Murphy Oil Announces Spinoff, Dan Loeb’s Hands at Play: Raymond James

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Murphy Oil Announces Spinoff, Dan Loeb's Hands at Play: Raymond James

Murphy Oil Corporation (NYSE:MUR) announced that its Board of Directors has approved a special dividend (~$500 million payable on December 3, 2012) and a share repurchase plan of up to $1 billion (the timing and amount of share repurchases is uncertain at the current time), as well as approval to proceed with the spinoff of its U.S. downstream retail operations (Murphy Oil USA, Inc., which includes 1,152 Company-owned and -operated service stations). Murphy also reaffirmed the plan to divest the UK downstream operations, and stated that it is continuing to review possible options with respect to other assets. Dan Loeb purchased a large stake in the company recently, and hinted at  a light activist stance.

Following in the footsteps of Marathon Oil Corporation (NYSE:MRO) and ConocoPhillips (NYSE:COP), Murphy is on its way to becoming the third U.S. integrated oil and gas company to “dis-integrate” in the past two years. Having in the past laid out the potential for a U.S. retail spinoff, it evidently took pressure from activist hedge fund Third Point for management to make this decision, according to Raymond James analyst Pavel Molchanov. A spokeswoman for Third Point declined to comment on whether this announcement is related to the hedge fund.

Recall, last month’s letter from Third Point asked the company to (1) follow through with the U.S. retail spinoff; (2) complete the divestiture of the U.K. refinery and related retail assets; and (3) sell the interest in Syncrude and Montney gas assets in Canada.

As shown by today’s spinoff announcement, point #1 is underway. Point #2 has already been in the works for nearly two years, though a timeline for completion is hard to predict given the difficulty of monetizing assets in Europe’s tough refining market. Point #3 is also underway, with Murphy Oil Corporation (NYSE:MUR) disclosing today that it has hired an investment bank to evaluate options for Syncrude and Montney. Spinoff details. Murphy USA, the U.S. downstream segment, consists of 1,152 retail sites, seven product terminals and two ethanol plants. Murphy USA shares will be distributed pro rata to Murphy shareholders, and the tax-free spinoff is expected to be completed in
2013. This is the same spinoff approach that had been taken by Marathon Oil and ConocoPhillips. The main difference is those two companies spun off a combination of refining and retail assets, whereas Murphy is only spinning off retail, having sold both its U.S. refineries last year.

On the conference call today, Steven Cosse – Murphy Oil Corp – President, CEO states:

Murphy Oil Corporation (NYSE:MUR) will become an independent exploration production company, with principal activities focused in the United States, Canada, and Malaysia. The company will continue its exploration program and offshore development projects, complemented by reliable growth in our North American on-shore businesses, primarily in Eagle Ford Shale in south Texas and the Seal properties in Canada.

Disclosure: No position in any securities mentioned

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