Murphy Oil’s U.K. Refinery Deal Goes South, British Press Takes Note

Murphy Oil Corp. announced Tuesday following the close of business that it failed to complete the sale of its 130,0000-barrel per day crude oil refinery in the United Kingdom as previously announced, prompting the immediate shut down and decommissioning of the sprawling facility and the loss of 400 jobs in the Welsh community of Milford Haven.

Murphy Oil officials were not available for comment Tuesday evening. However, the deal collapse is receiving quite a bit of press in Great Britain, mainly because of the job cuts and loss of refinery capacity in the U.K.

On Tuesday, the BBC, Reuters and The London Daily Telegraph all posted major headlines about the failed Murphy deal on their websites. Bryan Kelly, of Murphy’s U.K. subsidiary Murco Petroleum Limited, was quoted by the Telegraph on Tuesday saying “it is with great frustration and regret that we make this announcement.”

“For the past four years we have worked tirelessly to secure a positive outcome for the future of the refinery and our workforce,” Kelly told the Telegraph. “Unfortunately, and despite every effort on the part of Murphy and our employees, we have been denied the desired outcome.”

News of the failed deal means that the El Dorado oil giant will have to postpone recent efforts to make a clean break from the refinery and downstream retail business. The company successfully spun off its retail subsidiary Murphy USA a year ago and closed the sale of its retail gasoline business in the U.K. at the end of September.

At the same time, Murphy CEO Roger Jenkins has announced the company’s intentions to focus on the upstream crude oil exploration and production business and return more money to investors. Jenkins was tabbed to lead the company in May 2013 and expressed last week that the company’s reorganization efforts were doing well.

“I am pleased with the progress we are making in portfolio optimization, production operations, and return to shareholders,” Jenkins said following the company’s third quarter earnings report on Oct. 29. “In production we continue to set quarterly production records, with the Eagle Ford Shale and offshore Malaysia projects leading in oil growth. Our recently announced share repurchase authorization and dividend increase continue to reward our shareholders. We have now returned nearly $4 billion to our shareholders since 2012 through the spin-off of Murphy USA, cash dividends and share repurchases.”

Originally, Murco Petroleum first announced in late July that it had signed an agreement to sell the Milford Haven refinery and terminal assets to Swiss-based Klesch Refinery Limited, pending regulatory approval and “other conditions.”

Murphy officials said then that the deal was expected to close no later than Oct. 31. After reporting nearly a week ago that the company’s profits were down from a year ago because of falling crude oil prices, Murphy officials gave no indication that the deal had gone south.

“We are scheduled to close on the sale of the Milford Haven refinery on October 31, 2014,” the company said.

Two days after the self-imposed Halloween deadline, however, the El Dorado oil giant said it was unable to complete the sale of the Milford Haven refinery and terminal assets to Swiss-based Klesch.

“The refinery is currently in a period of shut-down, and will be decommissioned and operated solely as a petroleum storage and distribution terminal,” Murphy said. “The company will seek a buyer for the terminal facility along with three inland terminals. The sale of the company`s retail assets is unaffected by the inability to sell the refinery.”

At the close of business Tuesday, Murphy shares were down 2.3%, or $1.20 at $51.24 as 1.34 million shares traded hands. On Wednesday, shares rebounded nearly 2% to $52.25.

Meanwhile, prices for West Texas Intermediate crude fell nearly 2% to $77.19 a barrel on the New York Mercantile Exchange, the lowest level in nearly three years. News of the bear market oil prices caused Saudi Arabia to announce that it was cutting the price of oil exports to the U.S., hoping to put pressure on America shale oil producers to also cut prices and reduce profitability.

The falling crude prices, however, do benefit refiners who can now buy fuel feedstock at cheaper rates.