MUSA Retail Strategy - Murphy USA OIL CORPORATION NYSE: MUR 1 MUSA Retail Strategy...

M U R P H Y O I L C O R P O R A T I O N www.murphyoilcorp.com NYSE: MUR 1

MUSA Retail Strategy

Andrew Clyde President and CEO


Cautionary Statement Cau3onary Note to U.S. Investors -‐ The United States Securi3es and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved and probable reserves. We use certain terms in this presenta3on, such as “reserve es3mates”, “con3ngent resource”, “gross or total resource”, “resource base”, “possible reserves”, “EUR or es3mated ul3mate recovery” and similar terms that the SEC’s rules strictly prohibit us from including in filings with the SEC. This presenta3on contains forward-‐looking statements as defined in the Private Securi3es Li3ga3on Reform Act of 1995. These statements, which express management’s current views concerning future events or results, are subject to inherent risks and uncertain3es. Factors that could cause actual results to differ materially from those expressed or implied in our forward-‐looking statements include, but are not limited to, the vola3lity and level of crude oil and natural gas prices, the level and success rate of our explora3on programs, our ability to maintain produc3on rates and replace reserves, poli3cal and regulatory instability, uncontrollable natural hazards and the failure to complete the spin-‐off of Murphy USA within the currently contemplated 3meframe, because of adverse market condi3ons or tax consequences, among other things. For further discussion of risk factors, see Murphy’s 2012 Annual Report on Form 10-‐K filed with the U.S. Securi3es and Exchange Commission. Murphy undertakes no duty to publicly update or revise any forward-‐looking statements.


Today’s Discussion

S  Why Spin Now?

S  Strengths and Strategy

S  Financial Overview


Established Advantaged Network

S  Operate 1,174 sites in 23 states –  1,017 Murphy USA stores on Walmart pads –  157 Murphy Express stores off Walmart pads

S  Provide ~5% fuel share in states marketed S  100% Company Operated

S  90% Company Owned

0% – 2% 3% – 6% 7% – 14%

2011 US Market Share ~3%

1 Murphy site count, as of May 2, 2013

820

936

968

991

995

1,000

1,003

1,015

1,017

704582

475

362259

137

2712

52

157

150

125

98

2009 1,047

2008 1,024 33

2007

2003

2002

2001 2000 1999

1998

1,174

2012 1,165

2011 1,128

970 2

2006 937 1

2005 821 1

2004

1,098

1997

On Walmart Pads

2013 YTD1

2010

Growth of Murphy Retail Sites – 1997-‐2013 On Walmart and Off Walmart LocaDons

CO

NM

TX

OK

KS

AR

LA

MO

IA

MN

IL IN

KY

TN

MS AL GA

FL

SC

NC

VA

OH

MI

Off Walmart Pads


Strong Financial Base Years Ended December 31,

(Millions of dollars) 2012 2011 2010 Fuel and ethanol sales* 17,511 17,158 13,623 Fuel and ethanol cost of goods sold* 16,871 16,408 13,053 Fuel and Ethanol Contribu3on 640 750 570

Merchandise sales 2,144 2,115 1,969 Merchandise cost of goods sold 1,856 1,852 1,717 Merchandise Contribu3on 288 263 252

StaDon and other operaDng expenses 526 509 440 Selling, general and administraDve 117 95 88

Adjusted EBITDA (non GAAP) 285 409 293

DepreciaDon and amorDzaDon 77 70 61

Adjusted EBIT (non GAAP) 208 339 232

Capital Employed 1,271 1,277 1,187

Adjusted EBIT/Capital Employed (non GAAP) 16.4% 26.5% 19.6% *This amount includes related excise taxes of $1,963 for 2012, $1,832 for 2011 and $1,885 for 2010. Note: The amounts on this slide are per the audited financial statements of Murphy USA Inc. filed with the SEC on Form 10 on May 6, 2013 See Appendix for reconciliaDon of non-‐GAAP measures


Single Site Growth with Walmart Total = 200 sites

Growth by Region1 Number of sites (Percentage of sites)

Murphy USA (200) and Murphy Express (40) locaDons

Significant Growth Opportunities

Southeast

Mid-‐Con3nent

Northeast

Southwest

2015/ 2016

1,408

597 (42%)

492 (35%)

290 (21%)

29 (2%)

2012

1,168

497 (43%)

431 (37%)

234 (20%)

6 (<1%)

Northeast Southwest

1 Regions: Southwest – CO, NM, TX, AR, LA, OK, KS; Southeast – AL, GA, FL, SC, NC, TN, MS; Mid-‐ConDnent – MN, IA, MO, IL, IN, MI, OH, KY; Northeast – VA

MUSA Retail Core Markets

35

4 3

9

16

15

9 11 13

16

4

9

16

Southeast

Mid-‐Con3nent

1

10

9

7

2

5

6



S  Why Spin Now?




1. Strategic and Complementary Rela3onship with

Walmart

2. Winning Proposi3on with Value Oriented Consumers

3. Low Cost Retail Opera3ng Model

4. Advantaged Fuel Supply Chain

5. Resilient Financial Profile

Strengths

Five Reinforcing Strengths = Advantage



Walmart





Strengths

1. Relationship with Walmart

S  Prime loca3ons adjacent to Walmart stores genera3ng significant traffic and offering compe33ve gasoline and convenience items to Walmart and MUSA customers

S  A fuel discount program that increases MUSA and Walmart compe33veness

S  Ongoing growth poten3al to build sites on exis3ng and new Walmart loca3ons


Co-‐Loca3on Strategy

S  Network of 1,017 retail locaDons adjacent to Walmart stores and 157 stand-‐alone Murphy Express locaDons

S  Key regional focus: South and Midwest

S  Generates significant customer traffic (~1.6 million transacDons processed daily)

S  Provides desDnaDon-‐focused, value-‐oriented consumers a compeDDvely priced fuel retail soluDon

Complementary Products

S  Focus on a limited selecDon of low-‐priced convenience products that complement Walmart’s core product offerings

S  Key products include tobacco, single-‐serving som drinks, alcoholic beverages, and single-‐unit snack items

Growth Strategy

S  Announced expansion plan for approximately 200 new sites with Walmart over next 3 years

S  New locaDons would be adjacent to Walmart Supercenters in both current markets and new geographic territories

Fuel Price Discount Program

§  Periodic fuel discount program, most currently offered 4/1/13 – 7/7/13

S  Over 950 locaDons parDcipaDng in current program −  $0.10 / gallon for customers using Walmart gim cards

−  $0.15 / gallon for customers using Walmart MoneyCards

State MUSA Loca3ons

Texas 250 Florida 107 Tennessee 80 Georgia 79 North Carolina 73 Alabama 66 Arkansas 60 Louisiana 60 Oklahoma 50 South Carolina 50 Mississippi 48 Missouri 46 Ohio 42 Kentucky 37 Indiana 32 Illinois 26 Michigan 23 Iowa 21 Minnesota 7 New Mexico 7 Colorado 6 Virginia 3 Kansas 1 *Total Current Markets 1,174

Strategic and Complementary

*Murphy site count, as of May 2, 2013



Walmart






Walmart





Strengths

2. Value Oriented Consumers

S  Low price fuel offer for value-‐oriented customers

S  Low price tobacco offers that drive industry leading per site sales

S  Growing assortment of other convenience items that emphasize different products than Walmart’s primary offer


150

100

50

0 2025 2020 2015 2010 2005 2000

Gasoline

Diesel E85

Light Duty Road Fuel Demand Billion Gallons

Forecast

2025 Gasoline equivalent: 143.5 bgal

Source: EIA Reference Case 2011, Booz & Company analysis

Customer Segments – Site Selec3on Criteria Murphy Markets

35%46%

12%

11%

31%44%

11%10%100%

Price

PromoDon

Convenience

Brand and Quality

2012 2009

Growing Value Segment


Murphy QuikTrip RaceWay Racetrac Kroger HEB Circle K Speedway 7-‐Eleven Valero BP Shell Exxon

Unleaded Fuel Average Rela3ve Price Posi3on among Selected Retailers Indexed to Lowest Price in CompeDDve Market

January 1, 2013 – April 14, 2013

Branded / Other Murphy HVR1

1 HVR: High volume retailers – high-‐volume c-‐stores, supermarkets, discount clubs Source: Murphy compeDtors last price survey of the day, January 1 – April 14, 2013

Low Price Leadership


Meeting Consumer Needs

6%

Price

PromoDon

62%

19%

13%

Source: Booz & Company consumer survey

Reasons for Choosing Gas Sta3on % Respondents, Murphy Markets

All Reasons Convenience-‐based

Reason for Choosing “Supermarket Brands”

All Reasons Promo@on-‐based

Close to home 13%

Shopping in main store 15%

Convenient locaDon 25%

Hours of operaDon 3%

Close to work 3%

Close to other stores 3%

Short lines/wait Dmes to pump 5%

On regular route 6%

Card readers at pump 7%

Ability to pay at pump 13%

Redeem coupons 6%

ParDcipate in a loyalty program 28%

Redeem a discount motor fuel reward

(from other shopping 68%

Have a discount motor fuel

reward card 72%

81%

Pull up brand and quality

Convenience

Brand & Quality



Walmart





Strengths

3. Low Cost Operating Model

S  Emphasis on fuel sales complemented by focused convenience offering allows for smaller store footprint than many of our compe3tors

S  Simple business model requires lower labor hours and other on-‐site costs while providing industry leading safety metrics

S  High store sales-‐to-‐costs ra3o and high volume fuel sales results in low break-‐even fuel margin requirements (cash + capital)


12.6

20.7

8.6

7.1

4.8

5.47.4

4.0

Industry 40.6

MUSA 30.0

Store Opera3ng Expense ($K) APSM

4,744

547Industry

MUSA

Annual Merchandise Sales Dollars by Square Foot

0.65

0.76

1.50

2.46Industry 3.22

Land PP&E

MUSA 2.15

Capital Expenditure ($Millions) Average per Site

278

124Industry

MUSA

Fuel Gallons (K) Average per Store Month (APSM)

208 squ Kiosk 77%

1200 squ Kiosk 4%

Large Format 7%

All Other 12%

Source: Murphy Financials, 2011 NACS State of the Industry Report

Leading Sales-to-Cost Metrics

MUSA Store Format Mix % of Stores by Square Footage

Wages Credit Card Maintenance Supplies Other


Low Cost = Sustained Performance

0.00

0.05

0.10

0.15

0.20

0.25

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 3Q11 1Q11 2Q09 1Q10 3Q10 2Q11 1Q09 3Q09 4Q10 4Q09 2Q10

MUSA Retail Quarterly Fuel Margin, $/Gal 1Q09 – 1Q13

2012 Retail Chain Breakeven, CPG

Cash: 6.6 Capital: 2.9 Total: 9.5

Cash (6.6)

Total (9.5)



Walmart





Strengths

4. Advantaged Fuel Supply

S  Diversity of fuel supply op3ons enable MUSA to source product at or below industry benchmarks

S  “Best Buy System” dispatches third-‐party tanker trucks to the most advantaged terminal to load products daily for each MUSA site

S  Broader par3cipa3on in the fuels supply chain provides addi3onal margin upside especially during periods of high vola3lity


2012 MUSA System-‐wide Mix of Supply Op3ons

January – December 2012 (All fuels) Total Gallons = 4.062 billion

Reliability 1 Demand Management 2 Incremental

Income 3

9%

11%

45%

35%

Rack

Exchange

Proprietary Supply

Contract

21% of Proprietary Supply volumes are sourced via MUSA

proprietary terminals (i.e., 8.8% of overall

volumes)

MUSA Midstream Assets Proprietary Terminals, Third-‐party Terminals,

and Pipeline ConnecDons

Supply Optionality

Value of Proprietary Fuel Supply Strategy:



Walmart





Strengths


S  Low cash fuel breakeven posi3on allows MUSA to weather sustained periods of lower fuel margins during rising wholesale price environments

S  Sufficient liquidity provided by strong cash posi3on and revolving credit facility to sustain disciplined capital program

S  High degree of fee-‐simple assets along with modest amount of debt


1. Grow Organically with Walmart

2. Enhance Kiosk Economics to Diversify

Non-‐Fuel Sales Mix

3. Improve Func3onal

Infrastructure to Lower SG&A Costs

4. Focus Midstream Par3cipa3on

5. Focus on Long-‐Term Investment

Strategy = Coherent Choices

Strategy

That Build on Distinctive Strengths


1. Grow Organically with

Walmart




Infrastructure to Lower SG&A

Costs



1. Organic Growth with Walmart

Strengths Strengths

Strategy

S  Our rela3onship with Walmart will be a key driver of our organic growth over the next several years

S  We plan to build approximately 200 sites in our core market with Walmart over the next three years

S  We partner with Walmart in our fuel discount promo3on

S  We will seek to rebrand addi3onal Murphy Express sites as Murphy USA and connect these sites to the fuel discount program


Murphy USA Retail Network

Existing Network (March 2013)

Today’s MUSA Network


Near-Term Growth

Walmart 200 + Murphy Express Pipeline

Existing Network

Current Sites and Planned Growth


Adjacent and Core Areas


Walmarts in MUSA’s Adjacent and Core Areas

Existing Network

Current / Planned Sites Plus Walmarts in Adjacent / Core Areas


Other Geographic Areas

Walmarts outside MUSA Core and Adjacent Areas


Existing Network

Total Walmart Footprint (1)

Walmarts in MUSA’s Adjacent and Core Areas

1) Supercenters only illustrated; excludes Walmart Express, Neighborhood Markets, and Sam’s Club


2. Enhanced Kiosk Economics


Walmart





Costs



Strengths Strengths

Strategy

S  We plan to con3nuously evaluate our kiosk strategy to maximize our site economics and return on investment

S  We are con3nually refining our new 1,200 sq.u. kiosk design for increasing higher-‐margin non-‐tobacco sales

S  We will implement new merchandizing, space management and workforce planning capabili3es to further op3mize merchandise revenue, labor needs and overall site returns


Benefits of 1,200 sq.ft. Kiosk

S  Addi3onal floor space allows for inside ATM’s S  Curved design provides natural traffic paths

S  Product mix enhancement

S  Cross merchandising opportuni3es

S  Addi3on of warmer program and frozen dispensed

S  Dispensed coffee and fountain become focal points

1,200 sq.ft. Kiosk Layout

208 sq.ft. Kiosk Layout


$27

$14

Beverages (30.9% GP)

Other Merchandise (89.8% GP)

$151

$110

$116

$104

$7 $5

Tobacco1 (10.8% GP)

2012 MUSA Non-‐Fuel Mix by Format $ 000s per site month

208squ 1200squ

2012 Site Count2 767 38

2012 Avg Non-‐Fuel GP per Site Month $000s 19 22

2012 Non-‐Fuel GP% per Site Month 12.8% 15.5%

1 Tobacco includes Cigareues, Smokeless & Other Tobacco 2 208 count represents formats 208 sqm and below Source: 2012 Murphy financials.

Improving Non-Fuel Sales Mix



Walmart





Costs



Strengths Strengths

Strategy

S  U3lize spin to create a more scalable business process and technology environment

S  Enhance end-‐to-‐end people processes to create high performance culture

S  Achieve SG&A cost savings opportuni3es in line with per-‐site cost targets auer growth

3. Lower Overhead Costs


S  We will focus on midstream ac3vi3es that enhance our ability to be a low cost and low price retail fuel leader

S  We also intend to allocate capital and human resources only to midstream assets that provide a specific retail advantage

S  We will consider strategic alterna3ves for midstream assets that do not directly benefit our retail opera3ons, such as our ethanol plants, that will maximize shareholder value

4. Focused Midstream Participation


Walmart





Costs



Strengths Strengths

Strategy


Strategy


Walmart





Costs



Strengths Strengths

Strategy

S  Establish strong balance sheet of fee-‐simple assets and appropriate debt structure resilient to inherent fuel price/margin vola3lity

S  Invest in retail growth throughout margin cycles

S  Return excess cash from above-‐cycle profits to shareholders to generate leading total shareholder returns

5. Long-Term Investment Focus



S  Why Spin Now?




MUSA Retail Marketing Financial Overview

Mindy West Vice President and Treasurer


Progress to Date

S  Filed IRS tax-‐free spin lewer ruling in December S  Announced Andrew Clyde as CEO in January S  Finalizing organiza3onal design, employee benefits and

compensa3on S  Building corporate func3on for MUSA S  Filed ini3al Form 10 with SEC May 6


Finance Timeline

S  Conduct ini3al ra3ng agency mee3ngs in Mid May u  Targe3ng solid BB ra3ng u  Typically requires leverage no higher than 2 – 2.5 X EBITDA

S  Determine Parent Co. dividend amount u  Previously stated range $250 – 500mm u  Assumed $500mm in ini3al Form 10 filing

S  Finalize size and mix of debt capital structure u  Revolving credit facility u  Term debt/Fixed rate notes

S  Prepare and launch credit facility and term debt/notes issuance u  Process beginning in June u  6 – 8 weeks prepara3on 3me u  Formal launch subject to expected spin 3ming


MUSA Full Year Operating Results

2012 2011 2010 Revenues (1)

$19,655 $19,273 $15,592

Adjusted EBITDA (non GAAP)(2) 285 409 293

Income from Cont. Oper. 84 205 143

Capital Expenditures 112 100 182

Fuel margin per gallon $.129 $.156 $.114

Gallons sold per store mo. 277,001 277,715 306,646

($ Millions) (3)

(1)  Amounts include excise taxes as revenue of $1,963, $1,832 and $1,885 for years 2012, 2011 and 2010, respectively. (2)  See Appendix for reconciliation of Adjusted EBITDA to net income for each period (3)  The amounts on this slide are per the audited financial statements of Murphy USA Inc. filed with the SEC on Form 10 on

May 6, 2013


Murphy Oil USA First Quarter Results

2013 2012 2011

Revenues (1) $ 4,020 $4,264 $3,963

Net Income (2) 29 (7) 9

Capital Expenditures 64 18 28

Fuel Margin per gallon $.110 $.071 $.091

Gallons sold per store month 250,952 254,806(3) 272,159

($ Millions)

(1)  Amounts shown do not include excise taxes. (2)  As reported by segment within MUR. Not representative of expected results as stand-alone company. (3)  Results for 2012 include one additional day due to leap year.


Capital Expenditures

CAPEX BY YEAR $MILLIONS

135

36

168 Maintenance Growth

30

135 Maintenance Growth

2013 CAPEX -‐ $204 Million 2014 CAPEX -‐ $165 Million

149165

204

112100

182

50

150

200

250

100

0 2015E 2014E 2013E 2012A 2011A 2010A


MUSA Projected Financial Metrics 2013

Outlook

($Millions) 2013

Net Inc from Cont Ops 140-‐150

EBITDA (non GAAP) 300-‐320

Capital Expenditures

204

Dividend to Parent Co.

500

Cash Balance 100

Total Debt 600

Total Debt/EBITDA (non GAAP) 1.9X

Number of U.S. StaDons 1,240 Gross Margin -‐ $/Gal (net of gim card) 0.13

S  To determine appropriate debt level for MUSA, sensi3vi3es will be run around key assump3ons u  Fuel margin (average 4-‐yr fuel

margin equals 12 cpg) u  Near – term growth based on

approximately 200 addi3onal sites

S  2013 includes upside from a number of factors which may not repeat year on year u  Strong contribu3on from

midstream u  Unusually high RIN sales prices


Walmart Growth

Same Store Margin Growth

Cost Reduc3on Product Supply & Wholesale

Margin Expansion

Financial Strength Strengths Strengths

Areas of Significant Upside Exposure

• Expand new site growth beyond 60-65 base case • Historically built 100+ sites per year

• Higher fuel margins from price volatility • Consistent fuel discount program • Enhanced merchandising programs • Replacing older 208’s with 1,200 format

• Post Spin overhead cost reduction • Additional scale benefits from new sites and accelerated build rates

• Advantaged product costs and wholesale margins from tight logistics systems • Sustained higher RIN values

• Strategic Options for Ethanol Plants

Strategy


Appendix


Non-GAAP Financial Measure Definitions & Reconciliations

The following list of Non-GAAP financial measure definitions and related reconciliations is intended to satisfy the requirements of Regulation G of the Securities Exchange Act of 1934, as amended. This information is historical in nature. Murphy undertakes no obligation to publicly update or revise any Non-GAAP financial measure definitions and related reconciliations.


For the Years Ended December 31, 2012 2011 2010

Net Income $83,568 $324,020 $157,441

DisconDnued operaDons -‐ (118,747) (14,704) Interest Expense 505 548 3,835 Income Taxes 62,172 132,284 85,029 AccreDon of asset reDrement obligaDons 980 877 773 Impairment of properDes 60,988 -‐ -‐

Adjusted EBIT (non GAAP) $208,213 $338,982 $232,374

DepreciaDon and amorDzaDon 76,622 69,550 60,698

Adjusted EBITDA (non GAAP) $284,835 $408,532 $293,072

Non GAAP Reconciliation Adjusted EBIT and EBITDA

The Company defines Adjusted EBIT as income from continuing operations plus income taxes, net interest expense, impairment of assets, and accretion expense. The Company also defines Adjusted EBITDA as income from continuing operations plus income taxes, net interest expense, depreciation and amortization expense, impairment of assets and accretion expense. Management believes that the presentation of Adjusted EBIT and Adjusted EBITDA provide information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBIT and Adjusted EBITDA are widely accepted financial indicators of a company’s ability to incur and service debt, fund capital expenditures and make distributions to shareholders. These measures are considered to be non-GAAP presentations according to the SEC and should be considered in conjunction with the appropriate GAAP measure. These non GAAP measures should not be viewed in isolation or used as a substitute for an analysis of the Company’s results as reported under GAAP. The amounts shown below are derived from the audited financial statements of Murphy USA Inc. contained in the Form 10 filed with the SEC on May 6, 2013.


For the Years Ended December 31, 2012 2011 2010

Capital Employed: Total current assets $821,962 $588,353 $1,026,691 Less total current liabiliDes (733,909) (492,552) (923,040) Net working capital 88,053 95,801 103,651

Beginning of year net PP&E 1,196,323 1,166,169 1,000,797 End of year net PP&E 1,169,960 1,196,323 1,166,169 Average of BOY and EOY net PP&E 1,183,142 1,181,246 1,083,483

Total capital employed (1) $1,271,195 $1,277,047 $1,187,134 Adjusted EBIT/Capital Employed (non GAAP) (2) 16.4% 26.5% 19.6%

Non GAAP Reconciliation

(1)  Total capital employed is calculated by adding net working capital plus the simple average of the beginning of year and end of year net property, plant and equipment. (2)  Adjusted EBIT/Capital Employed is calculated by dividing the net working capital by the total capital employed calculated in (1) above. Note: The amounts on this slide are per the audited financial statements of Murphy USA Inc. filed with the SEC on Form 10 on May 6, 2013

The Company considers the metric Adjusted EBIT divided by Capital Employed to be an important measure of the use of the Company’s fixed assets and liquidity to maximize investment returns for shareholders. This measure is considered to be non GAAP because of the use of Adjusted EBIT in the calculation. See prior slide for more detail on Adjusted EBIT and a reconciliation of that metric back to net income.


MUSA Retail Strategy

M U R P H Y O I L C O R P O R AT I O N

2013 Analyst Meeting

El Dorado, Arkansas

May 7, 2013

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