Murphy Oil Corp.: Massive Capital Reinvestment

Feb. 6, 2008
Massive profits spur equally massive facilities projects for Arkansas-based petroleum producer/refiner.

Hurricane Katrina was a social and economic watershed moment for the United States. Nowhere has this impact been more strongly felt than in the oil and gas industry, where the fragile balance between production, refining and distribution capacity was upset in a fundamental fashion.

While many facilities were damaged by this infamous storm's fury, the destabilizing impact certainly hasn't hurt the oil and gas companies where it counts -- on the balance sheet -- as big player after big player has rolled out news of record earnings in the years since.

For 2007 IW 50 Best Manufacturer Murphy Oil Corp., fourth-quarter net income increased 133% between 2006 and 2007. Murphy had a net income of $206.1 million in the fourth quarter of 2007, compared with $88.4 million for the same quarter in 2006. Higher oil and natural gas prices and production levels accounted for the higher net income in 2007. Crude oil and gas liquids production averaged 113,341 barrels per day in the fourth quarter of 2007 compared with 83,105 barrels per day in the fourth quarter of 2006.

This jump in profits and production levels has spurred a reinvestment in its refining facilities by the El Dorado, Ark.-based company. Murphy's plans show that the company is looking to bulk up refining capacity along both the Gulf Coast and the North Coast (in Wisconsin) as well, and in doing so is attempting to refashion its Superior, Wis.-based refinery into what refinery manager Dave Podratz calls one of "the cleanest, most efficient refineries in the world."

Murphy Oil Corp.
At A Glance

Murphy Oil Corp.
El Dorado, Ark.
Primary Industry: Petroleum & Coal Products
Number of Employees: 7,296
2006 In Review
Revenue: $14.3 billion
Profit Margin: 4.46%
Sales Turnover: 1.92
Inventory Turnover: 30.89
Revenue Growth: 20.46%
Return On Assets: 10.02%
Return On Equity: 18.44

According to Podratz, the expansion of the refinery in the Duluth-Superior area could cost up to $6 billion and create 400 permanent jobs, not to mention employing 4,000 workers in the construction of the facility, as well as providing a significant boost to the area's economy.

The plan would expand capacity at a strategically placed facility that can take advantage of the increasing output of the Canadian oil sands region. After all, the pipeline carrying the Alberta crude passes directly through Superior.

Murphy Oil president and CEO Claiborne Deming used a Jan. 31 conference call with investors to announce its plans to make capital investments in this 34,500 barrel-per-day refinery in Superior and its 120,000 barrel-per-day refinery in Meraux, Louisiana. Deming was short on details, giving neither a timetable nor scope, but did state that the work will include new tanks at the Louisiana refinery to replace the tanks damaged during Hurricane Katrina in 2005, as well as the Superior refinery expansion project.

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