Murphy Oil Corp. said Wednesday that it's closing its El Dorado headquarters and consolidating operations with its office in Houston. The company announced the move just before releasing its first-quarter results, reporting a net loss of $416 million.
Citing the "extraordinary drop in crude oil prices," the oil and gas exploration and production company said that it also will close its Canadian office in Calgary, Alberta, which has about 110 employees. The El Dorado office employs about 80 workers.
Murphy Oil said April 1 that because of ongoing weakness in the oil sector, it was cutting executive pay, lowering its annual capital spending guidance and reducing its quarterly cash dividend by 50%.
Board Chairman Claiborne Deming said in a news release Wednesday that those cuts weren't enough to allow Murphy Oil to stay competitive in the current market.
[CORONAVIRUS: Click here for our complete coverage » arkansasonline.com/coronavirus]
"We simply do not have a choice and came to this decision only after exhausting all other cost-saving measures," Deming said. "The El Dorado office closure is particularly painful and difficult, because the company was founded here by C.H. Murphy Jr. and has been an integral and important part of the community for many years."
Roger Jenkins, Murphy Oil's president and chief executive officer, said in the release that the company expects to complete the office closures early in the third quarter.
Jenkins acknowledged the hardship the move will be for the company's employees in El Dorado and Calgary. Murphy Oil plans to offer them "appropriate severance packages," he said.
El Dorado Mayor Veronica Smith-Creer said Wednesday afternoon that while it was bad news to hear of the headquarters closing, it wasn't the worst possible scenario for the city because Murphy USA and its 600 employees were staying in town. Still, the news was bittersweet, she said, adding that the city is grateful for all that Murphy Oil has done for the community over the years.
Lt. Gov. Tim Griffin said in a statement Wednesday that he was saddened the state is losing such an iconic company along with the jobs it provided where he grew up in south Arkansas.
"The unprecedented impact of the covid-19 pandemic on our business community cannot be overstated but this news is also a reminder that there is intense competition for jobs and industry, and we must remain committed to improving Arkansas' business climate," Griffin said.
Bill Luther, president and chief executive of the El Dorado Chamber of Commerce, said the loss of a legacy company like Murphy Oil will be hard on the community, but it's for situations like this that the chamber works to diversify the regional economy and attract new industries and employers.
"I'm optimistic El Dorado will pull through this," Luther said.
Murphy Oil's ties to El Dorado and south Arkansas are deep. They began with Charles H. Murphy Sr. arriving at the Union County seat 116 years ago. He arrived before the oil boom but began investing in banks and then timber, which positioned him to take advantage of future oil discoveries.
The first commercially viable oil well, the Busey-Armstrong No. 1, was developed in January 1921, sparking the region's first oil boom and leading El Dorado's population to swell from 4,000 to 25,000, according the American Oil & Gas Historical Society.
Murphy's investments paid off a few months later when oil was discovered in a second field at Smackover, sparking a second boom. "Production was in the name of Marine Oil Company, in which Murphy had a 22% interest," according to an online company history.
"The oil-producing area of the Smackover field covered more than 25,000 acres," according to the society. "By 1925, it had become the largest-producing oil site in the world."
Charles H. Murphy's son, Charles H. Murphy Jr., took over the business in 1946 after his return from World War II.
The company at the time was known as Charles H. Murphy and Co. It was incorporated as Murphy Corp. in 1950 in Louisiana and went public in 1956, trading on the American Stock Exchange. The year also marked its participation in an oil venture in Venezuela, its first venture outside North America. Its name was changed to Murphy Oil Corp. in 1964.
The company began a retail gasoline partnership with Walmart in 1996, the same year it spun off the timber and real estate portion of the company, Deltic Farm & Timber.
Through it all, the international oil and gas company remained firmly rooted in El Dorado.
The company backed the El Dorado Promise. Started in 2007, the El Dorado Promise affords every graduate of El Dorado High School a college scholarship covering tuition and mandatory fees equal to the highest in-state, public university rate.
The scholarship is renewable over five consecutive years if the student maintains a 2.0 grade point average and successfully completes 12 credit hours per semester. The scholarship can be used at any regionally accredited U.S. public or private college or university for students working toward an associate's or bachelor's degree.
To date, more than 2,600 students have taken advantage of the promise, attending 145 higher-education institutions in 35 states. About 80% of the students who took advantage of the promise remain in college, according to the El Dorado Promise website.
The company said in its news release Wednesday that it intends to continue funding the scholarship program.
Murphy Oil also was behind the creation of the $100 million Murphy Arts District, designed to transform El Dorado into a regional draw for arts and entertainment. The grand opening for its $60 million first phase of the six-block project was held three years ago and features an 8,000-capacity outdoor amphitheater, a farm-to-table upscale restaurant with a cabaret stage, and a 2,500-seat indoor concert venue.
According to Zacks Equity Research, the economic distress caused by the coronavirus's spread has led to the drop in crude oil demand and prices. Oil prices have tumbled from about $53 a barrel in mid-February to about $23 a barrel.
In the first quarter of 2019, Murphy Oil posted net income of $40 million.
Murphy Oil reported a per-share loss of $2.71 for the quarter that ended March 31, compared with a gain of 23 cents per share in the same quarter the previous year. Fourteen analysts surveyed by Thomson Reuters had estimated an average loss of 46 cents per share.
Murphy Oil's revenue rose 58.7% in the quarter, topping $1 billion.
The company's shares fell 7 cents, or 0.67%, to close Wednesday at $10.39 on the Nasdaq stock exchange. Murphy Oil's shares have traded between $4.50 and $28.43 in the past year.
Information for this article was contributed by John Magsam of the Arkansas Democrat-Gazette.
A Section on 05/07/2020