Murphy Oil Corporation
) announced its plan to spin off its U.S. downstream subsidiary,
Murphy Oil USA, Inc. ("Murphy USA"), to an independent entity.
The company has already received required approvals from its
board of directors, but closure of this deal will be subject to
several other customary nods. This transaction is expected to be
settled in 2013.
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Per the transaction, Murphy USA will trade in the exchange
separately. The Board of Directors of Murphy Oil has approved to
distribute a special dividend per share of $2.50, a total of
around $500 million, to its shareholders and intends to
distribute shares of Murphy USA on pro-rata basis to every Murphy
Oil stockholders. This new dividend is in addition to the
existing dividend of roughly 31 cents per share and will be
payable on December 3, 2012.
Post transaction, Murphy USA will continue to operate as a
low-price and high volume fuel seller, having important strategic
relationships and skilled management professionals. It will get
seven product distribution terminals and two ethanol production
capacities in North Dakota and Texas. Its business will deal with
retail petroleum products marketing and convenience merchandise
through a large chain of retail gasoline stations.
On the other hand, Murphy Oil will become an independent
exploration and production company. It will be mainly operating
in the United States, Canada and Malaysia. The company will
continue its exploration program and offshore development
projects in its North America onshore operations, primarily in
the Eagle Ford Shale and Seal areas.
The resilience of Murphy Oil's balance sheet is clearly evident
as the company in addition to shelling out dividends has also
announced a share repurchase program to boost shareholder value.
The Board of Directors approved a share repurchase program of up
to $1 billion of the company's shares. Murphy Oil intends to
exercise open market purchases, negotiated block purchases and
accelerated share repurchases for its share buyback program.
As of June 30, 2012, Murphy Oil had cash and cash equivalents of
about $671.6 million and net cash provided by operating
activities of $1,347.1 million in the first six months of 2012.
We believe strong financial position will help the company to
manage its present restructuring burden.
This spin off will enable both the companies to assign resources
and redeploy existing capital as per their own market conditions
and priorities. We believe this transaction will enable both the
companies to concentrate on their own strategic preferences as
well as identify own capability for their future growth.
Post restructuring, we believe that both the companies will focus
on achieving reasonable revenue, optimize cost structure, and
maintain robust margins and strong liquidity position in the
El Dorado, Arkansas-based Murphy Oil Corporation engages in the
exploration, production, refining and marketing of oil and gas in
the U.S. and U.K. One of the company's peers is
Occidental Petroleum Corporation
). Murphy Oil Corporation currently has short-term Zacks #3 Rank