LITTLE ROCK — Murphy Oil Corp. shares continued to climb Thursday, the day after Third Point LLC, the $9 billion hedge fund run by Daniel Loeb, said shares of the company could be worth more than $90 if Murphy sells various international assets and spins off its retail gasoline business.
On Thursday, Murphy shares closed at $58.43 on the New York Stock Exchange after reaching a six-month high on Wednesday. It is up $3.43 since Tuesday’s close.
Shares of Murphy rose Wednesday after Third Point, in its third-quarter letter to investors, urged the El Dorado-based company to spin off its retail operations.
Third Point, which said it has taken a “significant stake” in Murphy, said investors have “grown frustrated” with Murphy’s delay in spinning off its retail business, considering the benefits of such a move.
“At this point, it appears sentimental attachment by management and the Murphy family is driving a stubborn desire to hold onto these and other nonstrategic assets, creating a significant drag on enterprise value,” the letter said.
For the past year, Murphy has been considering whether to spin off its Murphy USA gas stations to separate its retail business from its more profitable exploration and production operations. But the company has not yet said if it will follow through.
In response to Third Point’s letter, Murphy said in a news release Thursday that it recently met with investors, including Third Point.
“These and other investors have made a variety of suggestions with regard to the Company’s portfolio and the Company values their input,” the news release said.
“The Board and management have been working to evaluate opportunities to illuminate the value in our stock price for the benefit of all of our shareholders,” said Claiborne Deming, chairman of the board, in a prepared statement.
Murphy said it will keep all shareholders informed “with respect to this evaluation.”
Third Point is an activist shareholder, meaning that it is an investor that buys up stock and then tries to pressure a company to take certain steps to increase stock value, said Pavel Molchanov, an analyst for Raymond James and Associates.
Third Points owns about 500,000 shares of Murphy, which is little less than 1 percent, Molchanov said.
“Right now, in this case, the two sides can talk about it or not, and we’ll see how Murphy management proceeds,” Molchanov said. “Given that Third Point owns less than 1 percent, the amount of influence they have on management will not be that huge.”
In its letter, Third Point also said Murphy should go ahead and complete its exit from the refining business in the U.K. and sell its Canadian natural gas assets and its 5 percent stake in the Syncrude Oil Sands Project.
Murphy sold two of its U.S. refineries last year, but has not yet been able to sell its Milford Haven refinery in Wales.
Molchanov said he did not know why Third Point would advocate for the sale of Murphy’s Canadian assets, but said the price of natural gas has been low recently.
A spinoff of Murphy’s retail operations would not be unusual in the industry.
Integrated oil and gasoline companies have been selling, spinning off or shutting down refinery and marketing assets, Molchanov said.
Murphy announced its intentions to become less integrated in 2010 when the company said it would sell all of its refineries and a British marketing business.
Steve Cosse, Murphy’s new president and chief executive officer, has taken a cautious approach.
During Murphy’s secondquarter conference call in August, Cosse said the company has not yet decided if it would separate its businesses and that it needed to address the underperformance of its retail operations.
In the first quarter, Murphy’s refining and marketing operations posted a $4.2 million loss. The operations reported $80.5 million in second-quarter income, while Murphy’s total net income dropped 5.2 percent from the previous year to $295.4 million.
Molchanov said Murphy’s refinery and retail business adds “complexity” to the company’s operations, so a sell or spinoff would benefit the company.
“It would help to simplify and streamline the asset base,” he said. “Right now, it’s just an odd combination.”
But, Molchanov said, it is not a decision that should be made hastily.
“It is appropriate for Murphy to take a deliberate and conscientious approach to this,” he said.
Business, Pages 25 on 10/05/2012