January 27, 2012 [OPIS] - It took more than a year for Murphy to dispose of its two U.S. refineries, but little progress has been made in finding a buyer for the 130,000-b/d Milford Haven plant in Wales, U.K. Murphy CEO David Wood today told analysts that the company will consider whether it should convert the facility into a terminal and retain the retail network that is supplied by the facility.
Wood acknowledged that “it (the sales process) has been a blow because of the external environment,” observing that European refining margins were stressed by oversupply in late 2011. However, he did say that there was a slight resurgence in interest now that numerous European plants have closed.
Press reports this winter have mentioned talks between Valero and Murphy about the plant, but OPIS sources say that Valero has not made any serious offer. The talk is “mere conjecture” about the potential for a deal since Valero operates a neighboring 270,000-b/d refinery in Pembroke, Wales. Valero bought Murphy’s Meraux, La., refinery last summer, and Calumet bought the Superior, Wis., plant.
Meanwhile, Wood confirmed to analysts that Murphy was looking at ways to get more value out of its U.S. retail and wholesale business. While he did not specifically mention the route toward monetizing those assets, OPIS sources say that the company is hopeful that it can spin off the U.S. retail stations, terminals, and wholesale operations into a master limited partnership. A decision on a retail spin, as well as the Welsh refinery, is likely in the first half of this year.
The downstream segment of Murphy’s business accounted for a $51 million profit in the fourth quarter despite a difficult December. The chain built another 29 stations and had a store count of 1,128 at year’s end. It broadened its partnership with Walmart via a 10ct/gal pump rollback, and Wood said it would increase retail both “within and outside” of the Walmart relationship.
Murphy saw 13cts/gal retail margins in the fourth quarter, up from just 7.4cts/gal in the same quarter of 2010. It will allocate about $200 million for 50 new station builds in 2012, as well as other downstream upgrades.
The upbeat items about U.S. retail came as the company reported a disappointing quarter, thanks to setbacks in its exploration and production side. The El Dorado, Ark., company lost $113.9 million last quarter, thanks in large part to a $369 million write-down of an oil field offshore of the Republic of the Congo.
