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Murphy Oil selling its refinery in Wales

Deal also near for U.K. retail assets

By Jessica Seaman

This article was published August 1, 2014 at 1:55 a.m.

Murphy Oil Corp.'s chief executive officer said Thursday that the company will be able to transfer about $550 million back to the United States after the sale of its assets in the United Kingdom.

"We have been wanting to repatriate the U.K. ... for a long time," CEO Roger Jenkins told analysts during a conference call to discuss the El Dorado-based company's second-quarter earnings report. "I'm very, very anxious to do so and we signed an agreement to do so."

Murphy Oil announced earlier in the day that its subsidiary, Murco Petroleum Ltd., has agreed to sell its Milford Haven refinery and terminal assets to Klesch Refinery Ltd. Milford Haven is in Wales, about 250 miles west of London.

The transaction should be completed by Oct. 31, pending regulatory approval.

"And a separate transaction for the sale of the U.K. retail business is at an very advanced stage," Jenkins said during the conference call. "We will provide further updates on this in due course."

Murphy Oil Corp. has struggled to sell its U.K. assets because of a challenging European refining industry, analysts have previously said.

Earlier this year, Murphy Oil said it was deciding whether to close the Milford Haven refinery after talks with a potential buyer fell through.

Murco Petroleum employs 370 full-time workers at the refinery, which has a capacity of 135,000 barrels of oil per day.

"We look forward to using our considerable industry expertise to return the site to profitable growth," A. Gary Klesch, founder and chairman of The Klesch Group, said in a statement. "By taking a long term investment view we aim to secure the future of this refinery for its employees and the broader community."

Murphy Oil has been trying to exit the refining and retail market in the United Kingdom for several years in its effort to become a solely exploration and production company, said Leo Mariani, an analyst with RBC Capital Markets.

He said the company can also improve its stock valuation by shedding its refinery and retail assets.

Shares of Murphy Oil slumped 6.9 percent to close Thursday at $62.13 on the New York Stock Exchange after the company missed analysts earnings estimates.

The company reported an almost 68 percent drop in profit for its second quarter of 2014 after markets closed on Wednesday.

Murphy Oil reported a net income of $129.4 million, or 72 cents per share, compared with $402.6 million, or $2.12 per share during the same period a year ago.

Murphy Oil said higher financing costs and "unfavorable effects" from U.S. commodity contracts contributed to the decline.

The company also said the drop in profit was the result of higher exploration expenses and higher costs of extraction in Malaysian oil fields, along with lower realized oil and natural gas sales prices for production from the Malaysian wells.

Reuters news service reported Thursday that Oil India Ltd. and Oil and Natural Gas Corp., a state-owned company in India, had presented a joint $1.5 billion bid to purchase some of Murphy Oil's Malaysian assets.

Citing sources familiar with the matter, Reuters said last month that Mitsubishi Corp., a trading company in Japan, had also submitted a bid to buy a 30 percent stake in the oil and gas assets.

Jenkins was asked by analysts about the news reports of the potential sale of the assets during the conference call Thursday.

"There is a lot of squawking, I think primarily by Reuters, in that region about selling 30 percent of our business," he said. "We didn't start that rumor and we don't comment on it. I'm not a big believer in sharing all the portfolio work."

Oil India Ltd. and Oil and Natural Gas Corp. did not respond to email messages requesting comment.

"I would expect them to announce some type of partial sale," Mariani said about Murphy Oil's prospects in Malaysia, where it generates almost half of its production.

Because wells in Malaysia have a short life and tend to play out quickly, the sale of some of the assets there would free the company to focus on more long-term production, Mariani said.

Business on 08/01/2014

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