Murphy USA shifts away from Walmart parking lots, will seek new ‘growth opportunities’

As Wal-Mart shutters 152 of its underperforming stores across the U.S., Murphy USA Inc. announced Monday that its board of directors has authorized a strategic allocation of $500 million to pursue new “growth opportunities” not tied to the company’s relationship with the Bentonville retailer.

In doing so, the El Dorado convenience store operator said it will continue to build Murphy Express branded stores at locations acquired from third parties, which achieve similar operational performance metrics as Murphy USA branded locations and represent over 50% of the company’s rapid store growth in the last five years.

“Since our spin, we have strategically positioned Murphy USA to be a strong independent company that can achieve a high level of organic growth and shareholder returns with or without another large acquisition of store locations from Walmart,” Murphy USA President and CEO Andrew Clyde said in a statement.

During the third quarter, Murphy USA opened 14 new retail locations. Through early November, the El Dorado-based spinoff of Murphy Oil Corp. opened an additional nine sites. Of those 1,300 total locations in operation, there are 1,081 Murphy USA sites located on Walmart parking lots and 219 Murphy Express sites. There were 36 sites under construction that will be added to Murphy USA’s growing retail network in the near future, company officials said.

In support of Monday’s decision, Murphy USA officials said the Arkansas convenience store operator has developed a large store format that will allow for higher impact growth from new locations going forward. To back this ongoing expansion within core marketing areas and into new marketing areas, Murphy officials said the company will continue to invest in and grow its midstream positions.

Additionally, company officials revealed that Walmart will have the ability to develop a proprietary gasoline program on Supercenter locations that are not currently supplied or committed to be supplied by Murphy USA. Still, Murphy USA said it will continue to work closely with Walmart on existing Murphy USA locations and anticipates further collaboration opportunities in the future.

In response to Murphy USA’s comments, Wal-Mart spokesman Randy Hargrove said the retail giant has had a gasoline program in place for several years and will continue moving forward with that program.

EL DORADO RETAILER CUTS TIES WITH FORMER PARENT MURPHY OIL
Although not surprising, Murphy USA’s decision to shift away its dependence on prime locations at Walmart stores comes only months after the El Dorado gas retailer and convenience store operator ended all ties with its former parent company, Murphy Oil Corp. Following the spinoff from the oil giant August 2013, Murphy Oil continued to perform certain corporate functions for Murphy USA on a fee basis in accordance with the Transition Services Agreement that was part of the split.

As of September 30, 2015, all services under the Transition Services Agreement have expired. When the El Dorado publicly-traded concern reports its fourth-quarter earnings next week, it will be the first time the company releases its consolidated financials as an independent company for all periods subsequent to the separation.

Also, Murphy USA closed a deal in November to sell its Hereford, Texas-based ethanol plant to Green Plains Inc. for $93.8 million and entered into a five-year supply agreement with West Coast retailer marketer Core-Mark to streamline its wholesale distribution operations across 23 states.

MURPHY USA BOARD AUTHORIZES SHARE BUYBACK PROGRAM

Those deals and Monday’s announcement also include a directive from Murphy USA’s board authorizing management to undertake a share buyback program as part of the company’s overall goal to strengthen its balance sheet and grow shareholder value.

“Through our existing store pipeline, growing third party land bank, our business improvement initiatives that enhance our core fuels business and differentiated retail capabilities, and the strength of our balance sheet, Murphy USA will continue to grow our base of value-seeking customers independently in both new and existing target markets with great clarity and confidence,” Clyde said. “Our share repurchase plan is a reflection of our confidence in the future and a commitment to maximizing shareholder value.”

The timing and number of shares repurchased under the program will be determined by management at its discretion, company officials said. The El Dorado retailer said it expects to use its balance sheet flexibility, operating cash flow and proceeds from the sale of non-core assets to fund the repurchase program.

At the close of business Monday, Murphy USA shares closed up 20 cents at $56.81 on the New York Stock Exchange, putting the company’s market capitalization at $2.66 billion.

By contrast, the company’s struggling former parent touched its 52-week low in Monday’s session as U.S. crude oil prices sank below $30 a barrel again. Murphy Oil market cap is now only at $2.89 billion as the El Dorado oil giant’s shares closed at $16.81, down 78 cents at $4.43.