Mapping Murphy USA’s Future With CEO Andrew Clyde

Editor’s note: This story appears in the latest magazine issue of Talk Business Arkansas, which you can read online at this link.

An El Dorado boy can have a lot of fun on the backroads and highways of south Arkansas and northern Louisiana. Those roads can also offer a great education about commerce and life.

R. Andrew Clyde, who spent many a childhood day on those backroads, is poised to lead Murphy Oil Corporation’s new spin-off company, Murphy USA.

After years of prodding from investors, Murphy Oil Corp. announced last December that it would separate its “downstream” operations – mainly its retail centers – and become a pure play oil and gas exploration and production company.

Clyde was tapped in January to guide the new company after years of management consulting in the energy business in Texas and around the world.

He majored in Business Administration and minored in Geology at Southern Methodist University in Dallas. After an early stint with Arthur Anderson CPAs, he found his way into the energy industry working with a turnaround entrepreneur and consulting giant Booz and Co., where he worked for 20 years.

At Booz, Clyde managed to make time to earn a MBA from the Kellogg School of Business at Northwestern University in Chicago. He eventually headed Booz’s North American energy, chemicals and utilities practice, which provided services to major oil and gas companies, large independent firms, and small box retail companies. His work took him to 30 countries around the world and introduced him to Murphy Oil.

“I think that career absolutely prepared me for taking on this role both in terms of knowing the industry, knowing the industry participants, and the industry structure and dynamics,” Clyde said.

EARLY YEARS
The 50-year old president and CEO of Murphy Oil’s retail business moved to El Dorado at the age of three after his father, an architect, relocated the family back to Arkansas after several years in Chicago, where Clyde was born.

The move offered Clyde and his two sisters a less stressful life and made sure that there would be plenty of time spent with family and friends hunting, fishing, and playing golf. El Dorado’s public schools offered a high quality education with the nucleus of Murphy Oil executives in the town.

Clyde’s grandfather, Robert Aycock, who worked and lived in the area sold fuels for PanAm Southern throughout south Arkansas and northern Louisiana. Aycock eventually retired and set up his own commercial fuels business serving small customers in the region.

During summers and on winter breaks in college, Clyde worked for and traveled with his grandfather to call on customers, giving the future business leader a real world education in “Personal Service 101.”

“What visiting customers meant to him was driving him to a peach orchard near Ruston, going out and picking five bushels of peaches, and driving through northern Louisiana and south Arkansas to these small, tier 3 railroads and dropping off a bushel of peaches and having lunch with a railroad customer,” Clyde recalls. “In the fall, the only thing that changed was picking up pecans instead of peaches.”

For Clyde, those interactions provided a foundation for the energy business that he would turn into a career. More importantly, it planted the seeds of a more important career lesson: taking care of customers.

“I learned a lot about the oil and gas business driving around with him and I learned a lot about customer-facing businesses watching how he interacted with his customers and how he was always there for them,” said Clyde. “If you were a middleman – which he was, and they were increasingly being phased out – he always said you have to offer something of value, otherwise there’s no need for a middleman. What he offered was the ability to get hold of him 24/7. He provided a level of service and responsiveness to their needs that the larger companies couldn’t.”

THE SPIN
Clyde hopes to translate that simple premise into spectacular success with Murphy USA.

The new company, which will keep its headquarters in Murphy Oil’s El Dorado corporate complex, already has a major U.S. footprint.

As of June 30, 2013, there were 1,179 retail outlets in 23 states with plans to top 1,200 by year’s end. The business also owns midstream assets, including product distribution terminals and pipeline positions.

Murphy USA accounts for roughly 47% of Murphy Oil’s current revenues, which topped $28.6 billion in 2012. Projections for 2013 indicate that Murphy USA will easily clear $19 billion in sales of fuel, merchandise and other transactions.

About 77% of the company’s retail locations are 208 square foot kiosks that handle 1.6 million transactions daily. Murphy USA is experimenting with larger 1,200 square foot formats, but its strength is in the smaller size, many of which can be found on Wal-Mart properties across the south and midwest.

That “strategic and complimentary” relationship with Wal-Mart is one of five major pillars that Clyde is counting on to come out of the gates fast with the new publicly traded company. Murphy USA has embarked on a 200-store expansion with Wal-Mart over the next three years.

“When you’re sitting in front of the world’s largest retailer, you’re drawing a lot of traffic,” Clyde says. “It’s great real estate and it’s a great consumer base because they are looking for low price and great values everyday.”

Low-cost gasoline and low-cost overhead are two more crucial components to driving shareholder value for Clyde. He notes that price-conscious shoppers – like the ones visiting Wal-Mart – are Murphy USA’s target customers.

Price is the overwhelming number one reason a customer chooses a gas station, Murphy USA’s research shows. In presentations to analysts, Clyde highlights a slide that shows price and promotion account for 81% of the decision-making driving fuel purchases. Convenience is also an important factor.

Murphy USA’s efficiency in building sites – $1.5 to $2 million per location – and the associated labor that comes with such an efficient operation is another crucial piece to its profitability puzzle. In its smaller 208 square foot formats, payroll may only include five employees.

“We think everyday about if we are doing something to add complexity to our business because we know if we add complexity, we’re going to add costs,” Clyde said.

He also asserts that the company’s safety, security and environmental record is “sterling” and its maturity in the fuel supply chain, thanks to Murphy Oil’s history, gives the new spin-off advantages to maintain low costs that will translate into lower prices for consumers.

“I think the story for investors is pretty straightforward,” Clyde says. “We have some distinctive strength and strategies. We have a strong earnings base, we have growth ahead of us, and we have a conservative capital structure. Those things make a really compelling story.”

NEXT CHAPTER
On August 30, 2013, Murphy USA shares launched trading on the New York Stock Exchange under the trading symbol “MUSA.” Murphy Oil shareholders received one share of MUSA common stock for every four shares of Murphy Oil common stock held at the close of business on the record date of August 21, 2013.

The company already has its management team and board of directors in place, so it was open for business on its first day as a standalone firm.

“Being prepared for Day One is key,” Clyde stresses. With Murphy USA operating in many ways as an independent division within Murphy Oil, Clyde expects few, if any, glitches. With the spin-off date being fluid, he said his team hit a July 1 deadline to have all of the accounting, finance, IT and human resources components in place. Contracts have been altered to segregate the two companies at the right time.

He’s hitting the road to meet with investors, analysts and potential shareholders in the third quarter of 2013. His presentation is made easier by the fact that he’s selling an existing enterprise that has been the baby of the family business.

“Not only has the earnings been tangled up and hidden inside Murphy Oil Corp, but the story has been a little lost as well,” he said. “It just doesn’t get the attention on the earnings call and at the analysts’ meeting, and rightly so, it’s a smaller portion of the business. As a standalone business, it is the story.”

BY THE NUMBERS
1,179 retail outlets in 23 states (as of June 30, 2013)
2012 total revenues – $19.655 billion
$2.144 billion merchandise sales
2012 net income – $83.568 million
1.6 million transactions daily
Number of employees – 7,662