downstream subsidiary, Murphy Oil USA Inc., into an independent and separately traded company, and Murphy reaffirmed plans to divest UK downstream operations, saying it is reviewing options for certain UK assets.

Last year, Murphy completed the sale of its refineries as the company shifted its focus to concentrate on exploration and production and US retailing. The company first outlined its downstream exit strategy in 2010 (OGJ Online, July 23, 2010).

Murphy sold its 125,000 b/d refinery in Meraux, La., and related properties to Valero Energy Corp. for $625 million (OGJ Online, Sept. 2, 2011). Murphy sold its 33,250 b/d refinery in Superior, Wisc., to Calumet Specialty Products Partners, Indianapolis (OGJ Online, July 26, 2011).

Regarding Murphy Oil USA, the parent company said creation of two publicly traded companies would enable each business to focus on its strategic priorities with financial targets that best fit each company’s market opportunities.

Other US majors previously have followed similar strategies.

Marathon Oil Corp. completed the spinoff of the downstream business, Marathon Petroleum Corp., making Marathon Oil an independent upstream company based in Houston. Marathon Petroleum became an independent refiner based in Findlay, Ohio (OGJ, Jan. 7, 2011, Newsletter).

ConocoPhillips separated its upstream and downstream businesses into two stand-alone, publicly traded corporations via a tax-free spinoff of the refining and marketing business. The downstream business is Phillips 66. That spinoff was completed earlier this year.

The Murphy spinoff, expected to be finalized in 2013, remains subject to customary conditions, including confirmation of the tax-free nature of the transaction.

The separate upstream and downstream businesses will be able to allocate resources and deploy capital consistent with the priorities of each, a news release said, adding that investors will be able to value the two separate businesses based on financial situation of each.

After the spinoff, the downstream business will involve retail marketing of petroleum products and convenience merchandise through a large chain of retail gasoline stations. Additionally, Murphy USA’s assets will include seven product distribution terminals and ethanol plants in North Dakota and Texas.

After the spinoff, the upstream Murphy will become an independent exploration and production company with principal activities focused in the US, Canada, and Malaysia. The UK downstream operations will remain with Murphy until such time as these assets are fully divested.

Murphy Chairman Claiborne Deming said, “Murphy will be a pure-play exploration and production company with strong returns and attractive investment opportunities, while Murphy USA will be a leading retailer with over 1,100 retail gasoline outlets.”

Steven Cosse, Murphy’s president and chief executive officer, said the two separate companies will be better able to prosper in their respective industries.

Contact Paula Dittrick at paulad@ogjonline.com.

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