EX-99.1 5 d530899dex991.htm INFORMATION STATEMENT Information Statement
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Exhibit 99.1

(Subject to Completion, Dated June 20, 2013)

 

LOGO    [•], 2013

Dear Murphy Oil Corporation Stockholder:

I am pleased to report that the previously announced repositioning of Murphy Oil Corporation (“Murphy Oil”) through the separation of its subsidiary, Murphy USA Inc. (“Murphy USA”), from our remaining businesses is expected to become effective on [•], 2013, on which date Murphy USA, a Delaware corporation, will become an independent public company and will hold, through its subsidiaries, the assets and liabilities associated with Murphy Oil’s U.S. marketing business (as defined herein).

The separation will be completed by way of a pro rata distribution of all the outstanding shares of Murphy USA common stock to our stockholders of record as of 5:00 p.m. New York City time, on [•], 2013, the distribution record date. Each Murphy Oil stockholder of record will receive one share of Murphy USA common stock for every [•] shares of Murphy Oil common stock held by such stockholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. Following the distribution, stockholders may request that their shares of Murphy USA common stock be transferred to a brokerage or other account at any time. No fractional shares of Murphy USA common stock will be issued. The distribution agent for the distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the distribution.

Murphy Oil has received a private letter ruling from the Internal Revenue Service to the effect that, among other things, the distribution of Murphy USA’s common stock to Murphy Oil stockholders, together with certain related transactions, will qualify as a transaction that is generally tax-free for U.S. federal income tax purposes. However, any cash that you receive in lieu of fractional shares generally will be taxable to you. You should consult your tax advisor as to the particular tax consequences of the distribution to you, including potential tax consequences under state, local and non-U.S. tax laws. The separation is also subject to other conditions as described in the enclosed information statement.

The distribution does not require stockholder approval, nor do you need to take any action to receive your shares of Murphy USA common stock. Murphy Oil’s common stock will continue to trade on the New York Stock Exchange under the ticker symbol “MUR.” Murphy USA intends to have its shares of common stock listed on the New York Stock Exchange under the ticker symbol “MUSA.”

The enclosed information statement, which we are mailing to all Murphy Oil stockholders, describes the separation in detail and contains important information about Murphy USA, including its historical combined financial statements. We urge you to read this information statement carefully.

We want to thank you for your continued support of Murphy Oil.

Sincerely,

Steven A. Cossé

President and Chief Executive Officer


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LOGO

[•], 2013

Dear Future Murphy USA Stockholder:

It is our pleasure to welcome you as a future stockholder of Murphy USA Inc. Upon separation from Murphy Oil Corp., we will be a stand-alone company focused primarily on the marketing of retail fuel products and convenience merchandise. While we will be a new company following the separation, our business has a strong history of financial and operating performance. We operate through a chain of 1,172 retail fuel stations in 23 states throughout the Southern and Midwestern United States, as of March 31, 2013. We own the majority of our sites, and most of our locations are adjacent to Walmart stores. Our business will also include certain midstream assets, including product distribution terminals and pipeline positions.

We believe that by continuing to grow with Walmart and focusing on our low price, high volume fuel retail strategy we are ideally positioned to expand our presence in the large and growing demographic of value-oriented consumers. We seek to drive value by generating high returns at our kiosks, through low operating, overhead and capital costs, and utilizing our midstream business to gain a fuel cost advantage. While fuel prices and margins will be volatile, we expect to put in place a capital structure that will allow us to invest through the cycle and provide long-term growth to our stockholders.

We intend to have our shares of common stock listed on the New York Stock Exchange under the ticker symbol “MUSA.”

Our management team is excited about the opportunities ahead of us, and we are committed to unlocking the full potential of Murphy USA. We invite you to learn more about our company and our plans by reading the enclosed material and look forward to updating you on our progress.

Sincerely,

R. Andrew Clyde

President and Chief Executive Officer

Murphy USA Inc.


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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

Preliminary Information Statement

(Subject to Completion, Dated June 20, 2013)

 

LOGO

Information Statement

Murphy USA Inc.

Common Stock

 

 

Murphy Oil Corporation (“Murphy Oil”) is furnishing this Information Statement in connection with the distribution to Murphy Oil stockholders of all of the common stock of Murphy USA Inc. (“Murphy USA”) owned by Murphy Oil, which will be 100 percent of such common stock outstanding immediately prior to the distribution. Murphy USA is currently a wholly owned subsidiary of Murphy Oil and at the time of the distribution will hold, through its subsidiaries, the assets and liabilities associated with Murphy Oil’s U.S. marketing business (as defined herein).

To implement the distribution, Murphy Oil will distribute the shares of Murphy USA common stock on a pro rata basis to the holders of Murphy Oil common stock. Each holder of Murphy Oil common stock will receive one share of common stock of Murphy USA for every [•] shares of Murphy Oil common stock held at 5:00 p.m. New York City time on [•], 2013, the record date for the distribution.

The distribution is expected to occur after the New York Stock Exchange (“NYSE”) market closing on [•], 2013. Immediately after Murphy Oil completes the distribution, Murphy USA will be an independent, publicly traded company. We expect that, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income in connection with the distribution, except with respect to any cash received in lieu of fractional shares.

No vote of Murphy Oil stockholders is required in connection with this distribution. Murphy Oil stockholders will not be required to pay any consideration for the shares of Murphy USA common stock they receive in the distribution, and they will not be required to surrender or exchange shares of their Murphy Oil common stock or take any other action in connection with the distribution.

As Murphy Oil owns all of the outstanding shares of Murphy USA’s common stock, there currently is no public trading market for Murphy USA common stock. We intend to have Murphy USA’s shares of common stock listed on the NYSE under the ticker symbol “MUSA.” Assuming the NYSE authorizes Murphy USA’s common stock for listing, we anticipate that a limited market, commonly known as a “when-issued” trading market, for Murphy USA’s common stock will develop on or shortly before the record date for the distribution and will continue up to and including the distribution date. We expect the “regular-way” trading of Murphy USA’s common stock will begin on the first trading day following the distribution date.

In reviewing this Information Statement, you should carefully consider the matters described in “Risk Factors” beginning on page 16 of this Information Statement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.


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This Information Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this Information Statement is [•], 2013.

Murphy Oil first mailed this Information Statement to Murphy Oil stockholders on or about [•], 2013.


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TABLE OF CONTENTS

 

     Page  

Summary

     1   

Our Business

     1   

Our Competitive Strengths

     2   

Our Business Strategy

     3   

The Separation

     4   

Questions and Answers About the Separation and Distribution

     6   

Summary of the Separation and Distribution

     11   

Summary Risk Factors

     14   

Risk Factors

     16   

Risks Relating to the Separation

     16   

Risks Relating to Our Business

     20   

Risks Relating to Our Industry

     23   

Risks Relating to Our Common Stock

     28   

Selected Combined Financial Data of Murphy USA

     31   

Cautionary Statement Regarding Forward-Looking Statements

     32   

The Separation

     33   

General

     33   

Reasons for the Separation

     33   

The Number of Shares You Will Receive

     33   

Treatment of Fractional Shares

     34   

When and How You Will Receive the Distribution of Murphy USA Shares

     34   

Treatment of Outstanding Compensation Awards

     34   

Treatment of 401(k) Shares

     35   

Results of the Distribution

     35   

Incurrence of Debt

     36   

Material U.S. Federal Income Tax Consequences of the Distribution

     36   

Market for Common Stock

     38   

Trading Between Record Date and Distribution Date

     38   

Conditions to the Distribution

     39   

Agreements with Murphy Oil Corporation

     40   

Transferability of Shares of Our Common Stock

     43   

Reason for Furnishing This Information Statement

     44   

Dividend Policy

     45   

Capitalization

     46   

Business and Properties

     47   

Overview

     47   

Our Competitive Strengths

     47   

Our Business Strategy

     48   

Industry Trends

     49   

Corporate Information

     49   

Description of Our Business

     49   

Competition

     51   

Market Conditions and Seasonality

     52   

Trademarks

     52   

IT Systems and Store Automation

     53   

Environmental

     53   

 

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Sale of Regulated Products

     54   

Safety

     55   

Other Regulatory Matters

     55   

Employees

     55   

Properties

     55   

Legal Proceedings

     56   

Management

     57   

Executive Officers Following the Distribution

     57   

Directors

     58   

Board of Directors Following the Distribution

     58   

Committees of the Board of Directors

     58   

Risk Management

     59   

Compensation Discussion and Analysis

     60   

Executive Compensation

     68   

Non-Employee Director Compensation

     74   

Stock Ownership

     75   

Certain Relationships and Related Transactions

     77   

The Separation from Murphy Oil Corporation

     77   

Related Party Transactions

     77   

Description Of Capital Stock

     78   

General

     78   

Common Stock

     78   

Preferred Stock

     78   

Election and Removal of Directors

     79   

Staggered Board

     79   

Limits on Written Consents

     79   

Stockholder Meetings

     79   

Amendment of Certificate of Incorporation

     79   

Amendment of Bylaws

     79   

Other Limitations on Stockholder Actions

     79   

Limitation of Liability of Directors and Officers

     80   

Anti-Takeover Effects of Some Provisions

     81   

Delaware Business Combination Statute

     81   

Distributions of Securities

     82   

Listing

     82   

Transfer Agent and Registrar

     82   

Where You Can Find More Information

     83   

Unaudited Pro Forma Condensed Combined Financial Statements

     84   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     90   

Executive Overview

     90   

Results of Operations

     92   

Capital Resources and Liquidity

     96   

Contractual Obligations

     98   

Capital Spending

     98   

Critical Accounting Policies

     99   

 

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Quantitative and Qualitative Disclosures About Market Risk

     102   

Interest Rate Risk

     102   

Commodity Price Risk

     102   

Index to Financial Statements

     F-1   

 

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NOTE REGARDING THE USE OF CERTAIN TERMS

We use the following terms to refer to the items indicated:

 

   

“We,” “us,” “our,” “Company” and “Murphy USA,” unless the context requires otherwise, refer to Murphy USA Inc., the entity that at the time of the distribution will hold, through its subsidiaries, the assets and liabilities associated with Murphy Oil’s U.S. marketing business, as defined below, and whose shares Murphy Oil Corporation will distribute in the separation. Where appropriate in context, the foregoing terms also include the subsidiaries of this entity; the use of these terms may be used to describe Murphy Oil’s U.S. marketing business prior to completion of the separation.

 

   

The term “U.S. marketing business” refers to Murphy Oil Corporation’s U.S. retail fueling and related merchandise marketing operations, together with wholesale midstream and ethanol assets. The term “U.S. marketing business” does not include any liabilities arising out of refineries and related facilities previously owned by Murphy Oil Corporation through its subsidiaries, which liabilities will be retained by Murphy Oil Corporation but are accounted for as discontinued operations in the combined financial statements included elsewhere in this Information Statement.

 

   

Except where the context otherwise requires, the terms “Murphy Oil Corporation” and “Murphy Oil” refer to Murphy Oil Corporation, the entity that owns Murphy USA prior to the separation and after the separation will be a separately traded public company consisting primarily of its exploration and production operations.

 

   

Except where the context otherwise requires, the term “distribution” refers to the distribution of all of the shares of Murphy USA common stock owned by Murphy Oil Corporation to stockholders of Murphy Oil Corporation as of the record date.

 

   

The term “separation” refers to the separation of the U.S. marketing business from Murphy Oil Corporation and the creation of an independent, publicly traded company, Murphy USA, holding the assets and liabilities of the U.S. marketing business through its subsidiaries immediately following the distribution.

 

   

The term “distribution date” means the date on which the distribution occurs.

Murphy Oil owns, or at the time of the separation will own, the rights to certain trademarks incorporating the term “Murphy,” including “Murphy USA,” to which we have or will have rights in the United States and other countries. This Information Statement also includes other trademarks of Murphy Oil, Murphy USA and other persons. All trademarks or trade names referred to in this Information Statement are the property of their respective owners.

INDUSTRY DATA

The National Association of Convenience Stores report described herein represents data, research opinions or viewpoints published by the National Association of Convenience Stores. The report speaks as of the original publication date (and not as of the date of this Information Statement) and the opinions expressed in the report are subject to change without notice.

 

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SUMMARY

This summary highlights selected information from this Information Statement relating to Murphy USA, Murphy USA’s separation from Murphy Oil and the distribution of Murphy USA common stock by Murphy Oil to its stockholders. For a more complete understanding of our businesses and the separation and distribution, you should read the entire Information Statement carefully, particularly the discussion set forth under “Risk Factors” beginning on page 16 of this Information Statement, and our audited historical combined financial statements, our unaudited interim historical combined financial statements, our unaudited pro forma condensed combined financial statements and the respective notes to those statements appearing elsewhere in this Information Statement.

Except as otherwise indicated or unless the context otherwise requires, the information included in this Information Statement, including the combined financial statements of Murphy USA for the three months ended March 31, 2013 and 2012 and for the three years ended December 31, 2012, assumes the completion of all the transactions referred to in this Information Statement in connection with the separation and distribution.

Our Business

Upon completion of our separation from Murphy Oil, Murphy USA’s business will consist primarily of marketing of retail motor fuel products and convenience merchandise through a large chain of 1,172 (as of March 31, 2013) retail stations owned and operated by Murphy USA, almost all of which are in close proximity to Walmart stores. Our retail stations are located in 23 states, primarily in the Southern and Midwestern United States. Of our stations, 1,016 are branded Murphy USA and 156 are standalone Murphy Express locations (as of March 31, 2013). Our retail stations under the brand name Murphy USA® participate in the Walmart discount program that we offer at most locations. The Walmart discount program offers a cents-off per gallon purchased for fuel when using specific payment methods as decided by Murphy USA and Walmart. The amount of the discount offered can vary based on many factors, including state laws. Our Murphy Express branded stations are not connected to the Walmart discount program but are similar to the Murphy USA sites in most other ways, including the types of fuel and merchandise offerings available to our customers.

Our business will also include certain midstream assets, including product distribution terminals and pipeline positions. As an independent publicly traded company, we believe we will be a low-price, high volume fuel retailer selling convenience merchandise through low cost kiosks with key strategic relationships and experienced management. At March 31, 2013, we had $1.9 billion in assets. For the year ended December 31, 2012, we generated $19.7 billion in revenues and earned $84 million in net income. For the three months ended March 31, 2013, we generated $4.5 billion in revenue and earned $22 million in net income.

Murphy USA was incorporated in Delaware on March 1, 2013 and will, at the time of the distribution, hold, through its subsidiaries, the assets and liabilities of Murphy Oil’s U.S. marketing business. Murphy USA’s headquarters will be located at 200 Peach Street, El Dorado, Arkansas 71730 and its general telephone number is (870) 875-7600. Our Internet website is www.murphyusa.com. Our website and the information contained on that site, or connected to that site, are not incorporated by reference into this Information Statement.

Elsewhere in this Information Statement we provide a more detailed description of the U.S. marketing business that will be separated from Murphy Oil’s other businesses. Following the separation, Murphy USA will be an independent, publicly traded company. Murphy Oil will not retain any ownership interest in Murphy USA. In connection with the separation, Murphy Oil and Murphy USA will enter into a number of agreements that will govern the relationship between Murphy Oil and Murphy USA following the distribution. See “The Separation” included elsewhere in this Information Statement.

Our business is subject to various risks. For a description of these risks, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Information Statement.

 

 

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Our Competitive Strengths

Strategic and complementary relationship with Walmart

Of our network of 1,172 retail gasoline stations (as of March 31, 2013), more than 1,000 are situated on prime locations connected to Walmart stores. We believe our proximity to Walmart stores generates significant traffic to our retail stations while our competitively priced gasoline and convenience offerings appeal to our shared customers. We also collaborate with Walmart on a fuel discount program which we believe enhances the customer value proposition as well as the competitive position of both Murphy USA and Walmart with respect to our peers. We began our relationship with Walmart in 1996 and in December 2012 we signed a new agreement that allows us to build approximately 200 new sites on Walmart locations, which we expect to complete over the next three years. We believe Walmart will continue to serve as a strategic partner as we pursue further organic growth opportunities on existing and new Walmart locations in both our core and adjacent geographies.

Winning proposition with value-oriented consumers

Our competitively priced fuel is a compelling offering for value-oriented consumers. Despite a flat long-term outlook in overall gasoline demand, we believe value-oriented consumers represent a growing demand segment. In combination with our high traffic locations, our low gasoline prices drive high fuel volumes and gross profit. In addition, we lead the industry in per-site tobacco sales with our low-priced tobacco products and total store sales per square foot as we also sell a growing assortment of low-priced convenience items that complement Walmart’s primary in-store product offering.

Low cost retail operating model

We operate our retail gasoline stations with a strong emphasis on fuel sales complemented by a focused convenience offering that allows for a smaller store footprint than many of our competitors. Almost all of our stations are standardized 208 or 1,200 square foot kiosks, which we believe have very low capital expenditure and maintenance requirements relative to our competitors. In addition, many of our stations require only one or two attendants to be present during business hours and the majority of our kiosks are located on Company-owned property and do not incur any rent expense. The combination of a focused convenience offering and standardized smaller footprint stores allows us to achieve lower overhead costs, on-site costs and labor costs compared to competitors with a larger store format. According to the 2011 National Association of Convenience Stores’ State of the Industry Survey, we operate at approximately 57% of the average monthly operating costs for top quartile performing stores in the industry. In addition, we operate among the highest industry safety standards and had a Total Recordable Incident Rate (TRIR) and Days Away from Work (DAW) rate that was substantially lower than the industry averages in 2011 using the most current published data by the Bureau of Labor Statistics. Our focus on safety and cost advantages translate into a lower fuel breakeven requirement that allows us to weather extended periods of lower fuel margins.

Advantaged fuel supply

We source fuel at or below the industry benchmark prices due to the diversity of fuel options available to us in the bulk and rack product markets, our shipper’s status on major pipeline systems, and our access to numerous terminal locations. In addition, we have a strong distribution system in which we utilize a “Best Buy” method that dispatches third-party tanker trucks to the most favorably priced terminal to load products for each Murphy USA site, further reducing our fuel product costs. By participating in the broader fuel supply chain, we believe our business model provides upside exposure to opportunities to enhance margins and volume. For example, we anticipate being able to increase revenue by selling Renewable Identification Numbers (RINs) generated by ethanol and bio-diesel blending. We also believe we can increase volumes by shifting non-contractual wholesale volumes to higher margin retail sales. Our participation in the broader fuel supply chain provides us with added flexibility, especially during periods of significant price volatility.

 

 

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Resilient financial profile

Our predominantly fee-simple asset base, ability to generate attractive gross margins through our low price, high volume strategy, and our low overhead costs should help us to endure prolonged periods of commodity price volatility and compressed fuel margins. To support our operating model, in connection with the separation, we intend to incur a modest amount of leverage through a new revolving credit facility and the potential issuance of term debt. We expect that our strong cash position and availability under our revolving credit facility will provide us with a significant level of liquidity to help maintain a disciplined growth capital expenditure program through periods of both high and low fuel margins.

Our Business Strategy

Grow organically with Walmart

We intend for our relationship with Walmart to be a key driver of our organic growth over the next several years. We expect to build approximately 200 sites in core markets on or near Walmart locations over the next three years and are evaluating opportunities for additional growth beyond those locations. Over 1,000 of our locations currently participate in our fuel discount program with Walmart which reinforces Walmart’s low price philosophy. In addition, in the near term, we will seek to rebrand additional Murphy Express sites as Murphy USA and connect these sites to the fuel discount program. We will continue to work with Walmart on the implementation and improvement of the fuel discount program as we believe it is an effective promotional tool for maximizing fuel volumes and investment returns.

Enhance kiosk economics to improve investment returns

We plan to continuously evaluate our kiosk strategy in an effort to maximize our site economics and return on investment. As part of that strategy, we are continually refining our new 1,200 square foot kiosk design to create a foundation for increasing higher-margin non-tobacco sales and diversifying our merchandise offerings. For example, we continue to tailor our product offerings to complement the retail selection within Walmart stores, such as by offering products in a variety of quantities and sizes, or stock keeping units (SKUs), that are more convenience-oriented. By implementing new merchandizing, space management and workforce planning capabilities, we expect to further optimize merchandise revenue, labor needs and overall site returns.

Improve functional infrastructure to lower overhead costs

We believe we will be better positioned to manage our cost structure, execute a more scalable business model and implement certain technology and business efficiency initiatives as an independent company. In order to do this successfully, we will focus heavily on the development of our employees and foster a high performance culture where incentives are aligned with business performance. We believe that through our planned growth and efficiency initiatives, we can achieve reductions in overhead costs to support an overall improvement in our site returns.

Focus midstream participation

We plan to continue to focus our midstream efforts on activities that enhance our ability to be a low price retail fuel leader, by optimizing our fuel supply contracts to capitalize on market dynamics whenever possible and minimizing physical midstream asset ownership. We also intend to allocate capital and human resources only to midstream assets that provide a specific retail advantage. In considering strategic alternatives for midstream assets that do not directly benefit our retail operations, such as our ethanol plants, we intend to pursue actions that will maximize shareholder value and enhance our ability to execute on our planned retail strategy after our separation from Murphy Oil.

 

 

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Focus on long-term investment

We maintain a portfolio of fee-simple assets and we intend to establish an appropriate debt structure in connection with the separation that will allow us to be resilient in environments of fuel price and margin volatility. We believe our strong financial position should allow us to profitably execute on our low-cost, high volume retail strategy and our organic growth strategy through periods of both high and low fuel margins. Furthermore, we will consider all alternatives for returning excess earnings or capital with a focus on maximizing shareholder value.

The Separation

Overview

On October 16, 2012, the board of directors of Murphy Oil approved a plan to distribute to its stockholders all of the shares of common stock of Murphy USA. Murphy USA is currently a wholly owned subsidiary of Murphy Oil and at the time of the distribution will hold, through its subsidiaries, the assets and liabilities associated with Murphy Oil’s U.S. marketing business. Immediately following the distribution, Murphy Oil stockholders as of the record date will own 100 percent of the outstanding shares of common stock of Murphy USA.

Before the distribution, we will enter into a Separation and Distribution Agreement and several other agreements with Murphy Oil to effect the separation and provide a framework for our relationship with Murphy Oil after the separation. These agreements will provide for the allocation between Murphy USA and Murphy Oil of Murphy Oil’s assets, liabilities and obligations subsequent to the separation (including with respect to transition services, employee matters, real and intellectual property matters, tax matters and certain other matters). Murphy USA and Murphy Oil will also enter into a Transition Services Agreement which will provide for various corporate services.

The Murphy Oil board of directors believes separating the U.S. marketing business from Murphy Oil’s exploration and production business through the distribution is in the best interests of Murphy Oil and its stockholders and has concluded the separation will provide Murphy Oil and Murphy USA with a number of opportunities and benefits, including the following:

 

   

Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own market and opportunities. The separation of the U.S. marketing business from the exploration and production business will enable Murphy Oil and Murphy USA to perform and operate in a manner that is consistent with current internal and external views of the businesses. The management of each resulting corporate group will be able to concentrate on its core concerns and growth opportunities, and will have increased flexibility to design and implement corporate policies and strategies based on the characteristics of its business.

 

   

Resource Allocation and Capital Deployment. Allow each company to allocate resources and deploy capital in a manner consistent with its own priorities. Transactions that are not available to Murphy Oil or Murphy USA while Murphy USA remains integrated with Murphy Oil will be available once the two businesses are separated. Both businesses will have direct access to the debt and equity capital markets to fund their respective growth strategies. In the exploration and production business, changes in the business environment, such as increased competition from national oil companies, require a faster and more flexible response to emerging opportunities. As an independent exploration and production business, Murphy Oil will have greater flexibility to respond to changing markets and new opportunities. Similarly, Murphy USA will be better positioned to meet the changes in demand in the downstream retail fueling sector.

 

   

Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their respective financial characteristics and make investment decisions based on those characteristics. Analysts who currently track the performance of Murphy Oil specialize primarily in exploration and production businesses. Because investors and analysts underemphasize the U.S. retail fuel business in making investment decisions and preparing analyses of Murphy Oil, the current integration of Murphy Oil’s exploration and

 

 

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production business and U.S. marketing business interferes with the ability of investors and analysts to properly value the two businesses. Separating the two businesses will provide investors with a more targeted investment opportunity so that investors interested in retail fueling companies will have the opportunity to acquire stock of Murphy USA as an independent U.S. marketing business. As a result, the separation may result in a combined post-separation trading value in excess of the current trading value of Murphy Oil.

The distribution of our common stock as described in this Information Statement is subject to the satisfaction or waiver of certain conditions. For more information, see “Risk Factors—Risks Relating to the Separation” and “The Separation—Conditions to the Distribution” included elsewhere in this Information Statement.

 

 

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Questions and Answers About the Separation and Distribution

 

Q: Why is Murphy Oil separating the U.S. marketing business?

 

A: Murphy Oil’s board of directors and management believe separating the U.S. marketing business will have the following benefits: it will enable (1) the management team of each company to focus on its own strategic priorities with financial targets that best fit its own market and opportunities; (2) each company to allocate resources and deploy capital in a manner consistent with its own priorities; and (3) investors, both current and prospective, to value the two companies based on their respective financial characteristics and make investment decisions based on those characteristics.

 

Q: How will Murphy Oil accomplish the separation of Murphy USA?

 

A: The separation involves Murphy Oil’s distribution to its stockholders of all the shares of our common stock. Following the distribution, we will be a publicly traded company independent from Murphy Oil, and Murphy Oil will not retain any ownership interest in our Company.

 

Q: What will I receive in the distribution?

 

A: Murphy Oil will distribute one share of Murphy USA common stock for every [•] shares of Murphy Oil common stock outstanding as of the record date. You will pay no consideration nor give up any portion of your Murphy Oil common stock to receive shares of our common stock in the distribution.

 

Q: What is the record date for the distribution, and when will the distribution occur?

 

A: The record date is [•], 2013, and ownership will be determined as of 5:00 p.m., New York City time, on that date. When we refer to the “record date,” we are referring to that time and date. Murphy Oil will distribute shares of Murphy USA common stock on [•], 2013, which we refer to as the distribution date.

 

Q: As a holder of shares of Murphy Oil common stock as of the record date, what do I have to do to participate in the distribution?

 

A: Nothing. Stockholders of Murphy Oil common stock on the record date are not required to pay any cash or deliver any other consideration, including any shares of Murphy Oil common stock, for the shares of our common stock to be distributed to them. No stockholder approval of the distribution is required or sought. You are not being asked for a proxy.

 

Q: Why is no stockholder vote required to approve the separation and its material terms?

 

A: Murphy Oil is incorporated in Delaware. Delaware law does not require a shareholder vote to approve the separation because the separation does not constitute a sale, lease or exchange of all or substantially all of the assets of Murphy Oil.

 

Q: How will fractional shares be treated in the separation?

 

A: Murphy Oil will not distribute any fractional shares of Murphy USA common stock to Murphy Oil stockholders. Fractional shares of Murphy USA common stock to which Murphy Oil stockholders of record would otherwise be entitled will be aggregated into whole shares and sold in the open market at prevailing prices by the distribution agent for the distribution. The net cash proceeds from the sales will be distributed pro rata to each holder who would otherwise have been entitled to receive a fractional share in the distribution. Proceeds from these sales will generally result in a taxable gain or loss to those stockholders. Each stockholder entitled to receive cash proceeds from these shares should consult his, her or its tax advisor as to such stockholder’s particular circumstances. The tax consequences of the distribution are described in more detail under “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”
 

 

 

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Q: If I sell my shares of Murphy Oil common stock before or on the distribution date, will I still be entitled to receive Murphy USA shares in the distribution with respect to the sold shares?

 

A: Beginning on or shortly before the record date and continuing up to and including the distribution date, we expect there will be two markets in Murphy Oil common stock: a “regular-way” market and an “ex-distribution” market. Shares of Murphy Oil common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common stock to be distributed in the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to receive shares of our common stock to be distributed in the distribution, so that holders who initially sell Murphy Oil shares ex-distribution will still be entitled to receive shares of our common stock even though they have sold their shares of Murphy Oil common stock after the record date. Therefore, if you owned shares of Murphy Oil common stock on the record date and sell those shares on the regular-way market before the distribution date, you will also be selling the right to receive the shares of our common stock that would have been distributed to you in the distribution. If you own shares of Murphy Oil common stock at 5:00 p.m. New York City time on the record date and sell these shares in the ex-distribution market on any date up to and including the distribution date, you will still receive the shares of our common stock that you would be entitled to receive in respect of your ownership of the shares of Murphy Oil common stock that you sold. You are encouraged to consult with your financial advisor regarding the specific implications of selling your Murphy Oil common stock prior to or on the distribution date.

 

Q: Will the distribution affect the number of shares of Murphy Oil I currently hold?

 

A: No, the number of shares of Murphy Oil common stock held by a stockholder will be unchanged. The market value of each Murphy Oil share, however, will decline to reflect the impact of the distribution.
Q: What are the U.S. federal income tax consequences of the distribution of shares of Murphy USA common stock to U.S. stockholders?

 

A: Murphy Oil has received a private letter ruling from the U.S. Internal Revenue Service (“IRS”), and expects to obtain an opinion of counsel, to the effect that the distribution will qualify under the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” as a transaction that is tax-free both to Murphy Oil and to its shareholders. On the basis the distribution so qualifies, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income in connection with the distribution, except with respect to any cash received in lieu of fractional shares. Murphy Oil may waive the condition that requires it to obtain the opinion of counsel discussed above. If, prior to the distribution date, there is a change in tax consequences that would be material to Murphy Oil or its shareholders, such change would be described in an amendment to the Form 10 of which this Information Statement forms a part.

You should consult your tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws, which may result in the distribution being taxable to you. For more information regarding the material U.S. federal income tax consequences of the distribution and a description of the private letter ruling and the tax opinion that Murphy Oil expects to receive, see the summary under “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

 

Q: How will I determine the tax basis I will have in my Murphy Oil shares after the distribution and the Murphy USA shares I receive in the distribution?

 

A:

Generally, for U.S. federal income tax purposes, your aggregate basis in your shares of Murphy Oil common stock and the shares of Murphy USA common stock you receive in the distribution (including any fractional shares for which cash is received) will equal the

 

 

 

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  aggregate basis of Murphy Oil common stock held by you immediately before the distribution. This
  aggregate basis should be allocated between your shares of Murphy Oil common stock and the shares of Murphy USA common stock you receive in the distribution (including any fractional shares for which cash is received) in proportion to the relative fair market value of each immediately following the distribution. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

 

Q: Will I receive a stock certificate for Murphy USA shares distributed as a result of the distribution?

 

A: No. Registered holders of Murphy Oil common stock who are entitled to participate in the distribution will receive a book-entry account statement reflecting their ownership of Murphy USA common stock. For additional information, registered stockholders in the United States, Canada or Puerto Rico should contact Murphy Oil’s transfer agent, Computershare Trust Company, N.A., in writing at 250 Royall St Canton, MA 02021, Toll Free 1-877-373-6374 or through its website at www.computershare.com/investor. Stockholders from outside the United States, Canada and Puerto Rico may call 1-781-575-2879. See “The Separation—When and How You Will Receive the Distribution of Murphy USA Shares.”

 

Q: What if I hold my shares through a broker, bank or other nominee?

 

A: Murphy Oil stockholders who hold their shares through a broker, bank or other nominee will have their brokerage account credited with Murphy USA common stock. For additional information, those stockholders should contact their broker or bank directly.

 

Q: What if I have stock certificates reflecting my shares of Murphy Oil common stock? Should I send them to the transfer agent or to Murphy Oil?

 

A: No, you should not send your stock certificates to the transfer agent or to Murphy Oil. You should retain your Murphy Oil stock certificates.

 

Q: Can Murphy Oil decide to cancel the distribution of the Murphy USA common stock even if all the conditions have been met?
A: Yes. Murphy Oil has the right to terminate the distribution at any time prior to the distribution, even if all of the conditions to the distribution are satisfied.

 

Q: Will Murphy USA incur any debt prior to or at the time of the separation?

 

A: Yes. We intend to enter into new financing arrangements in anticipation of the separation and distribution. We expect to incur approximately $600 to $700 million of new debt, which we intend to use in part to fund a cash dividend to Murphy Oil immediately prior to the separation, and for working capital and other general corporate purposes. See “The Separation—Incurrence of Debt.”

Following the separation, our debt obligations could restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from Murphy Oil’s other businesses may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to the businesses collectively. Also, our business, financial condition, results of operations and cash flows could be harmed by a deterioration of our credit profile or by factors adversely affecting the credit markets generally. See “Risk Factors—Risks Relating to the Separation.”

 

Q: Does Murphy USA intend to pay cash dividends?

 

A: The declaration and amount of all future dividends will be determined by our board of directors and will depend on our financial condition, earnings, cash flows, capital requirements, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and any other factors that our board of directors believes are relevant. We will include more information regarding our dividend policy in an amendment to the Form 10 of which this Information Statement forms a part. See “Dividend Policy.”

 

Q: Will Murphy USA common stock trade on a stock market?

 

A:

Yes. Currently, there is no public market for our common stock. We intend to have Murphy USA’s shares of common stock listed on the NYSE under the ticker symbol “MUSA,” subject to official notice of

 

 

 

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  issuance. We cannot predict the trading prices for our common stock when such trading begins.

 

Q: Will my shares of Murphy Oil common stock continue to trade?

 

A: Yes. Murphy Oil common stock will continue to be listed and trade on the NYSE under the ticker symbol “MUR.”

 

Q: Will the separation affect the trading price of my Murphy Oil stock?

 

A: Yes. The trading price of shares of Murphy Oil common stock immediately following the distribution is expected to be lower than immediately prior to the distribution because the trading price will no longer reflect the value of the U.S. marketing business. We cannot provide you with any assurance regarding the price at which the Murphy Oil shares will trade following the separation.

 

Q: What will happen to outstanding Murphy Oil stock options, restricted stock units (“RSUs”), performance units, stock appreciation rights, and phantom units?

 

A: We expect that incentive compensation awards generally will be treated as follows:

 

   

Outstanding vested stock options will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation. Employees of Murphy USA will have until the earlier of two years from the date of the separation or the stated expiration date of the option to exercise these adjusted options.

 

   

Any unvested stock options and stock appreciation rights held by employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation.

 

   

Murphy USA will replace any outstanding unvested stock options and stock appreciation rights held by individuals who are or will become employees of Murphy USA with long-term

   

Murphy USA incentive awards of generally equivalent value.

 

   

Phantom units will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

Non-employee director RSU awards will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are or will become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of such awards on the date of the separation. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance of the RSUs will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

   

Performance units that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance of the performance units will be replaced by Murphy Oil substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

 

 

 

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Performance units that are held by current employees of Murphy Oil who are or will become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance of the performance units will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

Q: What will the relationship between Murphy Oil and Murphy USA be following the separation?

 

A: After the separation, Murphy Oil will not own any shares of Murphy USA common stock, and each of Murphy Oil and Murphy USA will be independent, publicly traded companies with their own management teams and Boards of Directors. However, in connection with the separation, we will enter into a number of agreements with Murphy Oil that, among other things, governs the separation and allocates responsibilities for obligations arising before and after the separation, including, among others, obligations relating to our employees, taxes and real and intellectual property. See “The Separation—Agreements with Murphy Oil Corporation.”

 

Q: Will I have appraisal rights in connection with the separation and distribution?

 

A: No. Holders of Murphy Oil common stock are not entitled to appraisal rights in connection with the separation and distribution.
Q: Who is the transfer agent for your common stock?

 

A: Computershare Trust Company, N.A.

 

Q: Who is the distribution agent for the distribution?

 

A: Computershare Trust Company, N.A.

 

Q: Who can I contact for more information?

 

A: If you have questions relating to the mechanics of the distribution of Murphy USA shares, you should contact the distribution agent:

Computershare Trust Company, N.A.

250 Royall St

Canton, MA 02021

Toll Free: 1-877-373-6374

International: 1-781-575-2879

Shareholder Services and ESPP: 1-888-239-5303

Before the separation, if you have questions relating to the separation and distribution, you should contact Murphy Oil at:

Investor Relations

Murphy Oil Corporation

200 Peach Street, P.O. Box 7000

El Dorado, Arkansas

Attention: Barry Jeffery, Director

Telephone: (870) 864-6501

Email: bjeffery@murphyoilcorp.com

 

 

 

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Summary of the Separation and Distribution

The following is a summary of the material terms of the separation, distribution and other related transactions.

 

Distributing company    Murphy Oil Corporation, a Delaware corporation. After the distribution, Murphy Oil will not own any shares of Murphy USA common stock.
Distributed company    Murphy USA Inc., a Delaware corporation, is a wholly owned subsidiary of Murphy Oil and, at the time of the distribution, will hold, through its subsidiaries, all of the assets and liabilities of Murphy Oil’s U.S. marketing business. After the distribution, Murphy USA will be an independent, publicly traded company.
Distributed company structure    Murphy USA Inc. is a holding company. At the time of the distribution it will own, directly or indirectly, the shares of a number of subsidiaries operating its businesses. Its main operating company will be Murphy Oil USA, Inc., which is currently the primary operating subsidiary of Murphy Oil’s U.S. marketing business.
Record date    The record date for the distribution is 5:00 p.m. New York City time on [•], 2013.
Distribution date    The distribution date is [•], 2013.
Distributed securities    Murphy Oil Corporation will distribute 100 percent of the shares of Murphy USA common stock outstanding immediately prior to the distribution. Based on the approximately [•] shares of Murphy Oil common stock outstanding on [•], 2013, and applying the distribution ratio of one share of Murphy USA common stock for every [•] shares of Murphy Oil common stock, Murphy Oil will distribute approximately [•] shares of Murphy USA common stock to Murphy Oil stockholders who hold Murphy Oil common stock as of the record date.
Distribution ratio    Each holder of Murphy Oil common stock will receive one share of Murphy USA common stock for every [•] shares of Murphy Oil common stock held at 5:00 p.m. New York City time on [•], 2013.
Fractional shares    Murphy Oil Corporation will not distribute any fractional shares of Murphy USA common stock to Murphy Oil stockholders. Instead, as soon as practicable on or after the distribution date, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds, net of brokerage fees and commissions, transfer taxes and other costs after making appropriate deductions of the amounts required to be held for United States federal income tax purposes, if any, from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the

 

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   distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders for U.S. federal income tax purposes as described in “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution” in this Information Statement.
Distribution method    Murphy USA common stock will be issued only by direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to stockholders, as is the case in this distribution.
Conditions to the distribution    The distribution is subject to the satisfaction or waiver by Murphy Oil of the following conditions, as well as other conditions described in this Information Statement in “The Separation—Conditions to the Distribution”:
  

•      The U.S. Securities and Exchange Commission (“SEC”) shall have declared effective our registration statement on Form 10, of which this Information Statement is a part, under the Securities Exchange Act of 1934, as amended, and no stop order suspending the effectiveness of our Form 10 registration statement shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the SEC.

 

•      Our common stock to be delivered in the distribution shall have been approved for listing on the NYSE, subject to official notice of issuance.

 

•      Murphy Oil shall have received a private letter ruling from the IRS (which Murphy Oil has received) and an opinion of counsel, in each case reasonably satisfactory to Murphy Oil, confirming the qualification of the distribution as tax-free to Murphy Oil stockholders for U.S. federal income tax purposes.

 

•      Any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operations of our business after the distribution date substantially as conducted as of the date of the Separation and Distribution Agreement shall have been obtained.

 

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•       No event or development shall have occurred or exist that, in the judgment of Murphy Oil’s board of directors, in its sole discretion, makes it inadvisable to effect the distribution.

 

•       A credit facility should have been made available to Murphy USA by its lenders on terms and in an amount satisfactory to Murphy Oil.

   The fulfillment of the foregoing conditions does not create any obligations on Murphy Oil’s part to effect the distribution, and Murphy Oil’s board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the distribution, including by accelerating or delaying the timing of the consummation of all or part of the distribution, at any time prior to the distribution date.
Stock exchange listing    We intend to have our shares of common stock authorized for listing on the NYSE under the ticker symbol “MUSA,” subject to official notice of issuance.
Dividend policy    The declaration and amount of all future dividends will be determined by our board of directors and will depend on our financial condition, earnings, cash flows, capital requirements, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and any other factors that our board of directors believes are relevant. We will include more information regarding our dividend policy in an amendment to the Form 10 of which this Information Statement forms a part. For more information, see “Dividend Policy.”
Transfer agent    Computershare Trust Company, N.A.
U.S. federal income tax consequences    The distribution is intended to qualify for U.S. federal income tax purposes as a transaction that is tax-free both to Murphy Oil and to its shareholders. Murphy Oil shareholders will not recognize gain in connection with the distribution, except with respect to any cash received in lieu of fractional shares. For more information regarding the potential U.S. federal income tax consequences to you of the distribution, see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

 

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Summary Risk Factors

We are subject to a number of risks, including risks related to the separation, distribution and other related transactions. The following list of risk factors is not exhaustive. Please read “Risk Factors” carefully for a more thorough description of these and other risks.

Risks Relating to the Separation

 

   

We may not realize the potential benefits from the separation, and our historical combined and pro forma financial information is not necessarily indicative of our future prospects.

 

   

We have no history operating as an independent public company. We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company, and we may experience increased ongoing costs in connection with being an independent public company.

 

   

Until the distribution occurs, Murphy Oil has sole discretion to change the terms of the distribution in ways that may be unfavorable to us.

 

   

In connection with our separation from Murphy Oil, Murphy Oil will indemnify us for certain liabilities and we will indemnify Murphy Oil for certain liabilities. If we are required to act under these indemnities to Murphy Oil, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. The Murphy Oil indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and Murphy Oil may not be able to satisfy its indemnification obligations to us in the future.

 

   

After the separation, Murphy Oil’s insurers may deny coverage to us for losses associated with occurrences prior to the separation. Furthermore, there can be no assurance that we will be able to obtain insurance coverage following the separation on terms that justify its purchase, and any such insurance may not be adequate to offset costs associated with certain events.

 

   

Following the separation, we will have debt obligations that could restrict our business and adversely impact our financial condition, results of operations or cash flows. In addition, the separation of our business from Murphy Oil may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

 

   

We potentially could have received better terms from unaffiliated third parties than the terms we receive in our agreements with Murphy Oil.

 

   

Members of our board of directors and management may have actual or potential conflicts of interest because of their ownership of shares of common stock of Murphy Oil and the overlap of up to 50% of our Board with the board of directors of Murphy Oil.

Risks Relating to Our Business

 

   

Volatility in the global prices of oil and petroleum products and general economic conditions that are largely out of our control, as well as seasonal variations in fuel pricing, can significantly affect our operating results.

 

   

Our ability to continue to generate revenue and operating income depends on our continued relationship with Walmart.

 

   

We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party supply and transportation of refined products.

 

   

Changes in credit card expenses could reduce our gross margin, especially on gasoline.

 

   

Walmart retains certain rights in its agreements with us, which may adversely impact our ability to conduct our business.

 

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Risks Relating to Our Industry

 

   

We operate in a highly competitive industry, which could adversely affect us in many ways, including our profitability, our ability to grow, and our ability to manage our businesses.

 

   

Changes in consumer behavior and travel as a result of changing economic conditions, the development of alternative energy technologies or otherwise could affect our business.

 

   

Our operations and earnings have been and will continue to be affected by worldwide political developments.

 

   

Our business is subject to operational hazards and risks normally associated with the marketing of petroleum products.

Risks Relating to Our Common Stock

 

   

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the distribution.

 

   

A large number of our shares are or will be eligible for future sale, which may cause the market price for our common stock to decline.

 

   

Because we do not expect our common stock will be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices, significant amounts of our common stock will likely need to be sold in the open market where they may not meet with offsetting new demand.

 

   

Provisions in our Certificate of Incorporation and Bylaws to become effective on the distribution date and certain provisions of Delaware law could delay or prevent a change in control of us.

 

   

We may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

 

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RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained in this Information Statement. Some of these risks relate principally to our separation from Murphy Oil, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock.

Our business, prospects, financial condition, results of operations or cash flows could be materially and adversely affected by any of these risks, and, as a result, the trading price of our common stock could decline.

Risks Relating to the Separation

We may not realize the potential benefits from the separation, and our historical combined and pro forma financial information is not necessarily indicative of our future prospects.

We may not realize the potential benefits we expect from our separation from Murphy Oil. We have described those anticipated benefits elsewhere in this Information Statement. See “The Separation—Reasons for the Separation.” In addition, we will incur significant costs, including those described below, which may exceed our estimates, and we will incur some negative effects from our separation from Murphy Oil, including loss of access to some of the financial, managerial and professional resources from which we have benefited in the past.

Our historical combined and unaudited pro forma condensed combined financial information is not necessarily indicative of our future financial condition, future results of operations or future cash flows, nor does it reflect what our financial condition, results of operations or cash flows would have been as an independent public company during the periods presented. In particular, the historical combined financial information is not necessarily indicative of our future financial condition, results of operations or cash flows primarily because of the following factors:

 

   

Our historical combined financial results reflect allocations of expenses for services historically provided by Murphy Oil, and those allocations may be significantly lower than the comparable expenses we would have incurred as an independent company.

 

   

Our working capital requirements historically have been satisfied as part of Murphy Oil’s corporate-wide cash management programs, and our cost of debt and other capital may significantly differ from that reflected in our historical combined financial statements.

 

   

The historical combined financial information may not fully reflect the costs associated with being an independent public company, including significant changes that may occur in our cost structure, management, financing arrangements and business operations as a result of our separation from Murphy Oil, including all the costs related to being an independent public company.

 

   

The historical combined financial information may not fully reflect the effects of certain liabilities that we will incur or assume.

We based the pro forma adjustments on available information and assumptions that may prove not to be accurate. In addition, our unaudited pro forma condensed combined financial information may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma condensed combined financial statements do not reflect what our financial condition, results of operations or cash flows would have been as an independent public company and is not necessarily indicative of our future financial condition or future results of operations.

Please refer to “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and the notes to those statements included elsewhere in this Information Statement.

 

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We have no history operating as an independent public company. We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company, and we may experience increased ongoing costs in connection with being an independent public company.

We have historically used Murphy Oil’s corporate infrastructure to support our business functions, including information technology systems. The expenses related to establishing and maintaining this infrastructure were spread among all of Murphy Oil’s businesses. Following the separation and after the expiration of the Transition Services Agreement, we will no longer have access to Murphy Oil’s infrastructure, and we will need to establish and maintain our own. We expect to incur costs beginning in 2013 to establish the necessary infrastructure. See “Unaudited Pro Forma Condensed Combined Financial Statements.”

Murphy Oil currently performs many important corporate functions for us, including some treasury and payroll, tax administration and compliance, human resources, compensation and benefits, legal and other services. We currently compensate Murphy Oil for many of these services on a cost-allocation basis. Following the separation, Murphy Oil will continue to provide some of these services to us on a transitional basis, generally for a period of up to 18 months, with a possible extension of 6 months, pursuant to a Transition Services Agreement that we will enter into with Murphy Oil. For more information regarding the Transition Services Agreement, see “The Separation—Agreements with Murphy Oil Corporation—Transition Services Agreement.” Murphy Oil may not successfully execute all these functions during the transition period or we may have to expend significant efforts or costs materially in excess of those estimated under the Transition Services Agreement. Any interruption in these services could have a material adverse effect on our business, financial condition, results of operation and cash flows. In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf. The costs associated with performing or outsourcing these functions may exceed the amounts reflected in our historical combined financial statements or that we have agreed to pay Murphy Oil during the transition period. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, financial condition, results of operations and cash flows.

Currently, we are not directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” After the separation, we will be directly subject to reporting and other obligations under the Exchange Act, and we expect to be compliant with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will require, in the future, annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing the effectiveness of these controls. These reporting and other obligations will place significant demands on our management and our administrative and operational resources, including accounting resources.

Until the distribution occurs, Murphy Oil has sole discretion to change the terms of the distribution in ways that may be unfavorable to us.

Until the distribution occurs, Murphy USA will be a wholly owned subsidiary of Murphy Oil. The distribution and separation remain subject to final approval by the board of Murphy Oil. Accordingly, Murphy Oil has the sole and absolute discretion to determine and change the terms of the distribution, including the establishment of the record date and distribution date. These changes could be unfavorable to us. In addition, Murphy Oil may decide at any time prior to the distribution not to proceed with the separation or the distribution.

In connection with our separation from Murphy Oil, Murphy Oil will indemnify us for certain liabilities and we will indemnify Murphy Oil for certain liabilities. If we are required to act under these indemnities to Murphy Oil, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. The Murphy Oil indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and Murphy Oil may not be able to satisfy its indemnification obligations to us in the future.

Pursuant to the Separation and Distribution Agreement and certain other agreements with Murphy Oil, Murphy Oil will agree to indemnify us for certain liabilities, and we will agree to indemnify Murphy Oil for certain liabilities, as discussed further in “The Separation—Agreements with Murphy Oil Corporation.” Indemnities that we may be required to provide Murphy Oil are not subject to any cap, may be significant and could negatively

 

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impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities that Murphy Oil has agreed to retain, and under certain circumstances, we may be subject to continuing contingent liabilities of Murphy Oil following the separation. Further, Murphy Oil may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Murphy Oil any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.

After the separation, Murphy Oil’s insurers may deny coverage to us for losses associated with occurrences prior to the separation. Furthermore, there can be no assurance that we will be able to obtain insurance coverage following the separation on terms that justify its purchase, and any such insurance may not be adequate to offset costs associated with certain events.

In connection with the separation, we will enter into agreements with Murphy Oil to address several matters associated with the separation, including insurance coverage. See “The Separation—Agreements with Murphy Oil Corporation.” However, after the separation, Murphy Oil’s insurers may deny coverage to us for losses associated with occurrences prior to the separation. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage. In addition, the Separation and Distribution Agreement will provide that following the separation from Murphy Oil, Murphy USA will no longer have insurance coverage under any Murphy Oil insurance policies in connection with events occurring as of or after the distribution. As a result, we will have to obtain our own insurance policies after the distribution is complete. Although we expect to maintain insurance against certain, but not all, hazards that could arise from our operations, we can provide no assurance that we will be able to obtain such coverage or that such coverage will be adequate to protect us from costs incurred with certain events. The occurrence of an event that is not insured or not fully insured could have a material adverse effect on our financial condition, results of operations and cash flows in the future. See “The Separation—Agreements with Murphy Oil Corporation.”

Following the separation, we will have debt obligations that could restrict our business and adversely impact our financial condition, results of operations or cash flows. In addition, the separation of our business from Murphy Oil may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

In connection with the separation, we expect to incur approximately $600 to $700 million of new debt, which we intend to use in part to fund a cash dividend to Murphy Oil immediately prior to the separation, and for working capital and other general corporate purposes. We may also incur substantial additional indebtedness in the future. Our indebtedness may impose various restrictions and covenants on us that could have material adverse consequences.

Our separation from Murphy Oil may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

We potentially could have received better terms from unaffiliated third parties than the terms we receive in our agreements with Murphy Oil.

The agreements we will enter into with Murphy Oil in connection with the separation will have been negotiated while we were still a wholly owned subsidiary of Murphy Oil. See “The Separation—Agreements with Murphy Oil Corporation.” Accordingly, during the period in which the terms of those agreements will have been negotiated, we will not have had an independent board of directors or a management team independent of Murphy Oil. The terms of the agreements to be negotiated in the context of the separation relate to, among other things, the allocation of assets, liabilities, rights and other obligations between Murphy Oil and us. Arm’s-length negotiations between Murphy Oil and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party.

 

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Members of our board of directors and management may have actual or potential conflicts of interest because of their ownership of shares of common stock of Murphy Oil and the overlap of up to 50% of our Board with the board of directors of Murphy Oil.

Ownership by our executive officers and directors of Murphy Oil common stock and/or stock options to purchase Murphy Oil common stock or other equity-based awards could create potential conflicts of interest when our executive officers are faced with decisions that could have different implications for Murphy Oil and us. We are in the process of finalizing the composition of our management and board of directors and until such management and board are established, we can provide no assurance there will not be any such conflicts.

In addition, although Murphy Oil and Murphy USA will operate independently of one another, the board of directors of each may have members in common after the separation. In no event, however, will Murphy Oil and Murphy USA have more than 50% of members of their boards of directors in common. The overlap of our board with the board of directors of Murphy Oil could create actual or potential conflicts of interest.

If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, you and Murphy Oil could be subject to significant tax liability and, in certain circumstances, we could be required to indemnify Murphy Oil for material taxes pursuant to indemnification obligations under the Tax Matters Agreement.

Murphy Oil has received a private letter ruling from the IRS substantially to the effect that, among other things, the distribution, together with certain related transactions, will qualify as a transaction that is generally tax-free to Murphy Oil stockholders for U.S. federal income tax purposes, and expects to receive a tax opinion from Davis Polk & Wardwell LLP, counsel to Murphy Oil, to substantially the same effect. The private letter ruling does, and the tax opinion will, rely on certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and neither the private letter ruling nor the opinion would be valid if such representations, assumptions and undertakings were incorrect. Moreover, the private letter ruling does not address all the issues that are relevant to determining whether the distribution will qualify for tax-free treatment. Notwithstanding the private letter ruling and the tax opinion, the IRS could determine the distribution should be treated as a taxable transaction for U.S. federal income tax purposes if it determines any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are false or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling. For more information regarding the private letter ruling and the opinion, see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

If the distribution fails to qualify for tax-free treatment, in general, Murphy Oil would be subject to tax as if it had sold the Murphy USA common stock in a taxable sale for its fair market value, and Murphy Oil stockholders who receive shares of Murphy USA common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

In connection with the distribution, we and Murphy Oil will enter into a Tax Matters Agreement that will govern our rights and obligations with respect to our respective tax liabilities. Generally, we and Murphy Oil will indemnify each other for taxes attributable to our respective operations, and we will indemnify Murphy Oil from the failure of the distribution to qualify as a distribution under Section 355 of the Code as a result of a breach of certain representations or covenants by us. If we are required to indemnify Murphy Oil under the circumstances set forth in the Tax Matters Agreement, we may be subject to substantial liabilities.

 

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We may not be able to engage in desirable strategic or capital-raising transactions following the distribution. In addition, under some circumstances, we could be liable for adverse tax consequences resulting from engaging in significant strategic or capital-raising transactions.

In the absence of a supplemental private letter ruling from the IRS or an unqualified opinion from a nationally recognized tax advisor, for the two-year period following the distribution, we would be prohibited from carrying out a number of transactions that may otherwise be desirable, including:

 

   

engaging in any transaction involving a merger, consolidation or other reorganization involving shares of our stock;

 

   

entering into transactions which would result in one or more persons acquiring stock representing a 40% or greater interest in us;

 

   

disposing of assets used in the U.S. marketing business (other than its ethanol assets or other asset sales in the ordinary course of business);

 

   

discontinuing the U.S. marketing business or dissolving or liquidating; and

 

   

repurchasing shares of our common stock, other than pursuant to open-market purchases to further legitimate business purposes.

These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business.

Transfer or assignment to us of certain contracts and other assets may require the consent of a third party. If such consent is not given, we may not be entitled to the benefit of such contracts, investments and other assets in the future.

Transfer or assignment of certain of the contracts and other assets in connection with our separation from Murphy Oil may require the consent of a third party to the transfer or assignment. Similarly, in some circumstances, we are joint beneficiaries of contracts, and we will need to enter into a new agreement with the third party to replicate the existing contract or assign the portion of the existing contract related to our business. Some parties may use the requirement of a consent to seek more favorable contractual terms from us. If we are unable to obtain such consents on commercially reasonable and satisfactory terms, we may be unable to obtain some of the benefits, assets and contractual commitments that are intended to be allocated to us as part of our separation from Murphy Oil. In addition, where we do not intend to obtain consent from third-party counterparties based on our belief that no consent is required, the third-party counterparties may challenge the transaction on the basis that the terms of the applicable commercial arrangements require their consent. We may incur substantial litigation and other costs in connection with any such claims and, if we do not prevail, our ability to use these assets could be adversely impacted.

Risks Relating to Our Business

Volatility in the global prices of oil and petroleum products and general economic conditions that are largely out of our control, as well as seasonal variations in fuel pricing, can significantly affect our operating results.

Our net income is significantly affected by changes in the margins on retail and wholesale gasoline marketing operations. Oil and domestic wholesale gasoline markets are volatile. General political conditions, acts of war or terrorism, instability in oil producing regions, particularly in the Middle East and South America, and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations, could significantly affect oil supplies and wholesale gasoline costs. In addition, the supply of gasoline and our wholesale purchase costs could be adversely affected in the event of a shortage, which could result from, among other things, lack of capacity at oil refineries, sustained increase in global demand or the fact that our gasoline contracts do not guarantee an uninterrupted, unlimited supply of gasoline. Our wholesale purchase costs could also be adversely affected by increasingly stringent regulations regarding the content and characteristics of fuel products. Significant increases and volatility in wholesale gasoline costs could result in lower gasoline gross margins per gallon. This volatility makes it extremely difficult to predict the effect that future wholesale cost fluctuations will have on our operating

 

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results and financial condition in future periods. Except in limited cases, we typically do not seek to hedge any significant portion of its exposure to the effects of changing prices of crude oil and refined products. Dramatic increases in oil prices reduce retail gasoline gross margins, because wholesale gasoline costs typically increase faster than retailers are able to pass them along to customers. We purchase refined products, particularly gasoline, needed to supply our U.S. retail marketing stations. Therefore, our most significant costs are subject to volatility of prices for these commodities. Our ability to successfully manage operating costs is important because we have little or no influence on the sales prices or regional and worldwide consumer demand for oil and gasoline. Furthermore, oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross margins and merchandise sales can be subject to seasonal fluctuations. For example, consumer demand for motor fuel typically increases during the summer driving season, and typically falls during the winter months. Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for motor fuel and merchandise that we sell. Therefore, our revenues are typically higher in the second and third quarters of our fiscal year. A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Further, recessionary economic conditions, higher interest rates, higher gasoline and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors may affect consumer spending or buying habits, and could adversely affect the demand for products we sell at our retail sites. Unfavorable economic conditions, higher gasoline prices and unemployment levels can affect consumer confidence, spending patterns and miles driven. These factors can lead to sales declines in both gasoline and general merchandise, and in turn have an adverse impact on our business, financial condition, results of operations and cash flows.

Our ability to continue to generate revenue and operating income depends on our continued relationship with Walmart.

At March 31, 2013, our 1,172 Company stations were almost all in close proximity to Walmart stores. Therefore, we are materially dependent upon our relationship with Walmart, the continued goodwill of Walmart and the integrity of Walmart’s brand name in the retail marketplace. Any deterioration in our relationship with Walmart could have a material adverse effect on us, including limiting our future growth. In addition, our competitive posture could be weakened by negative changes at Walmart. Many of our Company stations are substantially dependent on customer traffic generated by Walmart retail stores, and if the customer traffic through these host stores decreases due to the economy or for any other reason, our sales could be materially and adversely affected.

In addition, on December 21, 2012, we entered into an agreement with Walmart to purchase approximately 200 properties for the development of additional retail fueling stations, which we expect to complete over the next three years. As a result, the foregoing risks impact our ability to achieve growth from these additional retail sites. We also rely upon Walmart’s cooperation with us in order to complete the purchases of these additional sites, and our agreement with Walmart requires us to obtain their approval of our development plans before we may purchase any properties from them. See “—Walmart retains certain rights in its agreements with us, which may adversely impact our ability to conduct our business” below. If our relationship with Walmart deteriorates or Walmart experiences a slowdown in customer traffic or reputational harm, we may not be successful in developing these additional retail sites, and as a result, our financial condition, results of operations and cash flows could be materially and adversely affected.

We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party supply and transportation of refined products.

We utilize key midstream assets, including our pipeline positions and product distribution terminals, to supply our retail fueling stations. Much of our competitive advantage arises out of these proprietary arrangements which, if disrupted, could materially and adversely affect us. In addition to our own operational risks discussed above, we could experience interruptions of supply or increases in costs to deliver refined products to market if the ability of the pipelines or vessels to transport petroleum or refined products is disrupted because of weather events, accidents, governmental regulations or third-party actions. Furthermore, at some of our locations there are very few suppliers for fuel in that market and we may have only one supplier.

 

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Changes in credit card expenses could reduce our gross margin, especially on gasoline.

A significant portion of our retail sales involve payment using credit cards. We are assessed credit card fees as a percentage of transaction amounts and not as a fixed dollar amount or percentage of our gross margins. Higher gasoline prices result in higher credit card expenses, and an increase in credit card use or an increase in credit card fees would have a similar effect. Therefore, credit card fees charged on gasoline purchases that are more expensive as a result of higher gasoline prices are not necessarily accompanied by higher gross margins. In fact, such fees may cause lower gross margins. Lower gross margins on gasoline sales caused by higher credit card fees may decrease our overall gross margin and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Walmart retains certain rights in its agreements with us, which may adversely impact our ability to conduct our business.

In recent years, we have purchased from Walmart the properties underlying 908 of our Company stations. Our December 21, 2012 agreement with Walmart provides for the potential purchase of approximately 200 additional sites. Our agreement requires us to obtain Walmart’s approval of our development plans and to indemnify Walmart for certain environmental liabilities. In addition, Walmart has the right to terminate the agreement with respect to certain properties located adjacent to Walmart stores if the sale of any such property to us would result in certain claims or liabilities against Walmart or, in Walmart’s sole discretion, would impair the operation of the related Walmart store. Although we expect to build approximately 200 sites over the next three years, to date, Walmart has terminated the agreement with respect to a few of the properties under the agreement. If we are unable to obtain Walmart’s approval or Walmart terminates the agreement with respect to additional properties, or we are unable to obtain site development permits, we may develop fewer sites than we currently anticipate, and the development of these sites may take longer than we anticipate or may not occur at all. As a result, we can provide no assurance as to the number of sites contemplated by the agreement that we will develop. The failure to develop these sites as currently contemplated for any reason could materially impact our forecasted growth.

In addition, our owned properties that were purchased from Walmart are subject to Easements with Covenants and Restrictions Affecting Land (the “ECRs”) between us and Walmart. The ECRs impose customary restrictions on the use of our properties, which Walmart has the right to enforce. The ECRs also provide that if we propose to sell a fueling station property or any portion thereof (other than in connection with the sale of all or substantially all of our properties that that were purchased from Walmart or in connection with a bona fide financing), Walmart has a right of first refusal to purchase such property or portion thereof on similar terms. Subject to certain exceptions (including a merger in which we participate, the transfer of any of our securities or a change in control of us), if we market for sale to a third party all or substantially all of our properties that were purchased from Walmart, or if we receive an unsolicited offer to purchase such properties that we intend to accept, we are required to notify Walmart. Walmart then has the right, within 90 days of receipt of such notice, to make an offer to purchase such properties. If Walmart makes such an offer, for a period of one year we will generally only be permitted to accept third-party offers where the net consideration to us would be greater than that offered by Walmart.

The ECRs also prohibit us from transferring all or substantially all of our fueling station properties that were purchased from Walmart to a “competitor” of Walmart, as reasonably determined by Walmart. The term “competitor” is, with one exception, generally defined in the ECRs as an entity that owns, operates or controls grocery stores or supermarkets, wholesale club operations similar to that of a Sam’s Club, discount department stores or other discount retailers similar to any of the various Walmart store prototypes or pharmacy or drug stores.

Similarly, our leased properties are subject to certain rights retained by Walmart. Our master lease agreement states that if Murphy Oil USA, Inc. is acquired or becomes party to any merger or consolidation that results in a material change in the management of the stations, Walmart will have the option to purchase the stations at fair market value. The master lease also prohibits us from selling all or any portion of a station without first offering to sell all or such portion to Walmart on the same terms and conditions. These provisions may restrict our ability to conduct our business on the terms and in the manner we consider most favorable and may adversely affect our future growth.

 

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We currently have one principal supplier for over 80% of our merchandise. A disruption in supply could have a material effect on our business.

Over 80% of our general merchandise, including most tobacco products and grocery items, is currently purchased from a single wholesale grocer, McLane’s Company, Inc. (“McLane”). We have a contract with McLane through September 2015, but we may not be able to renew the contract when it expires, or on similar terms. Alternative suppliers that we could use may not be immediately available. A disruption in supply could have a material effect on our business, cost of goods sold, financial condition, results of operations and cash flows.

We may be unable to protect or maintain our rights in the trademarks we use in our business.

We expect to use the Murphy USA and Murphy Express trademarks under the Trademark License Agreement that we expect to enter with Murphy Oil, which will continue to own those trademarks. Murphy Oil’s actions and our actions to protect our rights in those trademarks may not be adequate to prevent others from using similar marks or otherwise violating our rights in those trademarks. Furthermore, our right to use those trademarks is limited to the downstream business and can be terminated by Murphy Oil upon the occurrence of certain events, such as our uncured material breach, insolvency or change of control.

Capital financing may not always be available to fund our activities.

We usually must spend and risk a significant amount of capital to fund our activities. Although most capital needs are funded from operating cash flow, the timing of cash flows from operations and capital funding needs may not always coincide, and the levels of cash flow may not fully cover capital funding requirements.

From time to time, we may need to supplement our cash generated from operations with proceeds from financing activities. Following the separation, at a minimum, we expect to have a liquidity facility, such as a revolving credit facility, to provide us with available financing intended to meet any ongoing cash needs in excess of internally generated cash flows. Uncertainty and illiquidity in financial markets may materially impact the ability of the participating financial institutions to fund their commitments to us under our liquidity facility. Accordingly, we may not be able to obtain the full amount of the funds available under our liquidity facility to satisfy our cash requirements, and our failure to do so could have a material adverse effect on our operations and financial position.

Deterioration in our credit profile could increase our costs of borrowing money and limit our access to the capital markets and commercial credit.

We expect to be rated by Moody’s and S&P based on our anticipated capital structure upon completion of the separation. Our credit ratings could be lowered or withdrawn entirely by a ratings agency if, in its judgment, the circumstances warrant. If we do not obtain an investment grade rating, or if we do and a rating agency were to downgrade us to below investment grade, our borrowing costs would increase and our funding sources could decrease. Actual or anticipated changes or downgrades in our ratings, including any announcement that our ratings are under review for a downgrade, could adversely affect our business, cash flows, financial condition and operating results.

We could be adversely affected if we are not able to attract and retain a strong management team.

We are dependent on our ability to attract and retain a strong management team. If, for any reason, we are not able to attract and retain qualified senior personnel, our business, financial condition, results of operations and cash flows could be adversely affected.

Risks Relating to Our Industry

We operate in a highly competitive industry, which could adversely affect us in many ways, including our profitability, our ability to grow, and our ability to manage our businesses.

We operate in the oil and gas industry and experience intense competition from other independent retail and wholesale gasoline marketing companies and ethanol producers. The U.S. marketing petroleum business is highly competitive, particularly with regard to accessing and marketing petroleum and other refined products. We compete

 

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with other chains of retail fuel stations for fuel supply and in the retail sale of refined products to end consumers, primarily on the basis of price, but also on the basis of convenience and consumer appeal. In addition, we may also face competition from other retail fueling stations that adopt marketing strategies similar to ours by associating with non-traditional retailers, such as supermarkets, discount club stores and hypermarkets, particularly in the geographic areas in which we operate. We expect that our industry will continue to trend toward this model, resulting in increased competition to us over time. Moreover, because we do not produce or refine any of the petroleum or other refined products that we market, and Murphy Oil does not currently and will not in the future supply us with refined products, we compete with retail gasoline companies that have ongoing supply relationships with affiliates or former affiliates that manufacture refined products. We also compete with integrated companies that have their own production and/or refining operations that are at times able to offset losses from marketing operations with profits from producing or refining operations, and may be better positioned to withstand periods of depressed retail margins or supply shortages. In addition, we compete with other retail and wholesale gasoline marketing companies that have more extensive retail outlets and greater brand name recognition. Some of our competitors have been in existence longer than we have and have greater financial, marketing and other resources than we do. As a result, these competitors may have a greater ability to bear the economic risks inherent in all phases of our business and may be able to respond better to changes in the economy and new opportunities within the industry. Such competition could adversely affect us, including our profitability, our ability to grow and our ability to manage our business.

In addition, the retail gasoline industry in the United States is highly competitive due to ease of entry and constant change in the number and type of retailers offering similar products and services. With respect to merchandise, our retail sites compete with other convenience store chains, independently owned convenience stores, supermarkets, drugstores, discount clubs, gasoline service stations, mass merchants, fast food operations and other similar retail outlets. In recent years, several non-traditional retailers, including supermarkets, discount club stores and mass merchants, have begun to compete directly with retail gasoline sites. These non-traditional gasoline retailers have obtained a significant share of the gasoline market, and their market share is expected to grow, and these retailers may use promotional pricing or discounts, both at the fuel pump and in the convenience store, to encourage in-store merchandise sales and gasoline sales. In addition, some large retailers and supermarkets are adjusting their store layouts and product prices in an attempt to appeal to convenience store customers. Major competitive factors include: location, ease of access, product and service selection, gasoline brands, pricing, customer service, store appearance, cleanliness and safety. Competition from these retailers may reduce our market share and our revenues, and the resulting impact on our business and results of operations could be materially adverse.

Changes in consumer behavior and travel as a result of changing economic conditions, the development of alternative energy technologies or otherwise could affect our business.

In the retail gasoline industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for commercial truck traffic and trends in travel and weather. Changes in economic conditions generally, or in the regions in which we operate, could adversely affect consumer spending patterns and travel in our markets. In particular, weakening economic conditions may result in decreases in miles driven and discretionary consumer spending and travel, which affect spending on gasoline and convenience items. In addition, changes in the types of products and services demanded by consumers may adversely affect our merchandise sales and gross margin. Additionally, negative publicity or perception surrounding gasoline suppliers could adversely affect their reputation and brand image, which may negatively affect our gasoline sales and gross margin. Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands and preferences while continuing to sell products and services that remain relevant to the consumer and thus will positively impact overall retail gross margin.

Similarly, advanced technology, improved fuel efficiency and increased use of “green” automobiles (e.g., those automobiles that do not use gasoline or that are powered by hybrid engines) would reduce demand for gasoline. Developments regarding climate change and the effects of greenhouse gas emissions on climate change and the environment may lead to increased use of “green” automobiles. Consequently, attitudes toward gasoline and its relationship to the environment may significantly affect our sales and ability to market our products. Reduced consumer demand for gasoline could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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Our operations and earnings have been and will continue to be affected by worldwide political developments.

Many governments, including those that are members of the Organization of Petroleum Exporting Countries (“OPEC”), unilaterally intervene at times in the orderly market of petroleum and natural gas produced in their countries through such actions as setting prices, determining rates of production, and controlling who may buy and sell the production. In addition, prices and availability of petroleum, natural gas and refined products could be influenced by political unrest and by various governmental policies to restrict or increase petroleum usage and supply. Other governmental actions that could affect our operations and earnings include tax changes, royalty increases and regulations concerning: currency fluctuations, protection and remediation of the environment, concerns over the possibility of global warming being affected by human activity including the production and use of hydrocarbon energy, restraints and controls on imports and exports, safety, and relationships between employers and employees. As a retail gasoline marketing company, we are significantly affected by these factors. Because these and other factors too numerous to list are subject to changes caused by governmental and political considerations and are often made in response to changing internal and worldwide economic conditions and to actions of other governments or specific events, it is not practical to attempt to predict the effects of such factors on our future operations and earnings.

Our business is subject to operational hazards and risks normally associated with the marketing of petroleum products.

We operate in many different locations around the United States. The occurrence of an event, including but not limited to acts of nature such as hurricanes, floods, earthquakes and other forms of severe weather, and mechanical equipment failures, industrial accidents, fires, explosions, acts of war and intentional terrorist attacks could result in damage to our facilities, and the resulting interruption and loss of associated revenues; environmental pollution or contamination; and personal injury, including death, for which we could be deemed to be liable, and which could subject us to substantial fines and/or claims for punitive damages.

We store gasoline in storage tanks at our retail sites. Our operations are subject to significant hazards and risks inherent in storing gasoline. These hazards and risks include, but are not limited to, fires, explosions, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally imposed fines or cleanup obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. Any such event could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Certain of our assets such as gasoline terminals and certain retail fueling stations lie near the U.S. coastline and are vulnerable to hurricane and tropical storm damages, which may result in shutdowns. The U.S. hurricane season runs from June through November, but the most severe storm activities usually occur in late summer, such as with Hurricanes Katrina and Rita in 2005. Although we expect to maintain insurance for certain of such risks as described below, due to policy deductibles and possible coverage limits, weather-related risks are not fully insured.

We are subject to various environmental laws and regulations, which could expose us to significant expenditures, liabilities or obligations and reduce product demand.

We are subject to stringent federal, state and local environmental laws and regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum products and hazardous materials; the emission and discharge of such substances into the environment; the content and characteristics of fuel products; the process safety of our facilities; and human health and safety. Pursuant to such environmental laws and regulations, we are also required to obtain permits from governmental authorities for certain of our operations. While we strive to abide by these requirements, we cannot assure you that we have been or will be at all times in compliance with such laws, regulations and permits. If we violate or fail to comply with these requirements, we could be subject to litigation, fines or other sanctions. Environmental requirements, and the enforcement and interpretation thereof, change frequently and have generally become more stringent over time. Compliance with existing and future environmental laws, regulations and permits may require significant expenditures. In addition, to the extent fuel content and characteristic standards increase our wholesale purchase costs, we may be adversely affected if we are unable to recover such costs in our pricing.

 

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We could be subject to joint and several strict liability for environmental contamination, without regard to fault or the legality of our conduct. In particular, we could be liable for contamination relating to properties that we own, lease or operate or that we or our predecessors previously owned, leased or operated. Substantially all of these properties have or in the past had storage tanks to store motor fuel or petroleum products. Leaks from such tanks may impact soil or groundwater and could result in substantial cleanup costs. We could also be held responsible for contamination relating to third-party sites to which we or our predecessors have sent hazardous materials. In addition to potentially significant investigation and remediation costs, any such contamination, leaks from storage tanks or other releases of hazardous materials can give rise to claims from governmental authorities and other third parties for fines or penalties, natural resource damages, personal injury and property damage.

Our business is also affected by fuel economy standards and greenhouse gas (“GHG”) vehicle emission reduction measures. As such fuel economy and GHG reduction requirements become more stringent over time, consumer demand for our products may be adversely affected. In addition, some of our facilities are subject to GHG regulation. We are currently required to report annual GHG emissions from certain of our operations, and additional GHG emission related requirements that may affect our business have been finalized or are in various phases of discussion or implementation. Any existing or future GHG emission requirements could result in increased operating costs and additional compliance expenses.

Our expenditures, liabilities and obligations relating to environmental matters could have a material adverse effect on our business, product demand, reputation, results of operations and financial condition.

Future tobacco legislation, campaigns to discourage smoking, increases in tobacco taxes and wholesale cost increases of tobacco products could have a material adverse impact on our retail operating revenues and gross margin.

Sales of tobacco products have historically accounted for an important portion of our total sales of convenience store merchandise. Significant increases in wholesale cigarette costs and tax increases on tobacco products, as well as future legislation and national and local campaigns to discourage smoking in the United States, may have an adverse effect on the demand for tobacco products, and therefore reduce our revenues and profits. Competitive pressures in our markets can make it difficult to pass price increases on to our customers. These factors could materially and adversely affect our retail price of cigarettes, cigarette unit volume and sales, merchandise gross margin and overall customer traffic. Reduced sales of tobacco products or smaller gross margins on the sales we make could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Currently, major cigarette manufacturers offer substantial rebates to retailers. We include these rebates as a component of our gross margin. In the event these rebates are no longer offered, or decreased, our profit from cigarette sales will decrease accordingly. In addition, reduced retail display allowances on cigarettes offered by cigarette manufacturers would negatively affect gross margins. These factors could materially affect our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross margin and overall customer traffic, which could in turn have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our retail operations are subject to extensive government laws and regulations, and the cost of compliance with such laws and regulations can be material.

Our retail operations are subject to extensive local, state and federal governmental laws and regulations relating to, among other things, the sale of alcohol, tobacco and money orders, employment conditions, including minimum wage requirements, and public accessibility requirements. The cost of compliance with these laws and regulations can have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, failure to comply with local, state and federal laws and regulations to which our operations are subject may result in penalties and costs that could adversely affect our business, financial condition, results of operations and cash flows.

In certain areas where our retail sites are located, state or local laws limit the retail sites’ hours of operation or their sale of alcoholic beverages, tobacco products, possible inhalants and lottery tickets, in particular to minors. Failure to comply with these laws could adversely affect our revenues and results of operations because these state and local regulatory agencies have the power to revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of these products or to seek other remedies, such as the imposition of fines or other penalties.

 

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Regulations related to wages also affect our business. Any appreciable increase in the statutory minimum wage would result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition, results of operations and cash flows.

Further, although we are still evaluating what effect, if any, U.S. health care reform legislation may have on our business, a requirement to provide additional health insurance benefits to our employees, or health insurance coverage to additional employees, would likely increase our costs and expenses, and such increases could be significant enough to materially affect our business, financial condition, results of operations and cash flows.

Any changes in the laws or regulations described above that are adverse to us and our properties could affect our operating and financial performance. In addition, new regulations are proposed from time to time which, if adopted, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Future consumer or other litigation could adversely affect our business, financial condition, results of operations and cash flows.

Our retail operations are characterized by a high volume of customer traffic and by transactions involving a wide array of product selections. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, we have been, and may in the future be from time to time, involved in lawsuits seeking cash settlements for alleged personal injuries, property damages and other business-related matters, as well as energy content, off-specification gasoline, products liability and other legal actions in the ordinary course of our business. While these actions are generally routine in nature and incidental to the operation of our business, if our assessment of any action or actions should prove inaccurate, our business, financial condition, results of operations and cash flows could be adversely affected. For more information about our legal matters, see Note L “Contingencies” to the combined unaudited financial statements for the three months ended March 31, 2013 included in this Information Statement. Further, adverse publicity about consumer or other litigation may negatively affect us, regardless of whether the allegations are true, by discouraging customers from purchasing gasoline or merchandise at our retail sites.

We rely on our IT systems and network infrastructure to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business.

We depend on our IT systems and network infrastructure to manage numerous aspects of our business and provide analytical information to management. These systems are an essential component of our business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses, which could result in a loss of sensitive business information, systems interruption or the disruption of our business operations. To protect against unauthorized access or attacks, we have implemented infrastructure protection technologies and disaster recovery plans, but there can be no assurance that a technology systems breach or systems failure, which may occur and go undetected, will not have a material adverse effect on our financial condition or results of operations.

Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data or to comply with applicable regulations relating to data security and privacy.

In the normal course of our business as a gasoline and merchandise retailer, we obtain large amounts of personal data, including credit and debit card information from our customers. While we have invested significant amounts in the protection of our IT systems and maintain what we believe are adequate security controls over individually identifiable customer, employee and vendor data provided to us, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur and have a material adverse effect on our reputation, operating results and financial condition. Such a breakdown or breach could also materially increase the costs we incur to protect against such risks. Also, a material failure on our part to comply with regulations relating to our obligation to protect such sensitive data or to the privacy rights of our customers, employees and others could subject us to fines or other regulatory sanctions and potentially to lawsuits.

 

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Compliance with and changes in tax laws could adversely affect our performance.

We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.

Risks Relating to Our Common Stock

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the distribution.

Prior to the distribution, there will have been no trading market for our common stock. An active trading market may not develop or be sustained for our common stock after the distribution, and we cannot predict the prices at which our common stock will trade after the distribution. The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including:

 

   

fluctuations in our quarterly or annual earnings results or those of other companies in our industry;

 

   

failures of our operating results to meet the estimates of securities analysts or the expectations of our stockholders or changes by securities analysts in their estimates of our future earnings;

 

   

announcements by us or our customers, suppliers or competitors;

 

   

changes in laws or regulations which adversely affect our industry or us;

 

   

changes in accounting standards, policies, guidance, interpretations or principles;

 

   

general economic, industry and stock market conditions;

 

   

future sales of our common stock by our stockholders;

 

   

future issuances of our common stock by us; and

 

   

the other factors described in these “Risk Factors” and elsewhere in this Information Statement.

A large number of our shares are or will be eligible for future sale, which may cause the market price for our common stock to decline.

Upon completion of the distribution, we will have outstanding an aggregate of approximately [•] shares of our common stock. All of those shares (other than those held by our “affiliates”) will be freely tradable without restriction or registration under the Securities Act of 1933, as amended. Shares held by our affiliates, which include our directors and executive officers, can be sold subject to volume, manner of sale and notice provisions under Rule 144. We are unable to predict whether large amounts of our common stock will be sold in the open market following the distribution. We are also unable to predict whether a sufficient number of buyers will be in the market at that time. As discussed in the immediately following risk factor, certain index funds will likely be required to sell shares of our common stock that they receive in the distribution. In addition, other Murphy Oil stockholders may sell the shares of our common stock they receive in the distribution for various reasons. For example, such stockholders may not believe our business profile or level of market capitalization as an independent company fits their investment objectives. A change in the level of analyst coverage following the distribution could also negatively impact demand for our shares. The sale of significant amounts of our common stock or the perception in the market that this will occur may lower the market price of our common stock.

 

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Because we do not expect our common stock will be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices, significant amounts of our common stock will likely need to be sold in the open market where they may not meet with offsetting new demand.

A portion of Murphy Oil’s outstanding common stock is held by index funds tied to the Standard & Poor’s 500 Index or other stock indices. Based on a review of publicly available information as of March 31, 2013, we believe approximately 18 percent of Murphy Oil’s outstanding common stock is held by index funds. Because we do not expect our common stock to be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices at the time of the distribution, index funds currently holding shares of Murphy Oil common stock will likely be required to sell the shares of our common stock they receive in the distribution. There may not be sufficient new buying interest to offset sales by those index funds. Accordingly, our common stock could experience a high level of volatility immediately following the distribution and, as a result, the price of our common stock could be adversely affected.

Provisions in our Certificate of Incorporation and Bylaws to become effective on the distribution date and certain provisions of Delaware law could delay or prevent a change in control of us.

The existence of some provisions of our Certificate of Incorporation and Bylaws to be in effect at the time of the distribution and Delaware law could discourage, delay or prevent a change in control of us that a stockholder may consider favorable. These include provisions:

 

   

providing for a classified board of directors;

 

   

providing that our directors may be removed by our stockholders only for cause;

 

   

establishing supermajority vote requirements for our shareholders to amend certain provisions of our Certificate of Incorporation and our Bylaws;

 

   

authorizing a large number of shares of stock that are not yet issued, which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us;

 

   

prohibiting stockholders from calling special meetings of stockholders or taking action by written consent; and

 

   

establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted on by stockholders at the annual stockholder meetings.

In addition, following the distribution, we will be subject to Section 203 of the Delaware General Corporation Law, which may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that could have resulted in a premium over the market price for shares of our common stock.

These provisions apply even if a takeover offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in our and our stockholders’ best interests. See “Description of Capital Stock.”

We may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

Our Certificate of Incorporation to be in effect at the time of the distribution will authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could

 

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dilute the voting power or reduce the value of our common stock. For example, we could grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or dividend, distribution or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. See “Description of Capital Stock—Preferred Stock.”

 

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SELECTED COMBINED FINANCIAL DATA OF MURPHY USA

The following selected financial data reflect the combined operations of Murphy USA. We derived the selected combined income statement data for the years ended December 31, 2012, 2011 and 2010, and the selected combined balance sheet data as of December 31, 2012 and 2011, as set forth below, from Murphy USA’s audited combined financial statements, which are included elsewhere in this Information Statement. We derived the selected combined income statement data for the three months ended March 31, 2013 and 2012, and the selected combined balance sheet data as of March 31, 2013 and 2012, as set forth below, from Murphy USA’s unaudited combined financial statements, which are included elsewhere in this Information Statement. We derived the selected combined income statement data for the year ended December 31, 2009, and the selected combined balance sheet data as of December 31, 2010, from Murphy USA’s audited combined financial statements, which are not included in this Information Statement. We derived the selected combined income statement data for the year ended December 31, 2008, and the selected combined balance sheet data as of December 31, 2009 and 2008, from Murphy USA’s underlying financial records, which were derived from the financial records of Murphy Oil, and which are not included in this Information Statement. The historical results do not necessarily indicate the results expected for any future period. Net sales and other operating revenues amounts below include excise taxes collected on behalf of and remitted to various governmental entities in each year presented. Also, in the years ended December 31, 2008 to December 31, 2011, the difference between income from continuing operations and net income relates to the discontinued operations of the Meraux, Louisiana and Superior, Wisconsin refineries sold in late 2011.

You should read the selected combined financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and accompanying notes included elsewhere in this Information Statement.

 

     Three Months Ended March 31     Year Ended December 31,  
     2013      2012     2012      2011      2010      2009      2008  
    

(thousands of dollars)

 

Net sales and other operating revenues

   $ 4,455,815       $ 4,701,695      $ 19,655,436       $ 19,273,455       $ 15,592,117       $ 13,011,385       $ 17,164,048   

Income (loss) from continuing operations

     22,047         (12,666     83,568         205,273         142,737         42,628         210,598   

Net income (loss)

     22,047         (12,666     83,568         324,020         157,441         65,180         191,726   

Total assets (at period end)

     1,859,773         1,905,369        1,992,465         1,784,983         2,978,753         2,534,544         2,331,333   

Long-term debt (at period end)

     1,112         1,158        1,124         1,170         1,213         83,253         —     

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Information Statement contains forward-looking statements which express management’s current views concerning future events or results, including without limitation our plans to separate from Murphy Oil and the expected benefits therefrom and our anticipated growth strategy, particularly with respect to our Walmart relationship and plans to build additional sites, and which are subject to inherent risks and uncertainties. Factors that could cause one or more of these forecasted events not to occur include, but are not limited to, a failure to obtain necessary regulatory approvals for the separation, a failure to obtain assurances of anticipated tax treatment of the separation, a deterioration in the business or prospects of the U.S. marketing business, adverse developments in the U.S. marketing business’s markets or adverse developments in the U.S. or global capital markets, credit markets or economies generally. 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 volatility and level of crude oil, corn and other commodity prices, customer demand for our products, political and regulatory instability, and uncontrollable natural hazards. For further discussion of risk factors, see “Risk Factors” in this Information Statement. We undertake no duty to publicly update or revise any forward-looking statements.

 

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THE SEPARATION

General

On October 16, 2012, the board of directors of Murphy Oil approved a plan to distribute to its stockholders all of the shares of common stock of Murphy USA. Murphy USA is currently a wholly owned subsidiary of Murphy Oil and at the time of the distribution will hold, through its subsidiaries, the assets and liabilities associated with Murphy Oil’s U.S. marketing business. Immediately following the distribution, Murphy Oil stockholders as of the record date will own 100 percent of the outstanding shares of common stock of Murphy USA. As defined herein, “U.S. marketing business” refers to Murphy Oil’s U.S. retail fueling and related merchandise marketing operations, together with wholesale midstream and ethanol assets. The assets related to the U.S. retail fueling and related merchandise marketing operations include:

 

   

real and personal property assets, including owned and leased retail sites and retail sites under construction;

 

   

fuel, merchandise and supplies inventories;

 

   

the rights to Murphy USA and Murphy Express brands (including certain trade names and trademarks), certain other intellectual property and software used in the business; and

 

   

dealer, vendor, and supplier contracts.

The wholesale midstream assets include product distribution terminals and pipeline positions, all of which support our retail operations. These midstream assets provide specific retail advantages because we believe they enable us to execute on our retail pricing strategy. See “Business—Our Competitive Strengths—Advantaged fuel supply” and “Business—Our Business Strategy—Focus midstream participation.”

The ethanol assets consist of two ethanol production facilities that were historically a part of the Murphy Oil operating segment that included the other retail and midstream assets described above. The ethanol assets do not directly support our retail operations, and to better focus our operations on our retail fuel business, we are currently considering strategic alternatives for these assets. See “Business—Description of Our Business.” The term “U.S. marketing business” does not include any liabilities arising out of refineries and related facilities previously included in the Murphy Oil operating segment, which liabilities will be retained by Murphy Oil but are accounted for as discontinued operations in the combined financial statements included elsewhere in this Information Statement.

In addition, Murphy Oil will contribute to an affiliate of Murphy USA the headquarters building at 200 Peach Street (a portion of which we will lease back to Murphy Oil) and the 422 North Washington Avenue real estate, each located in El Dorado, Arkansas, as well as certain aircraft and information technology assets to support our operations and corporate functions.

The distribution of Murphy USA common stock as described in this Information Statement is subject to the satisfaction or waiver of certain conditions. We cannot provide any assurances Murphy Oil will complete the distribution. For a more detailed description of these conditions, see “—Conditions to the Distribution” below.

Reasons for the Separation

The Murphy Oil board of directors believes separating the U.S. marketing business from Murphy Oil’s exploration and production business through the distribution is in the best interests of Murphy Oil and its stockholders and has concluded the separation will provide Murphy Oil and Murphy USA with a number of opportunities and benefits, including the following:

 

   

Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own market and opportunities. The separation of the U.S. marketing business from the exploration and production business will enable Murphy Oil and Murphy USA to perform and operate in a manner that is consistent with current internal and external views of the businesses. The management of each resulting corporate group will be able to concentrate on its core concerns and growth opportunities, and will have increased flexibility to design and implement corporate policies and strategies based on the characteristics of its business.

 

   

Resource Allocation and Capital Deployment. Allow each company to allocate resources and deploy capital in a manner consistent with its own priorities. Transactions that are not available to Murphy Oil or Murphy USA while Murphy USA remains integrated with Murphy Oil will be available once the two businesses are separated. Both businesses will have direct access to the debt and equity capital markets to fund their respective growth strategies. In the exploration and production business, changes in the business environment, such as increased competition from national oil companies, require a faster and more flexible response to emerging opportunities. As an independent exploration and production business, Murphy Oil will have greater flexibility to respond to changing markets and new opportunities. Similarly, Murphy USA will be better positioned to meet the changes in demand in the downstream retail fueling sector.

 

   

Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their respective financial characteristics and make investment decisions based on those characteristics. Analysts who currently track the performance of Murphy Oil specialize primarily in exploration and production businesses. Because investors and analysts underemphasize the U.S. retail fuel business in making investment decisions and preparing analyses of Murphy Oil, the current integration of Murphy Oil’s exploration and production business and U.S. marketing business interferes with the ability of investors and analysts to properly value the two businesses. Separating the two businesses will provide investors with a more targeted investment opportunity so that investors interested in retail fueling companies will have the opportunity to acquire stock of Murphy USA as an independent U.S. marketing business. As a result, the separation may result in a combined post-separation trading value in excess of the current trading value of Murphy Oil.

The financial terms of the separation, including the new indebtedness expected to be incurred by Murphy USA or entities that are, or will become, prior to the distribution, subsidiaries of Murphy USA, and the amount of the cash distribution to Murphy Oil as a separate dividend are expected to be determined by the Board of Directors of Murphy Oil based on a variety of factors, including establishing an appropriate pro forma capitalization for Murphy USA as a stand-alone company considering the historical earnings of Murphy Oil’s U.S. marketing business and the level of indebtedness relative to earnings of various comparable retail companies.

The Board of Directors of Murphy Oil is expected to determine that it is appropriate to include the ethanol production facilities in the assets underlying the capital stock that will be contributed to Murphy USA upon completion of the separation because the ethanol facilities were historically a part of the Murphy Oil operating segment that consists primarily of its U.S. marketing business, and the objective was to leave Murphy Oil as a company engaged solely in oil & gas exploration and production. As noted above, we are currently considering strategic alternatives for our ethanol facilities. See “Business—Description of Our Business.” We expect to be able to pursue such strategic alternatives without any impact on the tax-free treatment of the separation.

The Number of Shares You Will Receive

For every [•] shares of Murphy Oil common stock you own at 5:00 p.m. New York City time on [•], 2013, the record date, you will receive one share of Murphy USA common stock on the distribution date.

 

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Treatment of Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock to Murphy Oil stockholders. Instead, as soon as practicable on or after the distribution date, the distribution agent for the distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales, net of brokerage fees and commissions, transfer taxes and other costs and after making appropriate deductions of the amounts required to be held for United States federal income tax purposes, if any, pro rata to each holder who would otherwise have been entitled to receive a fractional share in the distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders for U.S. federal income tax purposes as described below in “—Material U.S. Federal Income Tax Consequences of the Distribution.”

When and How You Will Receive the Distribution of Murphy USA Shares

Murphy Oil will distribute the shares of our common stock on [•], 2013, to holders of record on the record date. The distribution is expected to occur following the NYSE market closing on the distribution date. Murphy Oil’s transfer agent and registrar, Computershare Trust Company, N.A. (“Computershare”), will serve as transfer agent and registrar for the Murphy USA common stock and as distribution agent in connection with the distribution.

If you own Murphy Oil common stock as of 5:00 p.m. New York City time on the record date, the shares of Murphy USA common stock that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to your account as follows:

 

   

Registered Stockholders. If you own your shares of Murphy Oil stock directly, either in book-entry form through an account at Computershare and/or if you hold paper stock certificates, you will receive your shares of Murphy USA common stock by way of direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to stockholders, as is the case in this distribution.

On or shortly after the distribution date, the distribution agent will mail to you an account statement that indicates the number of shares of Murphy USA common stock that have been registered in book-entry form in your name.

Stockholders having any questions concerning the mechanics of having shares of our common stock registered in book-entry form may contact Computershare at the address set forth in “Summary—Questions and Answers About the Separation and Distribution” in this Information Statement.

 

   

Beneficial Stockholders. Many Murphy Oil stockholders hold their shares of Murphy Oil common stock beneficially through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your Murphy Oil common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of Murphy USA common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares of common stock held in “street name,” we encourage you to contact your bank or brokerage firm.

Treatment of Outstanding Compensation Awards

For a discussion of provisions concerning retirement, health and welfare benefits to our employees upon completion of the separation, see “—Agreements with Murphy Oil Corporation—Employee Matters Agreement” below. The separation is not a change-in-control and therefore will not entitle Murphy USA officers to any change-in-control benefits.

We expect that incentive compensation awards generally will be treated as follows:

 

   

Outstanding vested stock options will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation. Employees of Murphy USA will have until the earlier of two years from the date of the separation or the stated expiration date of the option to exercise these adjusted options.

 

   

Any unvested stock options and stock appreciation rights held by employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation.

 

   

Murphy USA will replace any outstanding unvested stock options and stock appreciation rights held by individuals who are or will become employees of Murphy USA with long-term Murphy USA incentive awards of generally equivalent value.

 

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Phantom units will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

Non-employee director RSU awards will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are or will become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of such awards on the date of the separation. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the RSUs will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

   

Performance units that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the performance units will be replaced by Murphy Oil substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

   

Performance units that are held by current employees of Murphy Oil who are or will become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the performance units will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

Treatment of 401(k) Shares

The treatment of outstanding Murphy Oil common stock held in tax-qualified defined contribution retirement plans maintained by Murphy Oil will be subject to the same treatment as other outstanding shares of Murphy Oil common stock.

Results of the Distribution

After our separation from Murphy Oil, we will be an independent, publicly traded company. Immediately following the distribution, we expect to have approximately [•] stockholders of record, based on the number of registered stockholders of Murphy Oil common stock on [•], 2013, and approximately [•] shares of Murphy USA common stock outstanding. The actual number of shares to be distributed will be determined on the record date and will reflect any exercise of Murphy Oil stock options and the vesting of Murphy Oil stock settled RSUs prior to the record date for the distribution.

Before the distribution, we will enter into a Separation and Distribution Agreement and several other agreements with Murphy Oil to effect the separation and provide a framework for our relationship with Murphy Oil after the separation. These agreements will provide for the allocation between Murphy USA and Murphy Oil of Murphy Oil’s assets, liabilities and obligations subsequent to the separation (including with respect to transition services, employee matters, real and intellectual property matters, tax matters and certain other commercial relationships).

For a more detailed description of these agreements, see the section entitled “—Agreements with Murphy Oil Corporation” included below. The distribution will not affect the number of outstanding shares of Murphy Oil common stock or any rights of Murphy Oil stockholders.

 

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Incurrence of Debt

We intend to enter into new financing arrangements in anticipation of the separation and distribution. We expect to incur approximately $600 to $700 million of new debt, which we intend to use in part to fund a cash dividend to Murphy Oil immediately prior to the separation, and for working capital and other general corporate purposes. We will provide more information about these financing arrangements in an amendment to the registration statement of which this Information Statement forms a part.

Material U.S. Federal Income Tax Consequences of the Distribution

The following is a discussion of the material U.S. federal income tax consequences of the distribution to U.S. Holders (as defined below) of Murphy Oil common stock that receive shares of Murphy USA common stock in the distribution.

This discussion does not describe all of the tax consequences that may be relevant to you in light of your particular circumstances, including alternative minimum tax consequences and differing tax consequences applicable to you if you are, for instance:

 

   

a financial institution;

 

   

a regulated investment company;

 

   

a dealer or trader in securities;

 

   

holding your shares as part of a “straddle” or integrated transaction;

 

   

a U.S. Holder whose functional currency is not the U.S. dollar;

 

   

a partnership for U.S. federal income tax purposes;

 

   

a tax-exempt entity; or

 

   

a holder who acquired your shares upon the exercise of employee stock options or otherwise as compensation.

If you are a partnership or an entity treated as a partnership for U.S. federal income tax purposes, the U.S. federal income tax treatment of your partners will generally depend on the status of the partners and your activities. If you are a partner in a partnership holding Murphy Oil common stock, you should consult your tax adviser regarding the tax consequences of the distribution.

This discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date hereof may affect the tax consequences described herein. This discussion does not address any aspect of state, local or non-U.S. taxation, or any taxes other than income taxes. You should consult your tax adviser with regard to the application of the U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

For purposes of this discussion, you are a U.S. Holder if for U.S. federal income tax purposes you are a beneficial owner of Murphy Oil common stock that is:

 

   

a citizen or individual resident of the United States;

 

   

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or

 

   

an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

 

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Distribution—Murphy Oil has received a private letter ruling from the IRS to the effect that, for United States federal income tax purposes:

 

   

No gain or loss will be recognized by (and no amount will be included in the income of) the Murphy Oil stockholders upon the receipt of our common stock in connection with the distribution other than with respect to fractional shares of our common stock for which cash is received;

 

   

No gain or loss will be recognized by Murphy Oil on the distribution of the Murphy USA common stock in connection with the distribution;

 

   

No gain or loss will be recognized by Murphy Oil as a result of certain internal restructuring transactions undertaken in connection with the distribution;

 

   

The basis of the shares of Murphy Oil common stock in the hands of the Murphy Oil stockholders will be allocated between the shares of Murphy Oil common stock and the shares of Murphy USA common stock received in the distribution in proportion to their fair market values;

 

   

The holding period of the shares of Murphy USA common stock received by the Murphy Oil stockholders will include the holding period of the shares of Murphy Oil stock held by each such stockholder prior to the distribution, provided that the shares of Murphy Oil common stock were held as a capital asset on the date of the distribution;

 

   

A Murphy Oil stockholder that receives cash in lieu of a fractional share of our common stock pursuant to the distribution should generally recognize capital gain or loss (provided that the fractional share is considered to be held as a capital asset), measured by the difference between the cash received for such fractional share and the stockholder’s tax basis in that fractional share, determined as described above; and

 

   

Proper allocation of earnings and profits between Murphy Oil and Murphy USA will be made.

The private letter ruling from the IRS is a condition to the distribution. Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the private letter ruling request are inaccurate or incomplete in any material respect, Murphy Oil will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution such as the distribution satisfies certain legal requirements necessary to obtain tax-free treatment under Section 355 of the Code. Rather, the private letter ruling will be based on representations by Murphy Oil that those requirements have been satisfied, and any inaccuracy in those representations could invalidate the ruling.

The distribution is also conditioned on the receipt by Murphy Oil of an opinion of Davis Polk & Wardwell LLP, in form and substance satisfactory to Murphy Oil, to the effect that the distribution of shares of Murphy USA common stock in the distribution will qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The opinion will address those matters upon which the IRS will not rule and will rely on the private letter ruling as to matters covered by the private letter ruling. The opinion will rely on, among other things, the continuing validity of the private letter ruling and various assumptions and representations as to factual matters and certain undertakings made by Murphy Oil and us, which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion. The opinion will not be binding on the IRS or the courts, and there can be no assurance that the IRS will not challenge the qualification of the distribution as a transaction under Sections 355 and 368(a)(1)(D) of the Code or that any such challenge would not prevail.

If the distribution of shares of Murphy USA common stock were not to qualify as a reorganization for U.S. federal income tax purposes, you would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the Murphy USA common stock received to the extent of Murphy Oil’s current and accumulated earnings and profits. Any amount that exceeds Murphy Oil’s earnings and profits would be treated first as a nontaxable return of capital to the extent of your tax basis in your shares of Murphy Oil common stock, with any remaining amount being taxed as capital gain. In addition, Murphy Oil would recognize taxable gain equal to the excess of the fair market value of the Murphy USA common stock distributed over Murphy Oil’s adjusted tax basis in such stock.

 

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Even if the distribution of shares of Murphy USA common stock otherwise qualifies under Section 355 of the Code, such distribution might be taxable to Murphy Oil under Section 355(e) of the Code if 50% or more of either the total voting power or the total fair market value of the stock of Murphy Oil or Murphy USA is acquired as part of a plan or series of related transactions that includes the distribution. If Section 355(e) applies as a result of such an acquisition, Murphy Oil would recognize taxable gain as described above, but the distribution would generally be tax free to you. Under some circumstances, the tax matters agreement would require us to indemnify Murphy Oil for the tax liability associated with the taxable gain. See “—Agreements with Murphy Oil Corporation—Tax Matters Agreement.”

Information Reporting and Backup Withholding—U.S. Treasury regulations require certain stockholders who receive stock in a distribution to attach to the stockholder’s U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution. In addition, payments of cash to you in lieu of fractional shares of Murphy USA common stock in the distribution will be subject to information reporting, unless you provide proof of an applicable exemption. Such payments that are subject to information reporting may also be subject to backup withholding (currently at a rate of 28 percent), unless you provide a correct taxpayer identification number and otherwise comply with the requirements of the backup withholding rules. Backup withholding does not constitute an additional tax, but merely an advance payment, which may be refunded or credited against your U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

THE FOREGOING IS A DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND FOR GENERAL INFORMATION ONLY. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF STOCKHOLDERS. YOU SHOULD CONSULT YOUR TAX ADVISER AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO YOU, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Market for Common Stock

There is not currently a public market for Murphy USA common stock. A condition to the distribution is the listing on the NYSE of our common stock. We intend to have Murphy USA’s shares of common stock listed on the NYSE under the ticker symbol “MUSA,” subject to official notice of issuance.

Trading Between Record Date and Distribution Date

Beginning on, or shortly before, the record date and continuing up to and including the distribution date, we expect there will be two markets in Murphy Oil common stock: a “regular-way” market and an “ex-distribution” market. Shares of Murphy Oil common stock that trade on the “regular-way” market will trade with an entitlement to receive shares of Murphy USA common stock in the distribution. Shares that trade on the “ex-distribution” market will trade without an entitlement to receive shares of Murphy USA common stock in the distribution. Therefore, if you sell shares of Murphy Oil common stock in the “regular-way” market after 5:00 p.m. New York City time on the record date and up to and including through the distribution date, you will be selling your right to receive shares of Murphy USA common stock in the distribution. If you own shares of Murphy Oil common stock at 5:00 p.m. New York City time on the record date and sell those shares in the “ex-distribution” market, up to and including through the distribution date, you will still receive the shares of Murphy USA common stock that you would be entitled to receive in respect of your ownership, as of the record date, of the shares of Murphy Oil common stock that you sold.

 

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Furthermore, beginning on or shortly before the record date and continuing up to and including the distribution date, we expect there will be a “when-issued” market in our common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for shares of Murphy USA common stock that will be distributed to Murphy Oil stockholders on the distribution date. If you own shares of Murphy Oil common stock at 5:00 p.m. New York City time on the record date, you would be entitled to receive shares of our common stock in the distribution. You may trade this entitlement to receive shares of Murphy USA common stock, without trading the shares of Murphy Oil common stock you own, in the “when-issued” market. On the first trading day following the distribution date, we expect “when-issued” trading with respect to Murphy USA common stock will end and “regular-way” trading in Murphy USA common stock will begin.

Conditions to the Distribution

We expect the distribution will be effective on [•], 2013, the distribution date, provided that, among other conditions described in the Separation and Distribution Agreement, the following conditions shall have been satisfied or waived by Murphy Oil in its sole discretion:

 

   

the Murphy Oil board of directors will be satisfied that the distribution will be made out of surplus within the meaning of Section 170 of the Delaware General Corporation Law;

 

   

the Murphy Oil board of directors will have approved the distribution and will not have abandoned the distribution or terminated the Separation and Distribution Agreement at any time prior to the distribution;

 

   

the separation-related restructuring transactions contemplated by the Separation and Distribution Agreement will have been completed;

 

   

the SEC will have declared effective our registration statement on Form 10, of which this Information Statement is a part, under the Exchange Act and no stop order suspending the effectiveness of our Form 10 registration statement will be in effect, and no proceedings for such purpose will be pending before or threatened by the SEC;

 

   

all actions and filings necessary or appropriate under applicable federal, state or foreign securities or “blue sky” laws and the rules and regulations thereunder will have been taken and, where applicable, become effective or accepted;

 

   

our common stock to be delivered in the distribution will have been approved for listing on the NYSE, subject to official notice of issuance;

 

   

the Murphy USA board of directors, as named in this Information Statement, will have been duly elected, and the amended and restated certificate of incorporation and the amended and restated bylaws of Murphy USA, in substantially the form attached as exhibits to the registration statement of which this information statement is a part, will be in effect;

 

   

each of the ancillary agreements contemplated by the Separation and Distribution Agreement will have been executed and delivered by the parties thereto;

 

   

Murphy Oil will have received a private letter ruling from the IRS (which Murphy Oil has received) and an opinion of counsel, in each case reasonably satisfactory to Murphy Oil, confirming the qualification of the distribution as tax-free to Murphy Oil stockholders for U.S. federal income tax purposes;

 

   

no applicable law will have been adopted, promulgated or issued that prohibits the consummation of the distribution or any of the transactions contemplated by the Separation and Distribution Agreement;

 

   

any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operations of the Murphy USA business after the distribution date substantially as conducted as of the date of the Separation and Distribution Agreement will have been obtained; and

 

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a credit facility should have been made available to Murphy USA by its Lenders on terms and in an amount satisfactory to Murphy Oil; and

 

   

no event or development will have occurred or exist that, in the judgment of the Murphy Oil board of directors, in its sole discretion, makes it inadvisable to effect the distribution or other transactions contemplated by the Separation and Distribution Agreement.

The fulfillment of the foregoing conditions will not create any obligations on Murphy Oil’s part to effect the distribution, and Murphy Oil’s board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the distribution, including by accelerating or delaying the timing of the consummation of all or part of the distribution, at any time prior to the distribution date.

Agreements with Murphy Oil Corporation

As part of our separation from Murphy Oil, we will enter into a Separation and Distribution Agreement and several other agreements with Murphy Oil to effect the separation and provide a framework for our relationships with Murphy Oil after the separation. These agreements will provide for the allocation between us and Murphy Oil of the assets, liabilities and obligations of Murphy Oil and its subsidiaries, and will govern the relationships between Murphy USA and Murphy Oil subsequent to the separation (including with respect to transition services, employee matters, real and intellectual property matters, tax matters and certain other commercial relationships). In addition to the Separation and Distribution Agreement (which will contain many of the key provisions related to our separation from Murphy Oil and the distribution of our shares of common stock to Murphy Oil stockholders), these agreements include, among others:

 

   

Trademark License Agreement;

 

   

Tax Matters Agreement;

 

   

Employee Matters Agreement;

 

   

Transition Services Agreement;

 

   

Lease Agreement for 200 Peach Street, El Dorado, Arkansas; and

 

   

Certain aircraft-related agreements.

The forms of certain of the principal agreements described below will be filed as exhibits in an amendment to the registration statement on Form 10 of which this Information Statement is a part. The following descriptions of these agreements are summaries of the material terms of the agreements; for the complete text of the agreements please see the filed exhibits.

The terms of the agreements described below that will be in effect following the separation have not yet been finalized. Changes, some of which may be material, may be made prior to our separation from Murphy Oil. No changes may be made after the separation without our consent.

Separation and Distribution Agreement

The Separation and Distribution Agreement will govern the terms of the separation of the U.S. marketing business from Murphy Oil’s other businesses. Generally, the Separation and Distribution Agreement will include Murphy Oil’s and our agreements relating to the restructuring steps to be taken to complete the separation, including the assets and rights to be transferred, liabilities to be assumed and related matters. Subject to the receipt of required governmental and other consents and approvals, in order to accomplish the separation, the Separation and Distribution Agreement will provide for Murphy Oil and us to transfer specified assets between the companies that will operate the U.S. marketing business after the distribution, on the one hand, and Murphy Oil’s remaining businesses, on the other hand. The Separation and Distribution Agreement will require Murphy Oil and us to use reasonable efforts to obtain consents, approvals and amendments required to novate or assign the assets and liabilities that are to be transferred pursuant to the Separation and Distribution Agreement.

 

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Unless otherwise provided in the Separation and Distribution Agreement or any of the related ancillary agreements, all assets will be transferred on an “as is, where is” basis. Generally, if the transfer of any assets or any claim or right or benefit arising thereunder requires a consent that will not be obtained before the distribution, or if the transfer or assignment of any such asset or such claim or right or benefit arising thereunder would be ineffective or would adversely affect the rights of the transferor thereunder so that the intended transferee would not in fact receive all such rights, each of Murphy Oil and Murphy USA will cooperate in a mutually agreeable arrangement under which the intended transferee would obtain the benefits and assume the obligations thereunder (including by sub-contract, sub-license or sub-lease to such transferee) or under which the transferor would enforce for the benefit of the transferee, with the transferee assuming the transferor’s obligations, the rights of the transferor against any third party.

The Separation and Distribution Agreement will specify those conditions that must be satisfied or waived by Murphy Oil prior to the distribution. In addition, Murphy Oil will have the right to determine the date and terms of the distribution, and will have the right, at any time until completion of the distribution, to determine to abandon or modify the distribution and to terminate the Separation and Distribution Agreement.

In addition, the Separation and Distribution Agreement will govern the treatment of indemnification, insurance and litigation responsibility and management. Generally, the Separation and Distribution Agreement will provide for uncapped cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Murphy Oil’s business and liabilities arising out of refineries and related facilities previously owned by Murphy Oil with Murphy Oil. The Separation and Distribution Agreement will also establish procedures for handling claims subject to indemnification and related matters.

Trademark License Agreement

The Trademark License Agreement will govern the allocation of trademark rights between Murphy USA and Murphy Oil. Murphy Oil USA, Inc. will assign all of its rights in all trademarks incorporating the term “Murphy” to Murphy Oil. Murphy Oil will license to Murphy USA certain trademarks incorporating such term for use in Murphy USA’s business on a royalty-free basis pursuant to the Trademark License Agreement.

Tax Matters Agreement

The Tax Matters Agreement will govern Murphy Oil’s and our respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution and certain related transactions to qualify as tax-free for federal income tax purposes), tax attributes, tax returns, tax contests and certain other tax matters.

In general, under the Tax Matters Agreement, we expect that responsibility for taxes for periods prior to the distribution will be allocated in the following manner:

 

   

with respect to any U.S. federal income taxes of the affiliated group of which Murphy Oil is the common parent, we generally will be responsible for such taxes to the extent attributable to the U.S. marketing business and all Murphy Oil USA, Inc. federal income tax filings and Murphy Oil generally will be responsible for all other such taxes;

 

   

with respect to U.S. state or local income taxes, we generally will be responsible for such taxes to the extent attributable to the U.S. marketing business and all Murphy Oil USA, Inc. income and franchise tax filings and Murphy Oil generally will be responsible for all other such taxes;

 

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with respect to any U.S. state or local property taxes, we generally will be responsible for such taxes to the extent attributable to property owned by us or one of our subsidiaries and prospectively, for any assets contributed, and Murphy Oil generally will be responsible for all other such taxes; and

 

   

with respect to certain non-income taxes, such as motor fuel, excise, sales and use taxes, we generally will be responsible for such taxes to the extent attributable to the U.S. marketing business and all Murphy Oil USA, Inc. non-income tax filings, and Murphy Oil generally will be responsible for all other such taxes.

In addition, the Tax Matters Agreement will impose certain restrictions on us and our subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the distribution and certain related transactions. The Tax Matters Agreement will provide special rules allocating tax liabilities in the event the distribution, together with certain related transactions, is not tax-free. In general, under the Tax Matters Agreement, we will be responsible for any taxes imposed on Murphy Oil that arise from the failure of the distribution and certain related transactions to qualify as a tax-free transaction for federal income tax purposes within the meaning of Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code to the extent that the failure to qualify is attributable to actions, events, or transactions relating to our stock, assets or business, or a breach of the relevant representations or covenants made by us in the Tax Matters Agreement.

The Tax Matters Agreement will also set forth Murphy Oil’s and our obligations as to the filing of tax returns, the administration of tax contests and assistance and cooperation on tax matters.

Employee Matters Agreement

The Employee Matters Agreement will govern Murphy Oil’s and our compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company, and generally will allocate liabilities and responsibilities relating to employee compensation and benefit plans and programs. The Employee Matters Agreement will provide for the treatment of outstanding Murphy Oil equity awards and certain other outstanding annual and long-term incentive awards. The Employee Matters Agreement will provide that, following the distribution, our active employees generally will no longer participate in benefit plans sponsored or maintained by Murphy Oil and will commence participation in our benefit plans. The Employee Matters Agreement also will set forth the general principles relating to employee matters, including with respect to the assignment of employees, the assumption and retention of liabilities and related assets, expense reimbursements, workers’ compensation, leaves of absence, the provision of comparable benefits, employee service credit, the sharing of employee information, and the duplication or acceleration of benefits.

The Employee Matters Agreement will also provide that (i) the distribution does not constitute a change in control under Murphy Oil’s plans, programs, agreements or arrangements and (ii) the distribution and the assignment, transfer or continuation of the employment of employees with another entity will not constitute a severance event under the applicable plans, programs, agreements or arrangements.

Transition Services Agreement

The Transition Services Agreement will set forth the terms on which Murphy Oil will provide to us, and we will provide to Murphy Oil, on a temporary basis, certain services or functions that the companies historically have shared. Transition services will include various corporate services. We expect the agreement will provide for the provision of specified transition services, generally for a period of up to 18 months, with a possible extension of 6 months (an aggregate of 24 months). Compensation for transition services will be determined using an internal cost allocation methodology based on fully loaded cost (e.g., including an allocation of corporate overhead), or, in certain cases, may be based on terms and conditions comparable to those that would have been arrived at by parties bargaining at arm’s-length.

 

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The foregoing description of the agreement does not purport to be complete and is qualified in its entirety by the full text of the agreement, which will be filed as an exhibit to an amendment to registration statement of which this Information Statement forms a part.

Lease Agreement for 200 Peach Street, El Dorado, Arkansas

In connection with the spin-off, Murphy Oil will contribute to an affiliate of Murphy USA the 120,000 square foot headquarters building located at 200 Peach Street, El Dorado, Arkansas, including certain appurtenant furniture and fixtures. We will enter into an agreement to lease to Murphy Oil a portion of our 200 Peach Street building. Annual lease payments under the agreement are expected to be approximately $375,000 per year.

Aircraft-Related Agreements

Murphy Oil and Murphy USA will enter into three agreements to govern the storage, maintenance and use of certain aircraft after the separation. Under the Hanger Rental Agreement, Murphy USA will rent space in Murphy Oil’s hanger on a monthly basis for the storage of its aircraft. Under the Aircraft Maintenance Labor Pooling Agreement, Murphy Oil will employ technicians and other maintenance staff to service Murphy Oil and Murphy USA aircraft stored in the Murphy Oil hangar, and Murphy USA will reimburse Murphy Oil for an allocated portion of such expenses on an actual cost basis on the terms set forth in the agreement. This agreement may be terminated by either party with 30 days’ notice. Murphy Oil and Murphy USA will also enter into an Airplane Interchange Agreement that will allow each company to use the other’s aircraft and flight crew from time to time solely for business purposes, subject to certain requirements including that the aircraft is not otherwise in use, and in consideration therefor the other party is entitled to an equal number of hours of usage of the borrower’s aircraft. Each company cannot use the other company’s aircraft if such company’s usage is greater than the other company’s, unless otherwise mutually agreed upon. This agreement may be terminated by either party with 30 days’ notice.

Transferability of Shares of Our Common Stock

The shares of our common stock that you will receive in the distribution will be freely transferable, unless you are considered an “affiliate” of ours under Rule 144 under the Securities Act of 1933, as amended (“the Securities Act”). Persons who can be considered our affiliates after the separation generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by or are under common control with us, and may include certain of our officers and directors. In addition, individuals who are affiliates of Murphy Oil on the distribution date may be deemed to be affiliates of ours. We estimate that our directors and executive officers, who may be considered “affiliates” for purposes of Rule 144, will beneficially own approximately [] shares of our common stock immediately following the distribution. See “Stock Ownership” included elsewhere in this Information Statement for more information. Our affiliates may sell shares of our common stock received in the distribution only:

 

   

under a registration statement that the SEC has declared effective under the Securities Act; or

 

   

under an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

 

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In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period, a number of shares of our common stock that does not exceed the greater of:

 

   

one percent of our common stock then outstanding; or

 

   

the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 for the sale.

Rule 144 also includes notice requirements and restrictions governing the manner of sale. Sales may not be made under Rule 144 unless certain information about us is publicly available.

Reason for Furnishing This Information Statement

This Information Statement is being furnished solely to provide information to Murphy Oil stockholders who are entitled to receive shares of our common stock in the distribution. The Information Statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe the information contained in this Information Statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither Murphy Oil nor we undertake any obligation to update such information except in the normal course of our respective public disclosure obligations.

 

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DIVIDEND POLICY

The declaration and amount of all dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the board of directors deems relevant. We will include more information regarding our dividend policy in an amendment to the Form 10 of which this Information Statement forms a part.

We are a holding company and have no direct operations. As a result, we will be able to pay dividends on our common stock only from available cash on hand and distributions received from our subsidiaries. Our indebtedness could also restrict our ability to pay dividends. There can be no assurance we will continue to pay any dividend even if we commence the payment of dividends.

 

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CAPITALIZATION

The following table sets forth (i) our historical capitalization as of March 31, 2013, and (ii) our as adjusted capitalization assuming the distribution, the incurrence of debt and other matters (as discussed in “The Separation”) was effective March 31, 2013. The table should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical combined financial statements and accompanying notes included elsewhere in this Information Statement.

We are providing the capitalization table for information purposes only. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operating as a separate, independent entity on March 31, 2013 and is not necessarily indicative of our future capitalization or financial condition.

 

     March 31, 2013  
     Actual      As Adjusted  
     (thousands of dollars)  

Debt Outstanding

     

Short-term debt

   $ 46       $ 46   

Long-term debt

     1,112         651,112   
  

 

 

    

 

 

 

Total Debt

     1,158         651,158   
  

 

 

    

 

 

 

Net Investment/Stockholders’ Equity

     

Common stock par value

     —           636   

Capital in excess of par

     —           470,310   

Net investment by parent

     1,120,946         —     
  

 

 

    

 

 

 

Total Net Investment/Stockholders’ Equity

     1,120,946         470,946   
  

 

 

    

 

 

 

Total Capitalization

   $ 1,122,104       $ 1,122,104   
  

 

 

    

 

 

 

 

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BUSINESS AND PROPERTIES

Overview

Upon completion of our separation from Murphy Oil, Murphy USA’s business will consist primarily of marketing of retail motor fuel products and convenience merchandise through a large chain of 1,172 (as of March 31, 2013) retail stations owned and operated by Murphy USA, almost all of which are in close proximity to Walmart stores. Our retail stations are located in 23 states, primarily in the Southern and Midwestern United States. Of our stations, 1,016 are branded Murphy USA and 156 are standalone Murphy Express locations (as of March 31, 2013). Our retail stations under the brand name Murphy USA® participate in the Walmart discount program that we offer at most locations. The Walmart discount program offers a cents-off per gallon purchased for fuel when using specific payment methods as decided by Murphy USA and Walmart. The amount of the discount offered can vary based on many factors, including state laws. Our Murphy Express branded stations are not connected to the Walmart discount program but are similar to the Murphy USA sites in most other ways, including the types of fuel and merchandise offerings available to our customers.

Our business will also include certain midstream assets, including product distribution terminals and pipeline positions. As an independent publicly traded company, we believe we will be a low-price, high volume fuel retailer selling convenience merchandise through low cost kiosks with key strategic relationships and experienced management.

Our Competitive Strengths

Strategic and complementary relationship with Walmart

Of our network of 1,172 retail gasoline stations (as of March 31, 2013), more than 1,000 are situated on prime locations connected to Walmart stores. We believe our proximity to Walmart stores generates significant traffic to our retail stations while our competitively priced gasoline and convenience offerings appeal to our shared customers. We also collaborate with Walmart on a fuel discount program which we believe enhances the customer value proposition as well as the competitive position of both Murphy USA and Walmart with respect to our peers. We began our relationship with Walmart in 1996 and in December 2012 we signed a new agreement that allows us to build approximately 200 new sites on Walmart locations, which we expect to complete over the next three years. We believe Walmart will continue to serve as a strategic partner as we pursue further organic growth opportunities on existing and new Walmart locations in both our core and adjacent geographies.

Winning proposition with value-oriented consumers

Our competitively priced fuel is a compelling offering for value-oriented consumers. Despite a flat long-term outlook in overall gasoline demand, we believe value-oriented consumers represent a growing demand segment. In combination with our high traffic locations, our low gasoline prices drive high fuel volumes and gross profit. In addition, we lead the industry in per-site tobacco sales with our low-priced tobacco products and total store sales per square foot as we also sell a growing assortment of low-priced convenience items that complement Walmart’s primary in-store product offering.

Low cost retail operating model

We operate our retail gasoline stations with a strong emphasis on fuel sales complemented by a focused convenience offering that allows for a smaller store footprint than many of our competitors. Almost all of our stations are standardized 208 or 1,200 square foot kiosks, which we believe have very low capital expenditure and maintenance requirements relative to our competitors. In addition, many of our stations require only one or two attendants to be present during business hours and the majority of our kiosks are located on Company-owned property and do not incur any rent expense. The combination of a focused convenience offering and standardized smaller footprint stores allows us to achieve lower overhead costs, on-site costs and labor costs compared to competitors with a larger store format. According to the 2011 National Association of Convenience Stores’ State of the Industry Survey, we operate at approximately 57% of the average monthly operating costs for top quartile performing stores in the industry. In addition, we operate among the highest industry safety standards and had a Total Recordable Incident Rate (TRIR) and Days Away from Work (DAW) rate that was substantially lower than the industry averages in 2011 using the most current published data by the Bureau of Labor Statistics. Our focus on safety and cost advantages translate into a lower fuel breakeven requirement that allows us to weather extended periods of lower fuel margins.

 

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Advantaged fuel supply

We source fuel at or below the industry benchmark prices due to the diversity of fuel options available to us in the bulk and rack product markets, our shipper’s status on major pipeline systems, and our access to numerous terminal locations. In addition, we have a strong distribution system in which we utilize a “Best Buy” method that dispatches third-party tanker trucks to the most favorably priced terminal to load products for each Murphy USA site, further reducing our fuel product costs. By participating in the broader fuel supply chain, we believe our business model provides upside exposure to opportunities to enhance margins and volume. For example, we anticipate being able to increase revenue by selling Renewable Identification Numbers (RINs) generated by ethanol and bio-diesel blending. We also believe we can increase volumes by shifting noncontractual wholesale volumes to higher margin retail sales. Our participation in the broader fuel supply chain provides us with added flexibility, especially during periods of significant price volatility.

Resilient financial profile

Our predominantly fee-simple asset base, ability to generate attractive gross margins through our low price, high volume strategy, and our low overhead costs should help us to endure prolonged periods of commodity price volatility and compressed fuel margins. To support our operating model, in connection with the separation, we intend to incur a modest amount of leverage through a new revolving credit facility and the potential issuance of term debt. We expect that our strong cash position and availability under our revolving credit facility will provide us with a significant level of liquidity to help maintain a disciplined growth capital expenditure program through periods of both high and low fuel margins.

Our Business Strategy

Grow organically with Walmart

We intend for our relationship with Walmart to be a key driver of our organic growth over the next several years. We expect to build approximately 200 sites in core markets on or near Walmart locations over the next three years and are evaluating opportunities for additional growth beyond those locations. Over 1,000 of our locations currently participate in our fuel discount program with Walmart which reinforces Walmart’s low price philosophy. In addition, in the near term, we will seek to rebrand additional Murphy Express sites as Murphy USA and connect these sites to the fuel discount program. We will continue to work with Walmart on the implementation and improvement of the fuel discount program as we believe it is an effective promotional tool for maximizing fuel volumes and investment returns.

Enhance kiosk economics to improve investment returns

We plan to continuously evaluate our kiosk strategy in an effort to maximize our site economics and return on investment. As part of that strategy, we are continually refining our new 1,200 square foot kiosk design to create a foundation for increasing higher-margin non-tobacco sales and diversifying our merchandise offerings. For example, we continue to tailor our product offerings to complement the retail selection within Walmart stores, such as by offering products in a variety of quantities and sizes, or stock keeping units (SKUs), that are more convenience-oriented. By implementing new merchandizing, space management and workforce planning capabilities, we expect to further optimize merchandise revenue, labor needs and overall site returns.

Improve functional infrastructure to lower overhead costs

We believe we will be better positioned to manage our cost structure, execute a more scalable business model, and implement certain technology and business efficiency initiatives as an independent company. In order to do this successfully, we will focus heavily on the development of our employees and foster a high performance culture where incentives are aligned with business performance. We believe that through our planned growth and efficiency initiatives, we can achieve reductions in overhead costs to support an overall improvement in our site returns.

 

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Focus midstream participation

We plan to continue to focus our midstream efforts on activities that enhance our ability to be a low price retail fuel leader, by optimizing our fuel supply contracts to capitalize on market dynamics whenever possible and minimizing physical midstream asset ownership. We also intend to allocate capital and human resources only to midstream assets that provide a specific retail advantage. In considering strategic alternatives for midstream assets that do not directly benefit our retail operations, such as our ethanol plants, we intend to pursue actions that will maximize shareholder value and enhance our ability to execute on our planned retail strategy after our separation from Murphy Oil.

Focus on long-term investment

We maintain a portfolio of fee-simple assets and we intend to establish an appropriate debt structure in connection with the separation that will allow us to be resilient in environments of fuel price and margin volatility. We believe our strong financial position should allow us to profitably execute on our low-cost, high volume retail strategy and our organic growth strategy through periods of both high and low fuel margins. Furthermore, we will consider all alternatives for returning excess earnings or capital with a focus on maximizing shareholder value.

Industry Trends

We operate within the large and growing U.S. retail fueling store industry, which is highly fragmented. We believe we will continue to benefit from several key industry trends and characteristics, including:

 

   

increased sensitivity to gas prices among price conscious consumers, and increasing demand for low priced fuel sellers;

 

   

highly fragmented nature of the industry providing larger chain operators with significant scale advantage; and

 

   

increasing consumer traffic around supermarkets and large format hypermarkets, supporting complementary consumer demand at nearby retail fueling and convenience stores.

Corporate Information

Murphy USA was incorporated in Delaware on March 1, 2013 and will, at the time of the distribution, hold, through its subsidiaries, the assets and liabilities of Murphy Oil’s U.S. marketing business. For more information, see “The Separation” included elsewhere in this Information Statement. Murphy USA’s headquarters will be located at 200 Peach Street, El Dorado, Arkansas 71730 and its general telephone number is (870) 875-7600. Our Internet website is www.murphyusa.com. Our website and the information contained on that site, or connected to that site, are not incorporated by reference into this Information Statement. We intend to have Murphy USA’s shares of common stock listed on the NYSE under the ticker symbol “MUSA.”

Description of Our Business

We market fueling products through a network of Company retail stations, unbranded wholesale customers and bulk product customers. During 2012, Company stations sold over 3.8 billion gallons of motor fuel through our retail outlets.

Below is a table that lists the states where we operate Company-owned stations at March 31, 2013 and the number of stations in each state.

 

State

   No. of stations     

State

   No. of stations     

State

   No. of stations  

Alabama

     66       Kansas      1       New Mexico      7   

Arkansas

     60       Kentucky      37       Ohio      42   

Colorado

     6       Louisiana      60       Oklahoma      50   

Florida

     106       Michigan      23       South Carolina      50   

Georgia

     79       Minnesota      7       Tennessee      80   

Iowa

     21       Missouri      46       Texas      249   

Illinois

     26       Mississippi      48       Virginia      3   
              

 

 

 

Indiana

     32       North Carolina      73       Total      1,172   
              

 

 

 

 

 

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The following table provides a history of our Company-owned station count during the three months ended March 31, 2013, and the three-year period ended December 31, 2012:

 

     Three Months Ended
March  31, 2013
     Years Ended December 31,  
            2012      2011     2010  

Number at beginning of period

     1,165         1,128         1,099        1,048   

New construction

     7         37         30        51   

Closed

     —           —           (1     —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Number at end of period

     1,172         1,165         1,128        1,099   
  

 

 

    

 

 

    

 

 

   

 

 

 

In recent years, we have purchased from Walmart the properties underlying 908 of our Company stations. Our December 21, 2012 agreement with Walmart provides for the potential purchase of approximately 200 additional sites. Our agreement requires us to obtain Walmart’s approval of our development plans and to indemnify Walmart for certain environmental liabilities. In addition, Walmart has the right to terminate the agreement with respect to certain properties located adjacent to Walmart stores if the sale of any such property to us would result in certain claims or liabilities against Walmart or, in Walmart’s sole discretion, would impair the operation of the related Walmart store.

Each of our owned properties that were purchased from Walmart is also subject to Easements and Covenants with Restrictions Affecting Land (“ECRs”), which impose customary restrictions on the use of such properties, which Walmart has the right to enforce. In addition, pursuant to the ECRs, certain transfers involving these properties are subject to Walmart’s right of first refusal or right of first offer. Also pursuant to the ECRs, we are prohibited from transferring such properties to a competitor of Walmart.

For risks related to our December 2012 agreement with Walmart, including the ECRs, see “Risk Factors—Risks Relating to Our Business—Walmart retains certain rights in its agreements with us, which may adversely impact our ability to conduct our business.”

For the remaining fueling stations located on or adjacent to Walmart property that are not owned, we have a master lease agreement that allows us to rent land from Walmart. The master lease agreement contains general terms applicable to all rental sites on Walmart property in the United States. The term of the leases is 10 years at each station, with us holding four successive five-year extension options at each site. A majority of the leased sites have over twenty years of term remaining including renewals. The agreement permits Walmart to terminate it in its entirety, or only as to affected sites, at its option under customary circumstances (including in certain events of bankruptcy or insolvency), or if we improperly transfer the rights under the agreements to another party. In addition, the master lease agreement prohibits us from selling all or any portion of a station without first offering to sell all or such portion of the station to Walmart and provides that if Murphy Oil USA, Inc. is acquired or becomes a party to any merger or consolidation that results in a material change in management of the stations, Walmart will have the option to purchase the stations at fair market value. We also have four Murphy USA sites located near Walmart locations where we pay rent to other landowners.

As of March 31, 2013, we have 149 Murphy Express sites where we own the land and seven locations where we rent the underlying land.

We have numerous sources for our retail fuel supply, including nearly all of the major and large oil companies operating in the U.S. We purchase fuel from oil companies and independent refiners at rates that fluctuate with market prices and generally are reset daily, and we sell fuel to our customers at prices that we establish daily. Most fuel is purchased by the truckload as needed to replenish supply at our Company stations. Our inventories of fuel on site turn approximately every day. By establishing motor fuel supply relationships with several alternate suppliers for most locations, we believe we are able to effectively create competition for our purchases among various fuel suppliers. We also believe that purchasing arrangements with multiple fuel suppliers may help us avoid product

 

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outages during times of motor fuel supply disruptions. At some locations, however, there are very few suppliers for fuel in that market and we may have only one supplier. Our refined products are distributed through a few product distribution terminals that are wholly owned and operated by us and from numerous terminals owned by others. About half of our wholly owned terminals are supplied by marine transportation and the rest are supplied by pipeline. We also receive products at terminals owned by others either in exchange for deliveries from our terminals or by outright purchase.

In addition to the motor fuel sold at our Company stations, our stores carry a broad selection of snacks, beverages, tobacco products and non-food merchandise. The merchandise we offer includes our private label products, such as an isotonic drink offered in several flavors and a private label energy drink. In 2012, we purchased more than 80% of our merchandise from a single vendor, McLane Company, Inc., a wholly owned subsidiary of Berkshire Hathaway, Inc.

A statistical summary of key operating and financial indicators for March 31, 2013 and 2012 and each of the five years ended December 31, 2012 are reported below.

 

     As of March 31,     As of December 31,  
     2013     2012     2012     2011     2010     2009     2008  

Branded retail outlets at December 31:

              

Murphy USA®

     1,016        1,005        1,015        1,003        1,001        996        992   

Murphy Express

     156        128        150        125        98        52        33   

Other (1)

     —          —          —          —          116        121        129   

Total

     1,172        1,133        1,165        1,128        1,215        1,169        1,154   
              
              

Retail marketing:

              

Fuel margin per gallon(2)

   $ 0.110        0.071      $ 0.129        0.156        0.114        0.083        0.165   

Gallons sold per store month

     250,952        254,806        277,001        277,715        306,646        312,493        324,223   

Merchandise sales revenue per store month

   $ 146,986        152,923      $ 156,429        158,144        153,530        137,623        110,943   

Merchandise margin as a percentage of merchandise sales

     12.9     13.0     13.5     12.8     13.1     12.5     13.5

 

(1) Represents former Spur locations sold in 2011 as part of the refinery sales recorded as discontinued operations.
(2) Represents net sales prices for fuel less purchased cost of fuel.

Our business is organized into two operating segments: Marketing and Ethanol. Our business primarily consists of our Marketing segment, which includes our retail marketing sites and midstream assets. Our Ethanol segment consists of ethanol production facilities located in Hankinson, North Dakota and in Hereford, Texas. Total ethanol production in 2012 amounted to about 124.9 million gallons at Hankinson and 97.9 million gallons at Hereford. Our ethanol operations experienced much weaker operating margins during 2012 compared to the prior year. Due to expectations of continued weak margins in the future, we wrote down the carrying value of the Hereford facility plant at year-end 2012.

To better focus the Company’s operations on its retail fuel business, we are currently considering strategic alternatives for the Hankinson and Hereford ethanol facilities. As part of this effort, we are evaluating various factors including the appropriate timing to maximize value in any potential sale; however, a final decision has not yet been determined and these assets do not meet the criteria for “held for sale” presentation at this time. Therefore, historical financial results for these plants are included in continuing operations for all periods presented.

For operating segment information, see Note T “Business Segments” in the accompanying audited combined financial statements for the three-year period ended December 31, 2012 and Note N “Business Segments” in the accompanying unaudited combined financial statements for the three months ended March 31, 2013.

Competition

The U.S. petroleum business is highly competitive, particularly with regard to accessing and marketing petroleum and other refined products. We compete with other chains of retail fuel stations for fuel supply and in the retail sale of refined products to end consumers, primarily on the basis of price, but also on the basis of convenience and consumer appeal. In addition, we may also face competition from other retail fueling stations that adopt

 

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marketing strategies similar to ours by associating with non-traditional retailers, such as supermarkets, discount club stores and hypermarkets, particularly in the geographic areas in which we operate. We expect that our industry will continue to trend toward this model, resulting in increased competition to us over time. Moreover, because we do not produce or refine any of the petroleum or other refined products that we market, and Murphy Oil does not currently and will not in the future supply us with refined products, we compete with retail gasoline companies that have ongoing supply relationships with affiliates or former affiliates that manufacture refined products. We also compete with integrated companies that have their own production and/or refining operations that are at times able to offset losses from marketing operations with profits from producing or refining operations, and may be better positioned to withstand periods of depressed retail margins or supply shortages. In addition, we compete with other retail and wholesale gasoline marketing companies that have more extensive retail outlets and greater brand name recognition. Some of our competitors have been in existence longer than we have and have greater financial, marketing and other resources than we do. As a result, these competitors may have a greater ability to bear the economic risks inherent in all phases of our business and may be able to respond better to changes in the economy and new opportunities within the industry.

In addition, the retail gasoline industry in the United States is highly competitive due to ease of entry and constant change in the number and type of retailers offering similar products and services. With respect to merchandise, our retail sites compete with other convenience store chains, independently owned convenience stores, supermarkets, drugstores, discount clubs, gasoline service stations, mass merchants, fast food operations and other similar retail outlets. In recent years, several non-traditional retailers, including supermarkets, discount club stores and mass merchants, have begun to compete directly with retail gasoline sites. These non-traditional gasoline retailers have obtained a significant share of the gasoline market, and their market share is expected to grow, and these retailers may use promotional pricing or discounts, both at the fuel pump and in the convenience store, to encourage in-store merchandise sales and gasoline sales. In addition, some large retailers and supermarkets are adjusting their store layouts and product prices in an attempt to appeal to convenience store customers. Major competitive factors include: location, ease of access, product and service selection, gasoline brands, pricing, customer service, store appearance, cleanliness and safety.

Market Conditions and Seasonality

Market conditions in the oil and gas industry are cyclical and subject to global economic and political events and new and changing governmental regulations. Our operating results are affected by price changes in crude oil, natural gas and refined products, as well as changes in competitive conditions in the markets we serve. In addition, our ethanol production operations are impacted by the price of corn, which was elevated in connection with the 2012 growing season and may be affected by future droughts.

Oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross margins and merchandise sales can be subject to seasonal fluctuations. For example, consumer demand for motor fuel typically increases during the summer driving season, and typically falls during the winter months. Therefore, our revenues are typically higher in the second and third quarters of our fiscal year. Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for motor fuel and merchandise that we sell. A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Trademarks

We sell gasoline primarily under the Murphy USA® and Murphy Express brands, which are trademarks of Murphy Oil. The Trademark License Agreement that we expect to enter into with Murphy Oil in connection with the separation will contain a trademark license granting us the right to continue to use such Murphy Oil-owned trademarks throughout the term of that agreement subject to the terms and conditions therein. See “The Separation—Agreements with Murphy Oil Corporation.”

 

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In the highly competitive business in which we operate, our trade names, service marks and trademarks are important to distinguish our products and services from those of our competitors. We are not aware of any facts which would negatively impact our continuing use of any of the above trade names, service marks or trademarks.

IT Systems and Store Automation

All of our Company stations use a standard hardware and software platform for point-of-sale (“POS”) that facilitates item level scanning of merchandise for sales and inventory, and the secure acceptance of all major payment methods – cash, check, credit, debit, fleet and mobile. Our standard approach to large scale and geographically dispersed deployments reduces total IT cost of ownership for the POS and inherently makes the system easier to use, support, and replace. This POS technology strategy reflects close alignment with our growth plan.

The store back office systems run on the same platform as the POS which further leverages economies of scale to keep system costs down. The back office systems are primarily “Intranet” based web applications which are rendered through a standard web browser. These applications are a combination of software as a service (“SaaS”), commercial off the shelf software (“COTS”), and custom software applications developed using modern industry standard tools and methodologies.

Our Company stations use the PDI Enterprise accounting system to manage fuel and merchandise inventory, place orders, record deposits and transmit sales to the home office. Our Company stations also use COTS workforce management and task management systems for managing store associate labor, schedules, and duties. Sophisticated systems are used to minimize store labor by automating most redundant tasks such as merchandise and fuel pricing on the POS, fuel dispensers, and price signs.

All Company stations are networked to our central servers in the corporate office. Detailed sales transactions and fuel inventory levels are processed and recorded locally, then transmitted to the corporate office each 15 to 30 minutes. The data is then fed into a centralized data warehouse, where it is combined with other sources and used to optimize fuel pricing, streamline fuel inventory management, facilitate loss prevention and optimize supply chain and distribution.

Our corporate services utilize JD Edwards, PDI Enterprise, SOLARC and other enterprise systems for financial reporting, accounts payable, accounts receivable, asset management, payroll, human resources, credit and risk management and other support functions. These enterprise class systems provide significant flexibility in managing corporate and store operations, as well as scalability for growth.

The on-boarding process for the entire enterprise is performed through a SaaS provider. All paperwork and associated workflow is handled electronically which reduces both store and corporate administrative costs.

We invest in disaster recovery, system backups, redundancy, firewall, remote access security and virus and spam protection to ensure a high level of system security and availability. We have systems, business policies and processes around access controls, password expirations and file retention to ensure a high level of control within our IT network.

Environmental

We are subject to numerous federal, state and local environmental laws, regulations and permits. Such environmental requirements have historically been subject to frequent change and tended to become more stringent over time. While we strive to comply with these environmental requirements, any violation can result in litigation or the imposition of significant civil and criminal penalties, injunctions or other sanctions. Compliance with these environmental requirements affects our overall cost of business, including capital costs to construct, maintain and upgrade equipment and facilities, and ongoing operating expenditures. We maintain sophisticated leak detection and remote monitoring systems for underground storage tanks at the vast majority of our retail fueling stations. We operate above ground bulk petroleum tanks at our terminal locations and have either replaced or intend to replace underground product lines at our terminals with overhead pipelines to help mitigate the risk of potential soil and groundwater contamination. We allocate a portion of our capital expenditure program to comply with environmental laws and regulations, and such capital expenditures are projected to be $2.7 million in 2013.

 

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We could be subject to joint and several strict liability for environmental contamination. Many of our current and former properties have been operated by third-parties whose handling and management of hazardous materials were not under our control, and substantially all of them have or previously had motor fuel or petroleum product storage tanks. Pursuant to certain environmental laws, we could be responsible for remediating contamination relating to such sites, including impacts attributable to prior site occupants or other third parties, and for implementing remedial measures to mitigate the risk of future contamination. We may also have liability for contamination and violations of environmental laws under contractual arrangements with third parties, such as landlords and former owners of our sites, including at our sites in close proximity to Walmart stores. Contamination has been identified at certain of our current and former terminals and retail fueling stations, and we are continuing to conduct investigation and remediation activities in relation to such properties. The discovery of additional contamination or the imposition of further cleanup obligations at these or other properties could result in significant costs. In some cases, we may be eligible to receive money from state “leaking petroleum storage tank” trust funds to help remediate contamination at certain sites. However, receipt of such payments is subject to stringent eligibility requirements and other limitations that can significantly reduce the availability of such trust fund payments and may delay or increase the duration of associated cleanups. We could also be held responsible for contamination relating to third-party sites to which we or our predecessors have sent hazardous materials for disposal. We are currently identified as a potentially responsible party in connection with one such disposal site. Any such contamination, leaks from storage tanks or other releases of hazardous materials could result in claims against us by governmental authorities and other third parties for fines or penalties, natural resource damages, personal injury and property damage. From time to time, we are subject to legal and administrative proceedings governing the remediation of contamination or spills from current and past operations, including from our terminal operations and leaking petroleum storage tanks. For information regarding our recorded environmental liabilities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Environmental and Other Loss Contingencies.”

Consumer demand for our products may be adversely impacted by fuel economy standards as well as greenhouse gas (“GHG”) vehicle emission reduction measures. In 2010, the U.S. Environmental Protection Agency (“EPA”) and the Department of Transportation’s National Highway Traffic Safety Administration (“NHTSA”) finalized new standards raising the required Corporate Average Fuel Economy of the nation’s passenger fleet to approximately 35 miles per gallon by 2016 and imposing the first-ever federal GHG emissions standards on cars and light trucks. In September 2011, the EPA and the Department of Transportation published first-time standards to reduce GHG emissions and fuel consumption of medium and heavy duty trucks. In August 2012, the EPA and NHTSA finalized further mandated decreases in passenger vehicle GHG emissions and increases in fuel economy beginning with 2017 model year vehicles and increasing to the equivalent of 54.5 miles per gallon by 2025. These and any future increases in fuel economy standards or GHG emission reduction requirements could decrease demand for our products.

GHG and other air emissions from our own facilities are also subject to regulation. For example, certain of our fueling stations may be required to install and maintain vapor recovery systems to control emissions of volatile organic compounds to the air during the vehicle fueling process. In addition, we are currently required to report annual GHG emissions from certain of our operations. Any existing or future GHG or other such air emission measures may result in increased compliance costs.

Our business is also subject to increasingly stringent laws and regulations governing the content and characteristics of fuel. For example, the gasoline we sell generally must meet increasingly rigorous sulfur and benzene standards. In addition, renewable fuel standards generally require refiners and gasoline blenders to meet certain volume quotas or obtain representative trading credits for renewable fuels that are established as a percentage of their finished product production. Such fuel requirements and renewable fuel standards may adversely affect our wholesale fuel purchase costs.

Sale of Regulated Products

In certain areas where our retail sites are located, state or local laws limit the hours of operation for the sale of alcoholic beverages and restrict the sale of alcoholic beverages and tobacco products to persons younger than a certain age. State and local regulatory agencies have the authority to approve, revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of alcoholic beverages, as well as to issue fines to

 

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convenience stores for the improper sale of alcoholic beverages and tobacco products. Failure to comply with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on us. Such a loss or imposition could have a material adverse effect on our business, liquidity and results of operations. In many states, retailers of alcoholic beverages have been held responsible for damages caused by intoxicated individuals who purchased alcoholic beverages from them. While the potential exposure for damage claims as a seller of alcoholic beverages and tobacco products is substantial, we have adopted procedures intended to minimize such exposure.

Federally mandated anti-money laundering regulations, specifically the USA PATRIOT Act, which amends the Bank Secrecy Act, dictate the rules and documentation requirements we follow for the sales of money orders. In addition, we are subject to random anti-money laundering compliance audits. We have an anti-money laundering compliance program and have employees of the Company who review certain money order sales transactions to ensure compliance with federal regulations.

We also adhere to the rules governing lottery sales as determined by state lottery commissions in each state in which we make such sales.

Safety

We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that certain information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We believe that our operations are currently in substantial compliance with OSHA requirements, including general industry standards, record-keeping requirements and monitoring of occupational exposure to regulated substances.

Other Regulatory Matters

Our retail sites are also subject to regulation by federal agencies and to licensing and regulations by state and local health, sanitation, fire and other departments relating to the development and operation of retail sites, including regulations relating to zoning and building requirements and the preparation and sale of food. Difficulties in obtaining or failures to obtain the required licenses or approvals could delay or prevent the development of a new retail site in a particular area.

Our operations are also subject to federal and state laws governing such matters as wage rates, overtime and citizenship requirements. At the federal level, there are proposals under consideration from time to time to increase minimum wage rates and beginning in January 2014, we are required under current laws to provide a system of mandated health insurance. These legal requirements could affect our results of operations.

Employees

At March 31, 2013, we had more than 7,350 employees, including more than 1,700 full-time employees and 5,650 part-time employees.

Properties

Our headquarters of approximately 120,000 square feet is located at 200 Peach Street, El Dorado, Arkansas. In connection with the distribution, Murphy Oil will contribute the headquarters building to an affiliate of Murphy USA, and we will lease back a portion of the building to Murphy Oil. Murphy Oil will also contribute real estate at 422 North Washington Avenue, El Dorado, Arkansas, to an affiliate of Murphy USA as this property will be used for a portion of our operations. See “The Separation—Agreements with Murphy Oil Corporation—Lease Agreement for 200 Peach Street, El Dorado, Arkansas.” We have numerous owned and leased properties for our retail fueling stations as described under “—Description of Our Business,” as well as wholly owned product distribution terminals and two ethanol production facilities.

 

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Legal Proceedings

Murphy USA and its subsidiaries are engaged in a number of legal proceedings, all of which Murphy USA considers routine and incidental to its business. See Note L “Contingencies” in the accompanying unaudited combined financial statements for the three-months ended March 31, 2013.

 

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MANAGEMENT

Executive Officers Following the Distribution

The following table sets forth information, as of June 1, 2013, regarding the individuals who are expected to serve as our executive officers following the distribution. In each case, such officer selections are expected to become effective on the distribution date. Other than Mr. Clyde, all individuals expected to serve as our executive officers are current employees of Murphy Oil or Murphy Oil USA, Inc. We expect that those individuals noted below who are current employees of Murphy Oil will transfer from their respective employment with Murphy Oil to Murphy Oil USA, Inc. and, immediately prior to the spin-off, resign from any officer roles with Murphy Oil.

 

Name

  

Positions with Murphy USA

   Age  

R. Andrew Clyde

   President and Chief Executive Officer; Director      49   

Mindy K. West

   Executive Vice President and Chief Financial Officer      44   

John C. Rudolfs

   Executive Vice President Marketing      41   

Jeffery A. Goodwin

   Senior Vice President Field Operations      54   

Marn K. Cheng

   Senior Vice President Operations Support      48   

John A. Moore

   Senior Vice President, General Counsel and Secretary      45   

There are no family relationships among any of the officers named above. Each officer of the Company will hold office from the date of election until a successor is elected. Set forth below is information about the executive officers identified above.

R. Andrew Clyde will serve as President and Chief Executive Officer of Murphy USA, and will also serve as a director. Mr. Clyde served Booz & Company (and prior to August 2008, Booz Allen Hamilton) in its global energy practice. He joined the firm in 1993 and was elected partner in 2000 holding leadership roles as North American Energy Practice Leader and Dallas office Managing Partner and serving on the firm’s board nominating committee. He worked with downstream petroleum and retail clients on engagements focused on corporate and business unit strategy, organization design and effectiveness and performance improvement. Mr. Clyde’s experience in Booz’s global energy practice will make him a valuable addition to our Board of Directors. Mr. Clyde received a master’s degree in Management with Distinction from the Kellogg Graduate School of Management at Northwestern University. He received a BBA in Accounting and a minor in Geology from Southern Methodist University.

Mindy K. West will serve as Executive Vice President and Chief Financial Officer of Murphy USA. Ms. West joined Murphy Oil in 1996 and has held positions in Accounting, Employee Benefits, Planning and Investor Relations. In 2007, she was promoted to Vice President & Treasurer for Murphy Oil. She holds a bachelor’s degree in Finance from the University of Arkansas and a bachelor’s degree in Accounting from Southern Arkansas University. She is a Certified Public Accountant and a Certified Treasury Professional.

John C. Rudolfs will serve as Executive Vice President Marketing of Murphy USA. From 2008 to 2009, Mr. Rudolfs was President of T-Court Investments in Washington D.C. Mr. Rudolfs joined Murphy Oil in 2010 as Vice President, Fuel for Murphy USA Marketing Company, a division of Murphy Oil USA, Inc. with over 15 years of experience in the oil and gas industry. In 2011, he was named Vice President, Real Estate & Business Development and promoted to Executive Vice President, Marketing in 2012. Mr. Rudolfs obtained a Bachelor of Science degree from the United States Naval Academy. He graduated from the United States Navy Supply Corps School with emphasis in Supply Chain Management, Finance, Accounting, and Combat Logistics. He is a retired decorated officer from the United States Navy.

Jeffery A. Goodwin will serve as Senior Vice President Field Operations of Murphy USA. Mr. Goodwin joined Murphy Oil in 2001 as District Manager in Jacksonville, Florida. In 2002, he was promoted to Maintenance Manager and transferred to El Dorado. He was promoted to Division Manager in 2003, then to Region Manager in 2006. In 2008, Mr. Goodwin was promoted to Vice President, Retail Operations and to Senior Vice President of Retail Operations in 2012. Mr. Goodwin holds a bachelor’s degree in Business from Widener University.

Marn K. Cheng will serve as Senior Vice President Operations Support of Murphy USA. Mr. Cheng joined Murphy Oil in 2000 as District Manager in Oklahoma City, Oklahoma. He held several positions within Murphy Oil before being promoted to General Manager, Retail Marketing in 2006. In 2008, he was named Regional Vice President for Murphy USA Marketing Company, a division of Murphy Oil USA, Inc. before serving as Vice President, Retail Operations. He was promoted to Vice President, Renewable Energy for Murphy Oil USA, Inc. in 2009. He returned to the retail marketing division in 2011 as Vice President, Fuels for Murphy USA Marketing Company and was promoted to Senior Vice President of Retail Operations in 2012. Mr. Cheng graduated from Texas Tech University with a bachelor’s degree in Marketing and also holds an MBA from Texas Tech University.

John A. Moore will serve as Senior Vice President, General Counsel, and Secretary of Murphy USA. Mr. Moore joined Murphy Oil in 1995 as Associate Attorney in the Law Department. He was promoted to Attorney in 1998 and Senior Attorney in 2005. He was promoted to Manager, Law and assumed the role of Corporate Secretary for Murphy Oil in 2011. Mr. Moore holds a bachelor’s degree in Philosophy from Ouachita Baptist University and a Law degree from the University of Arkansas.

 

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DIRECTORS

Board of Directors Following the Distribution

The following individuals are expected to serve as members of our Board of Directors following the distribution. None of the individuals expected to serve as members of our Board of Directors are current employees of Murphy Oil.

 

Name

   Age*

R. Madison Murphy

   55

R. Andrew Clyde

   49

Claiborne P. Deming

   58

Thomas M. Gattle Jr.

   61

Robert A. Hermes

   73

Fred Holliger

   65

Christoph Keller, III

   58

James W. Keyes

   58

Diane N. Landen

   52

Jack T. Taylor

   61

*  As of June 1, 2013

  

Upon completion of the distribution, our Board of Directors will be divided into three classes, each of roughly equal size. The directors designated as Class I directors will have terms expiring at the first annual meeting of stockholders following the distribution; the directors designated as Class II directors will have terms expiring at the following year’s annual meeting of stockholders; the directors designated as Class III directors will have terms expiring at the following year’s annual meeting of stockholders after that. Commencing with the first annual meeting of stockholders held following the distribution, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. We have not yet set the date of the first annual meeting of stockholders to be held following the distribution.

Set forth below is additional information regarding the directors identified above, as well as a description of the specific skills and qualifications such candidates are expected to provide the Board of Directors of Murphy USA Inc.

R. Madison Murphy will serve as the Chairman of the board of directors. Mr. Murphy has been a director of Murphy Oil Corporation since 1993 and serves on its Executive Committee and as Chair of the Audit Committee. He was Chairman of the board of directors of Murphy Oil from 1994 to 2004 and Chief Financial Officer of Murphy Oil from 1992 to 1994. Mr. Murphy has served on the board of directors of Deltic Timber Corporation since December 17, 1996. Mr. Murphy has also been the Managing Member of Murphy Family Management, LLC since 1998, which is engaged in investments, farm, timber and real estate operations. Mr. Murphy has been the President of The Murphy Foundation since 1994 which is a substantial private foundation providing charitable support for a range of initiatives, predominantly in Arkansas with an emphasis on education, scholarships and support. Mr. Murphy is also the owner of Presqu’ile Winery and the owner of the Sumac Company, LLC, which is engaged in investments, timber, and vineyard operations. Mr. Murphy serves on the Hendrix College board of trustees and was Chairman from 2001-2011. He also served a ten year term on the Arkansas Highway Commission and served as Chairman of the Commission from 2010 through his retirement in early 2013. Mr. Murphy’s corporate experience, along with his current board service to Murphy Oil and Deltic Timber Corporation, and previous board service to BancorpSouth, Inc., provide invaluable corporate leadership and financial expertise for the Board and for the board committees on which he is expected to serve. Mr. Murphy is a first cousin of Mr. Claiborne P. Deming and Rev. Christoph Keller, III, both to serve on our Board.

R. Andrew Clyde — See “—Executive Officers Following the Distribution.”

Claiborne P. Deming has served as Chairman of the Board of Murphy Oil since March 2012, and is also Chairman of its Executive Committee. He served as President and Chief Executive Officer of Murphy Oil from October 1, 1994 to December 31, 2008. Prior to assuming that position, he served as Executive Vice President and Chief Operating Officer and had served previously as President of Murphy Oil USA, Inc. He served on the board of directors of Entergy Corporation from 2002 to 2006, and was a member of the Arkansas State Board of Education from September 1999 to June 2002. Mr. Deming is a past President of the 25 Year Club of the Oil and Gas Industry, past Chairman of the National Petroleum Council and was awarded API’s 2011 Gold Medal Award for Distinguished Achievement. In addition, Mr. Deming is a member of the Vanderbilt University Board of Trust and a member of the Jefferson Scholars Foundation Board of the University of Virginia. Mr. Deming is currently a private investor and he serves on several private company boards, including Tudor, Pickering, Holt & Co., a private investment and merchant bank that services the oil and gas industry. Mr. Deming’s vast experience in the oil and gas industry and his leadership roles at Murphy Oil will provide a wealth of insight to our Board. Mr. Deming is a first cousin of Mr. R. Madison Murphy and Rev. Christoph Keller, both to serve on our Board.

        Thomas M. Gattle Jr. has served as Chairman of the Board, President and Chief Executive Officer of Terral RiverService, Inc. since 1992. Terral RiverService, Inc. is a private company which employs 225 people and which operates fertilizer terminals, boats and barges on the lower Mississippi River and its connected inland waterways. Prior to his tenure at Terral RiverService, Mr. Gattle owned and operated several businesses including Terral Barge Line, which operated the Lake Providence and Madison Ports on the Mississippi River from 1980-1992 and Great River Grain from 1980-1990, which owned and operated grain elevators on the lower Mississippi River. He worked for Terral Norris Seed Company from 1975-1980. Mr. Gattle is currently a director of American Plant Food, based in Houston, Texas and President of the Louisiana Wildlife & Fisheries Foundation. He is past Chairman of the Louisiana Wildlife and Fisheries Commission, past President of the Agricultural Leaders of Louisiana and past Chairman of the Briarfield Academy School board of directors. He is involved in numerous charitable and trade organizations. Mr. Gattle’s many years of experience as a successful company owner and executive officer will allow him to provide significant input to our Board on both financial and operational matters.

Robert A. Hermes has been a director of Murphy Oil Corporation since 1999 and serves as a member of the Executive Committee, Nominating & Governance Committee and Environmental, Health & Safety Committee. He was Chairman of the Board of Purvin & Gertz, Inc., an international energy consulting firm before his retirement in 2005. Dr. Hermes has broad experience in economic and technical aspects of petroleum refining, crude oil pricing, oil logistics, petroleum marketing, and interfuel competition. He also brings to the Board expertise in strategic planning and feasibility studies. As former Chairman of the Board of Purvin & Gertz, Inc., Dr. Hermes has a strong background as an advisor on energy policy, which will enable him to provide valuable insight to our Board.

Fred Holliger was Chairman and CEO of Giant Industries (“Giant”), a NYSE petroleum refining and retail convenience store company from 2005 until 2007 when it was merged with Western Refining Company. Mr. Holliger was President and Chief Operating Officer of Giant for the previous 16 years. He is a former director of the National Petroleum Refinery Association and the New Mexico Oil and Gas Association. He spent his entire 36-year career in the petroleum industry in a variety of engineering, marketing, supply and general management positions, including serving as President of Northern Natural Gas Company. He was also an independent consultant to Western Refining Company from 2007 through June 2012. Mr. Holliger’s long career in the oil and gas industry along with his leadership experience will allow him to provide valuable insight to our Board.

The Reverend Dr. Christoph Keller, III has been a director of Deltic Timber Corporation since December 17, 1996 and is a member of the Executive Compensation Committee and Chair of the Nominating and Corporate Governance Committee of Deltic Timber Corporation. He has been an Episcopal priest since 1982, and is currently Theologian-in-Residence for St. Margaret’s Episcopal Church in Little Rock, Arkansas. He was founding pastor of St. Margaret’s Episcopal Church, serving from 1991 to 1998. In that role, he was in charge of all business operations of the church including budgeting, accounting and auditing. He is a member of the board of trustees of General Theological Seminary in New York City, and a past board member of the Episcopal Church Building Fund, also in New York City. Reverend Keller has served from 1998 to 2008 as a manager of Keller Enterprises, L.L.C., a firm with farming operations and real estate and venture capital investments. He has served on its board and currently chairs its Executive Compensation Committee. Rev. Keller’s board level experience on both public and private companies will enable him to make valuable contributions to our Board. Rev. Keller is first cousin of Claiborne P. Deming and R. Madison Murphy, all to serve on our Board.

James W. Keyes is currently Chairman and Chief Executive Officer of Wild Oats LLC, a position he has held since January 2012. He was Chief Executive Officer of 7-Eleven Inc. from 2000 to 2005 and held a variety of other positions prior to that in his twenty-one year career, including Chief Financial Officer and Chief Operating Officer. Mr. Keyes was Chairman and Chief Executive Officer of Blockbuster from 2007 to 2011 and led the company through a restructuring process that involved the successful sale of assets to Dish Networks, preserving over 19,000 jobs and providing continuity for the Blockbuster brand. Blockbuster filed for Chapter 11 bankruptcy on September 23, 2010. Mr. Keyes serves on numerous civic boards and was the recipient of the Horatio Alger award in 2005 and the Ellis Island Medal of Honor in 2008. Mr. Keyes experience running large companies, and specifically a retail gasoline chain should provide invaluable expertise to our Board.

Diane N. Landen is owner and President of Vantage Communications, Inc. where she has experience in investment management, communications, and broadcast property ownership for over 20 years. She also serves as Vice Chairman and and Executive Vice President of Noalmark Broadcasting Corporation, which is a radio and media company which owns and operates radio stations in multiple markets in Arkansas and New Mexico. Her responsibilities at Noalmark include oversight of the Company’s corporate strategy. She is a partner at Munoco Company LC., an oil and gas exploration and production company. Ms. Landen also serves on the board of Loutre Land and Timber Company, a natural resources company. She acts as Secretary of the Company and serves on the Executive and Nominating Committees. Ms. Landen serves in leadership position on numerous charitable organizations. She has, through her involvement in these many and varied business ventures, developed a broad range of experience in operating successful companies, allowing her to make significant contributions to our Board.

        Jack T. Taylor has been a director of Sempra Energy since February 2013 and serves as a member of the Audit; Environmental, Health, Safety and Technology; and LNG Joint Venture and Financing Committees. He was the Chief Operating Officer-Americas and Executive Vice Chair of U.S. Operations for KPMG LLP from 2005 to 2010. From 2001 to 2005 he served as the Vice Chairman of U.S. Audit and Risk Advisory Services for KPMG LLP. Mr. Taylor is a director of Christus Schumpert Health System Foundation. Mr. Taylor has extensive experience with financial and public accounting issues as well as a deep knowledge of the energy industry. He spent over 35 years as a public accountant at KPMG LLP, many of which he worked in a leadership capacity. This experience with financial and public accounting issues, together with his executive experience and knowledge of the energy industry, make him a valuable addition to our Board.

Qualification of Directors

We believe our board of directors following the distribution consists of individuals with appropriate skills and experiences to meet board governance responsibilities and contribute effectively to our company. The Nominating and Governance Committee will seek to ensure the board of directors reflects a range of talents, ages, skills, diversity and expertise, particularly in the areas of accounting and finance, management, domestic and international markets, governmental/regulatory, leadership and retail-related industries, sufficient to provide sound and prudent guidance with respect to our operations and interests. Our board of directors will seek to maintain a diverse membership, but will not have a separate policy on diversity at the time of our separation from Murphy Oil.

Composition of the Board of Directors

We currently expect that, upon the completion of the separation, our board of directors will consist of ten members, a majority of whom we expect to satisfy the independence standards established by the Sarbanes-Oxley Act of 2002 and the applicable rules of the SEC and the NYSE.

Committees of the Board of Directors

Our board of directors will establish several standing committees in connection with the discharge of its responsibilities. Effective upon the distribution, our board of directors will have the following committees:

Audit Committee—The Audit Committee will have the sole authority to appoint or replace the Company’s independent registered public accounting firm, which reports directly to the Audit Committee. The Audit Committee will also assist the Board with its oversight of the integrity of the Company’s financial statements, the independent registered public accounting firm’s qualifications, independence and performance, the performance of the Company’s internal audit function, the compliance by the Company with legal and regulatory requirements, and the review of programs related to compliance with the Company’s Code of Business Conduct and Ethics. The Audit Committee will meet with representatives of the independent registered public accounting firm and with members of the internal Auditing Department for these purposes.

The size and composition of the Audit Committee will meet the independence requirements set forth in the applicable listing standards of the SEC and the NYSE and requirements set forth in the Audit Committee charter. At least one member of the Audit Committee will qualify as a financial expert within the meaning of applicable SEC rules. The initial membership of the Audit Committee will be determined prior to the distribution.

A more detailed discussion of the committee’s mission, composition and responsibilities is contained in the Audit Committee charter, which will be available on our website: www.murphyusa.com.

Executive Committee—The Executive Committee will be vested with the authority to exercise certain functions of the board when the board is not in session. The Executive Committee will also be in charge of all financial, legal and general administrative affairs of the Company, subject to any limitations prescribed by our Bylaws or by the board. The initial members of the Executive Committee will be determined prior to the distribution.

A more detailed discussion of the committee’s mission, composition and responsibilities is contained in the Executive Committee charter, which will be available on our website: www.murphyusa.com.

Executive Compensation Committee—The Executive Compensation Committee will oversee the compensation of the Company’s executives and directors and administer the Company’s annual incentive compensation plan, the long-term incentive plan and the stock plan for non-employee directors.

The Executive Compensation Committee will consist entirely of independent directors, each of whom will meet the NYSE listing independence standards and our Company’s independence standards. The initial members of the Executive Compensation Committee will be determined prior to the distribution. See “Compensation Discussion and Analysis” for additional information about the Executive Compensation Committee.

In carrying out its duties, the Executive Compensation Committee will have direct access to outside advisors, independent compensation consultants and others to assist them.

A more detailed discussion of the committee’s mission, composition and responsibilities is contained in the Executive Compensation Committee charter, which will be available on our website: www.murphyusa.com.

        Nominating and Governance Committee—The Nominating and Governance Committee will identify and recommend potential board members, recommend appointments to board committees, oversee evaluation of the board’s performance and review and assess the Corporate Governance Guidelines of the Company. Information regarding the process for evaluating and selecting potential director candidates, including those recommended by stockholders, will be set out in the Company’s Corporate Governance Guidelines. Stockholders desiring to recommend candidates for membership on the Board for consideration by the Nominating and Governance Committee will be able to address their recommendations to: Nominating and Governance Committee of the Board of Directors, c/o Secretary, Murphy USA, 200 Peach Street, El Dorado, Arkansas 71730-5836. As a matter of policy, candidates recommended by stockholders will be evaluated on the same basis as candidates recommended by the board members, executive search firms or other sources. The Corporate Governance Guidelines will also provide a mechanism by which stockholders may send communications to board members.

The Nominating and Governance Committee will consist entirely of independent directors, each of whom will meet the NYSE listing independence standards and our Company’s independence standards. The initial members of the Nominating and Governance Committee will be determined prior to the distribution.

A more detailed discussion of the committee’s mission, composition and responsibilities is contained in the Nominating and Governance Committee charter, which will be available on our website: www.murphyusa.com.

 

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Risk Management

While our Company’s management will be responsible for the day-to-day management of risks to the Company, the board of directors will have broad oversight responsibility for our risk management programs following the separation from Murphy Oil.

The board of directors will exercise risk management oversight and control both directly and indirectly, the latter through various board committees as discussed above. The board of directors will regularly review information regarding the Company’s credit, liquidity and operations, including the risks associated with each. The Executive Compensation Committee will be responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee will be responsible for oversight of financial risks, including the steps the Company has taken to monitor and mitigate these risks. The Nominating and Governance Committee, in its role of reviewing and maintaining the Company’s corporate governance guidelines, will manage risks associated with the independence of the board of directors and potential conflicts of interest. While each committee will be responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors will be regularly informed through committee reports and by the chief executive officer about the known risks to the strategy and the business.

Stock Ownership and Retention Guidelines for Directors and Officers

We expect to adopt guidelines imposing certain obligations on our directors and officers with respect to the ownership and retention of our common stock. Any guidelines adopted will be available on our website: www.murphyusa.com.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2012 and the three months ended March 31, 2013, Murphy Oil’s retail business was operated by subsidiaries of Murphy Oil and not through an independent company and therefore did not have a compensation committee or any other committee serving a similar function. Decisions as to the compensation of those who will serve as Murphy USA’s executive officers were made by Murphy Oil. See “Compensation Discussion and Analysis” included elsewhere in this information statement.

 

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COMPENSATION DISCUSSION AND ANALYSIS

For purposes of the following Compensation Discussion and Analysis and Executive Compensation disclosures, the five persons who we expect will be our named executive officers as of the distribution date are identified below (collectively, our “Named Executive Officers”). The information provided reflects compensation earned at Murphy Oil or its subsidiaries and the design and objectives of the executive compensation programs in place prior to the separation. In addition, summary information concerning Murphy USA’s executive compensation approach developed to date in connection with planning for the separation is also included below.

This Compensation Discussion and Analysis has three main parts:

 

   

Murphy Oil 2012 Executive Compensation—This section describes and analyzes the executive compensation programs at Murphy Oil in 2012.

 

   

Effects of the Separation on Outstanding Executive Compensation Awards—This section discusses the effect of the separation on outstanding Murphy Oil compensation awards held by our Named Executive Officers.

 

   

Murphy USA Compensation Programs—This section discusses the anticipated executive compensation programs at Murphy USA.

Our Named Executive Officers are as follows:

 

Name

  

2012 Murphy Oil Job Title

  

2013 Murphy USA Job Title

R. Andrew Clyde (1)

   N/A    President and Chief Executive Officer

Mindy K. West

   Vice President & Treasurer (2)    Executive Vice President and Chief Financial Officer

John A. Moore

   Manager, Law & Corporate Secretary (2)    Senior Vice President, General Counsel and Secretary

Jeffery A. Goodwin

  

Senior Vice President, Field Operations (3)

  

Senior Vice President, Field Operations

John C. Rudolfs

   Executive Vice President, Marketing (3)    Executive Vice President, Marketing

 

(1) Mr. Clyde is currently an employee of Booz & Company and is on secondment at Murphy USA from January 1, 2013 until August 1, 2013, at which point he will become our employee. Therefore, he held no position at and received no compensation from Murphy Oil in 2012.
(2) Ms. West and Mr. Moore are currently officers of Murphy Oil.
(3) Mr. Goodwin and Mr. Rudolfs are currently officers of Murphy USA Marketing Company, a division of Murphy USA.

Executive Summary

2012 was an important year for Murphy Oil and the execution of Murphy Oil’s business strategy. During fiscal year 2012, Murphy Oil undertook significant actions to execute its long-term business strategy to reposition itself as an independent exploration and production company while at the same time creating a distinct and freestanding fuel-focused retail organization. On October 16, 2012 the Company announced its intent to spin off Murphy USA to its stockholders. The separation of Murphy USA, as contemplated by this Information Statement, is expected to occur sometime during the second half of 2013.

The Murphy Oil Board of Directors and senior management believe that the separation will have direct benefits to Murphy Oil shareholders. As a result of the separation, we believe that both Murphy Oil as well as Murphy USA will be able to focus on their respective business strategies and priorities with financial targets and performance that fit each entity’s market and opportunities. In turn, each entity will be able to better allocate designated resources and allocate its capital in a manner consistent with its priorities. Over the longer-term, shareholders and prospective investors will be able to consider the value of each of the two businesses and assess the financial characteristics and investment opportunities associated with each.

Introduction

The Executive Compensation Committee of Murphy Oil (the “ECC”) oversees the compensation of Murphy Oil’s senior executive officers. The ECC consists of no fewer than two members, all of whom have been determined by the board of directors of Murphy Oil (the “Murphy Oil Board”) to satisfy the independence requirements of the NYSE and Murphy Oil’s categorical independence standards. The Nominating and Governance Committee recommends nominees for appointment to the ECC annually and as vacancies or newly created positions occur. ECC members are appointed by the Murphy Oil Board and may be removed by the Murphy Oil Board at any time. Current members of the ECC include Neal E. Schmale (Chairman), David J.H. Smith, James V. Kelley, Walentin Mirosh and Jeffrey W. Nolan. Executive compensation decisions following the separation will be made by the Compensation Committee of Murphy USA (our “Compensation Committee”), which also will be composed entirely of independent directors.

 

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The ECC reviews and approves corporate goals and objectives relevant to Murphy Oil’s senior executive officer compensation. The ECC approves any compensation-related decisions affecting the pay of all Named Executive Officers.

The ECC administers and makes recommendations to the Murphy Oil Board with respect to incentive compensation plans and equity-based plans and reviews and approves awards granted under such plans.

Sole authority to retain and terminate any compensation consultant rests with the ECC, which also has sole authority to approve the consultant’s fees and other retention terms. Advice and assistance from internal or external legal, accounting or other advisors is also available to the ECC.

In 2012, the ECC retained Pay Governance LLC as an independent compensation consultant. In its role as an advisor to the ECC. Pay Governance provided the ECC with objective and expert analyses, independent advice and information with respect to executive and director compensation. Pay Governance provides no other consulting services to the ECC, or to Murphy Oil, other than those dealing with executive compensation and the compensation of non-employee directors.

Pay Governance provides the ECC with, among other things, an analysis of trends and compensation data for general industry, the oil and gas industry and a select group of comparator companies within the oil and gas industry. For 2012, the comparator group included Anadarko Petroleum, Apache, Chesapeake Energy, ConocoPhillips, Denbury Resources, Devon Energy, EOG Resources, Hess, Marathon Oil Corporation, Newfield Exploration, Noble Energy, Occidental Petroleum, Pioneer Natural Resources, Plains Exploration & Production and Southwestern Energy. While structured as an integrated oil company like the “major” and “super-major” oil companies, Murphy Oil’s size is more comparable to that of certain independent exploration and production companies and refining and marketing companies. Various members of the investment community place Murphy Oil in each of these groups. The comparator group was developed by Pay Governance to provide representation from each of (i) integrated oil companies, (ii) independent exploration and production companies and (iii) refining and marketing companies.

In addition to comparator information, the ECC uses survey information to determine competitive market pay levels for the Named Executive Officers. The surveys used include:

 

   

Towers Watson 2012 Petroleum Industry Compensation Data Bank;

 

   

Mercer Human Resource Consulting 2012 Energy 27 Survey;

 

   

Towers Watson 2012 General Industry Compensation Data Bank; and

 

   

Organization Resources Counselors 2012 Manufacturing and Marketing Survey.

The survey data analyzed includes both general industry and energy industry (as available) information. Regression analysis is utilized to adjust for differences in company size. Where regression is not possible, data for companies with similar revenue size is analyzed.

The ECC generally takes action on compensation matters at its meeting held in conjunction with the February Murphy Oil Board meeting. Murphy Oil grants employee stock options at this meeting, and the exercise price of such stock options is based on the average of the high and the low market price for the Murphy Oil’s shares on the date of grant. The ECC also considers at this time adjustments to executive officers’ base salary, annual incentive bonus and grants of long-term equity and cash-based incentive awards. The ECC meets at other times during the year as necessary and, in 2012, met five times. A copy of the ECC’s charter can be found on the Murphy Oil’s website: http://www.murphyoilcorp.com/about/governance/compensate.aspx.

 

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Guiding Principles

The ECC bases its executive compensation decisions on principles designed to align the interests of executives with those of stockholders. The ECC intends compensation to provide a direct link with Murphy Oil’s values, objectives, business strategies and financial results. In order to motivate, attract and retain key executives who are critical to its long-term success, Murphy Oil believes that its pay package should be competitive with others in the oil and gas industry. In addition, Murphy Oil believes that executives should be rewarded for both the short-term and long-term success of Murphy Oil and, conversely, be subject to a degree of downside risk in the event that Murphy Oil does not achieve its performance objectives.

In order to promote the long-term as well as short-term interests of Murphy Oil, and to more closely align the interests of its key employees to those of its stockholders, Murphy Oil uses a mix of short-term and long-term incentives. Individuals at Murphy Oil in a primary position to influence the growth of stockholder wealth have larger portions of their total compensation package delivered in the form of equity-based long-term incentives. To this end, executives have a compensation package which includes a base salary, participation in a cash-based annual incentive plan, participation in a long-term incentive plan and certain other compensation, including customary benefits as discussed in “—Elements of Compensation” below. Murphy Oil believes that this combination of base salary, short-term incentives, long-term incentives and other employee benefits provides the best balance between the need for Murphy Oil to provide executive compensation which is competitive in the marketplace and therefore necessary for recruiting and retention, and the desire to have management’s interests, motivations and prosperity aligned with the interests of Murphy Oil’s stockholders.

Murphy Oil had no employment, change in control or termination agreements with its Named Executive Officers in effect in 2012. Under the terms of Murphy Oil’s incentive plans, in the event of a change in control of Murphy Oil, each executive officer would retain his “earned” compensation and all outstanding equity awards would vest, become immediately exercisable or payable or have all restrictions lifted as may apply to the type of the award. The separation of Murphy USA is not a change-in-control and therefore will not entitle executive officers of Murphy Oil to any change-in-control benefits.

Elements of Compensation

A. Base Salary

The objectives of the base salary component of compensation include:

 

   

to provide a fixed level of compensation to reward the executive for day-to-day execution of primary duties and responsibilities;

 

   

to assist Murphy Oil in the attraction and retention of a highly skilled competitive team by paying base salaries which are competitive with Murphy Oil’s comparator group; and

 

   

to provide a foundation level of compensation upon which incentive opportunities can be added to provide the motivation to deliver superior performance.

Murphy Oil targets the median of competitive market pay levels for the base salary of its Named Executive Officers. Murphy Oil targets the 50th percentile because it believes that it allows the organization to recruit, attract and retain qualified management talent having the requisite skills and competencies to manage Murphy Oil and to deliver additional value for stockholders. In practice, some executives are paid above or below the 50th percentile because of their individual job performance, time in the position and tenure with Murphy Oil. Executives’ salaries are ultimately determined based on the market pay levels as well as a combination of experience, duties and responsibilities, individual performance, Company performance, general economic conditions and marketplace compensation trends.

 

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The base salaries of our Named Executive Officers in 2012 was as follows:

 

Named Executive Officer

   2012 Base
Salary($)
 

R. Andrew Clyde (1)

   $ 0   

Mindy K. West

     324,401   

John A. Moore

     282,150   

Jeffery A. Goodwin

     250,000   

John C. Rudolfs

     318,000   

 

(1) See Named Executive Officers table above for more information about Mr. Clyde’s employment arrangements.

B. Annual Incentive Plan

The objectives of Murphy Oil’s annual incentive plan are:

 

   

to provide incentive compensation to those officers, executives and key employees who contribute significantly to the growth and success of Murphy Oil;

 

   

to attract and retain individuals of outstanding ability;

 

   

to align the interests of those who hold positions of major responsibility in Murphy Oil with the interests of Murphy Oil’s stockholders; and

 

   

to promote excellent operational performance by rewarding executives when they achieve it.

Murphy Oil targets the median of competitive market pay levels for annual target incentive compensation because Murphy Oil believes it allows Murphy Oil to retain and motivate its executives. Executives have the opportunity to be compensated above the median of market pay levels when Murphy Oil has above market performance based on established performance measures.

Murphy Oil’s current cash-based annual incentive plan, the 2012 Annual Incentive Plan (the “2012 AIP”), was approved by Murphy Oil stockholders at the 2012 annual meeting. Amounts earned under the 2012 AIP are intended to qualify as tax-deductible performance-based compensation under Section 162(m) of the Internal Revenue Code (the “Code”). In connection with the separation, Murphy USA intends to adopt a cash-based annual incentive plan, substantially similar to the 2012 AIP (see “Executive Compensation—2013 Annual Incentive Plan”). The 2012 AIP provides Murphy Oil with a list of performance criteria to be used for determination of performance-based awards. Murphy Oil currently uses return on capital employed (“ROCE”) as one performance metric to determine the annual award under the 2012 AIP because it measures the quality of Murphy Oil’s earnings by looking at net income earned on the capital employed in the business. The ECC believes that stockholders should receive a return which, at least, meets the cost of capital. In turn, this means that Murphy Oil has efficiently used the capital resources invested in the business and has earned a rate of return and level of income which exceeds the implied cost of such capital resources.

ROCE is computed as a percentage based on dividing the sum of (i) Murphy Oil’s annual net income, as adjusted from time-to-time at the discretion of the ECC for certain unusual and nonrecurring gains or losses and (ii) Murphy Oil’s after-tax net interest expense, by the sum of (a) the balance of Murphy Oil’s consolidated stockholders’ equity at January 1 of the respective year and (b) the average of Murphy Oil’s beginning and ending long-term debt during the respective year.

For 2012, the performance criteria included a mixture of ROCE, a safety metric, financial metrics and operating metrics. With respect to the Named Executive Officers, the following tables summarize the performance metrics, respective weighting of performance metrics and weighted performance scores based on actual performance, used in determining their respective annual incentive awards.

For Ms. West and Mr. Moore:

 

Metric

   Target     Weighting     Weighted
Performance
Score
 

ROCE

     14.2     50.00     34.65

Total Recordable Incident Rate

     1.0     10.00     12.80

Production

     194,230        20.00     16.38

Reserves Replacement

     150.0     10.00     20.00

US Downstream ROIC

     11.9     10.00     5.00
      

 

 

 

Total

         88.83
      

 

 

 

For Mr. Goodwin and Mr. Rudolfs:

 

Metric

   Target     Weighting     Weighted
Performance
Score
 

US Downstream ROIC

     11.9     90.00     45.00

US Downstream Total Recordable Incident Rate

     1.2     10.00     12.00
      

 

 

 

Total

         57.00
      

 

 

 

When establishing the target ROCE percentage, the ECC considered (i) the rate of return on risk-free investments (Treasury Bills), (ii) a risk premium reflecting the increased return required to invest in equities, (iii) the cost of long-term debt, as measured by Murphy Oil’s annual interest expense on long-term debt and (iv) general industry conditions. The targets for other operating metrics were primarily based on historical data, budgets and forecasts. Under the terms of the 2012 AIP, achievement of 100% of the target rate results in the payment of 100% of individual target awards. For Named Executive Officers, achievement of the minimum of the performance range results in the payment of 62.5% of individual target awards and achievement of the maximum results in the payment of 250% of individual target awards, subject to downward adjustment by the ECC of up to 40%. Upward adjustments are not permitted for Named Executive Officers and no awards are payable if performance falls below the minimum.

 

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Named Executive Officer

   Target Bonus as a
Percentage of Base
Salary
    Actual Amount
Awarded($)
 

R. Andrew Clyde(1)

     0   $ 0   

Mindy K. West

     50     178,123   

John A. Moore

     40     109,092   

Jeffery A. Goodwin

     40     67,016   

John C. Rudolfs

     40     79,971   

 

(1) See Named Executive Officers table above for more information about Mr. Clyde’s employment arrangements.

C. Long-term Incentive Compensation

The objectives of Murphy Oil’s long-term incentive program include:

 

   

to align executives’ interests with the interests of stockholders;

 

   

to reinforce the critical objective of building stockholder value over the long term;

 

   

to assist in the long-term attraction, motivation and retention of an outstanding management team;

 

   

to complement the short-term performance metrics of the 2012 AIP; and

 

   

to focus management attention upon the execution of the long-term business strategy of Murphy Oil.

Long-term incentive compensation for 2012 included the grant of stock options, performance-based RSUs and cash-based performance units under Murphy Oil’s 2007 Long-Term Incentive Plan (the “2007 LTIP”). Stock options are designed to align the interests of executives with the performance of Murphy Oil over time. The exercise or grant price of fixed-priced stock options equals the average of the high and the low of Murphy Oil’s Common Stock on the date of the grant. Fixed-price stock options are inherently performance-based because option holders realize no economic benefit unless Murphy Oil’s stock price increases in value subsequent to the grant date. This aligns the optionees’ interests with that of stockholders. The vesting of performance-based RSUs is based upon Murphy Oil’s total shareholder return (“TSR”) relative to the TSR of the same fifteen companies used for compensation comparator analysis (as described above). Because stock price appreciation is not enough to guarantee payment, performance-based RSUs are at greater risk of forfeiture. The vesting of cash-based performance units is based on Murphy Oil’s earnings before interest, taxes, depreciation and amortization (“EBITDA”). In connection with the separation, Murphy USA intends to adopt a long-term incentive plan substantially similar to the Murphy Oil Corporation 2012 Long-Term Incentive Plan (the “2012 LTIP”). (See “Executive Compensation—2013 Long-Term Incentive Plan”).

On January 31, 2012, the ECC granted long-term incentive awards pursuant to the 2007 LTIP to our Named Executive Officers (other than Mr. Clyde) with the value either divided between stock options and performance-based RSUs (Murphy Oil generally targets an evenly weighted split between stock options and performance-based RSUs) on an expected value basis or awarded directly in cash-based performance units. Murphy Oil believes that the awards are effective and appropriate methods of long-term compensation. Murphy Oil generally targets the median of competitive market pay levels for the annual grant value of long-term incentive compensation. When determining the size of the long-term incentive awards to our executives and the total number of shares available for long-term incentive award grants for all management employees for the fiscal year, the ECC considers survey data provided by the ECC’s compensation consultant, internal equity and individual performance; as well as the proportion of our total shares outstanding used for annual equity-based award grants and the potential voting power dilution to our stockholders. In 2012, Murphy Oil made long-term incentive grants to our Named Executive Officers using grant guidelines developed from competitive data provided by the ECC’s independent compensation consultant. These grant guidelines, which were developed by Pay Governance from the Towers Watson 2012 Petroleum Industry and General Industry Compensation Data Banks as well as the Mercer Human Resource Consulting Energy 27 Survey, were constructed around the 50th percentile (median) competitive data.

 

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Grants were as follows:

 

Named Executive Officer

   Number of
Stock  Options
     Number of
Restricted Stock
Units
     Number  of
Cash-Based
Performance
Units
 

R. Andrew Clyde(1)

     0         0         0   

Mindy K. West

     35,000         10,000         0   

John A. Moore

     10,000         6,000         0   

Jeffery A. Goodwin

     0         0         1,250   

John C. Rudolfs

     0         0         1,500   

 

(1) See Named Executive Officers table above for more information about Mr. Clyde’s employment arrangements.

Murphy Oil has not backdated stock options and does not intend to do so in the future. The exercise price for all stock options is equal to the fair market value (average of daily high and low) on the date of the grant.

Beginning in 2006, Murphy Oil’s stock option award form provides for payment of the aggregate exercise price to be automatically net settled in stock, which reduces dilution. Thus upon exercise, shares having a fair market value equal to the exercise price as well as statutory minimum withholding taxes are withheld by Murphy Oil and only net shares are delivered to the holder of the option. The options granted in 2012, all of which are non-qualified, vest in two equal installments on the second and third anniversaries of the grant date, and unless otherwise forfeited or exercised, these options expire seven years from the date of the grant.

Performance-based RSUs awarded in 2012 will vest in three years based on how Murphy Oil’s TSR compares to the TSR of an index of the fifteen energy companies. The same fifteen companies used for compensation comparator analysis (as described above) were used for this purpose. The 2012 performance-based RSU awards contain four equally weighted measurement periods: year 1; year 2; year 3; and years 1-3 combined. Achievement of the 50th percentile of the peer group is required for vesting and payment of 100% of the target performance-based RSUs awarded, achievement of the 90th percentile of the peer group for the vesting and payment of 150% of the target performance-based RSUs awarded, achievement of the 25th percentile of the peer group for the vesting and payment of 50% of the target performance-based RSUs awarded, and there is a prorated percentage of performance-based RSUs that can vest and be paid for performance between the 25th and 90th percentiles. No payment is made for achievement below the 25th percentile of the peer group. Dividend equivalents are accumulated during the performance period and pay out only if the underlying units vest. Holders of performance-based RSUs do not have any voting rights.

Cash-based performance units awarded in 2012 will vest in three years based on how Murphy USA’s EBITDA compares to the absolute growth from the baseline EBITDA which was derived from actual results from 2011. The 2012 cash-based performance unit awards contain four equally weighted measurement periods: year 1; year 2;·year 3; and years 1-3 combined. Achievement of 5% absolute growth in EBITDA is required for vesting and payment of 50% of the target cash-based performance units awarded, achievement of 10% of absolute growth in EBITDA is required for vesting and payment of 100% of the target performance-based RSUs awarded, achievement of 12.5% of absolute growth in EBITDA is required for vesting and payment of 150% of the target cash-based performance units awarded, achievement of 15% of absolute growth in EBITDA is required for vesting and payment of 200% of the target cash-based performance units awarded and there is a prorated percentage of cash-based performance units that can vest and be paid for performance between 5% and 15% of absolute growth in EBITDA. No payment is made for achievement below 5% absolute growth in EBITDA.

The 2007 LTIP is structured so that awards granted under the 2007 LTIP qualify as tax-deductible “performance-based” compensation under Section 162(m) of the Code. The stock option, performance-based RSU and cash-based performance unit awards granted in 2012 qualify as “performance-based” under Section 162(m) of the Code.

 

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D. Employee Benefits and Perquisites

The objectives of Murphy Oil’s employee benefits and perquisites program are:

 

   

to provide an employee benefit package with the same level of benefits provided to all Murphy Oil employees which is competitive within Murphy Oil’s industry sector;

 

   

to offer executives indirect compensation which is efficient and supplemental to their direct compensation to assist with retirement, health and welfare needs for individuals and their families; and

 

   

to provide only limited benefits to selected executives as required.

Murphy Oil’s executives are provided usual and customary employee benefits available to all employees (except certain hourly retail employees). These include thrift savings (401(k)), life insurance, accidental death and dismemberment insurance, medical/dental insurance, vision insurance, long-term disability insurance and a Company sponsored defined benefit pension plan. Murphy USA does not intend to provide to its employees participation in a defined benefit pension plan after the separation.

Tax regulations adversely affect certain highly compensated employees by restricting their full participation in qualified defined benefit pension and defined contribution (thrift) plans. In an effort to provide the same level of retirement benefit opportunity for all employees, Murphy Oil has a Supplemental Executive Retirement Plan (the “SERP”). The purpose of the SERP is to restore pension plan and thrift plan benefits which are not payable under such plans because of certain specified benefit and compensation limitations under tax regulations. The benefit to Murphy Oil of this arrangement is the retention and long-term service of employees who are otherwise unprotected by employment contracts. Other than the SERP, Murphy Oil does not offer a deferred compensation option to its Named Executive Officers. Murphy USA currently expects to offer a defined contribution supplemental plan after the separation.

Agreement with Our Chief Executive Officer

In connection with the separation, Murphy USA expects to enter into a Severance Protection Agreement with our Chief Executive Officer which will provide certain severance benefits. If Mr. Clyde’s employment is terminated by Murphy USA without cause or he terminates employment for “good reason,” in either case within 24 months following a change in control, Mr. Clyde will be entitled under this agreement to his earned but unpaid compensation, a lump sum severance payment equal to three times the sum of his base salary and the average of his last three annual bonuses, accelerated vesting of his outstanding equity-based awards and continued life, accident and health insurance benefits for 36 months. Mr. Clyde will not be entitled to any “golden parachute” excise tax gross-up payments, and will be subject to non-solicitation and non-competition restrictive covenants for 12 months following any such termination.

Murphy USA Compensation Programs

A. Approach as an Independent Public Company

In connection with preparations for the separation, in 2013 Murphy USA engaged Mercer, an independent consulting firm, to provide external benchmark data, industry perspectives and advisory services to develop an approach to the initial base salary, annual bonus opportunity and long-term incentive compensation (or LTIC) for our Named Executive Officers and other VP-level officers on a going forward basis.

B. Retail Compensation Peer Group

A retail peer group was established for purposes of calculating peer group 25th and 75th percentiles and peer group median compensation. The peer group was developed based on certain key factors, including:

 

   

Industry Sector: direct motor fuel and convenience retailers; retailers exposed to vehicle miles travelled (or VMT), and other small box common goods retailers (e.g., quick serve restaurants or QSRs).

 

   

Method of Operation: emphasis on company operated sites and direct owned real estate.

 

   

Scale of Operation: emphasis on earnings and market capitalization over revenue; employee and store count.

The 17 companies comprising the Murphy USA peer group and used in the compensation analysis fall into three groups:

 

   

Fuels Retailers (6);

 

   

VMT Retailers (4);

 

   

QSRs and other small-box retailers (7).

C. Murphy USA Overall Philosophy

The base compensation design, based on Mercer input, took into account a number of inputs and considerations:

 

   

Job descriptions and Hay/DB2 points were established for the various roles, including the full complement of responsibilities that in some cases exceeded those of peers (e.g., additional reporting and compliance obligations and duties) and in other cases more diffuse than peer group members. This approach also took into account reporting obligations, e.g., direct reports to the CEO.

 

   

Base compensation for peers at the median level peer group generally reflects the length of service in that position.

 

   

Best practice in transitioning compensation from private/public division status to standalone public status is typically done over a period of two to three years, starting closer to the 25th percentile and moving towards the median.

 

   

The expectation in a public company environment is that after two to three years NEOs and VPs should be performing in new roles and future compensation design will target the median.

The annual bonus and LTIC target level are intended to reflect this transition of base compensation with the goal of achieving median total cash and total direct compensation over time. The approach for the bonus and LTIC components is to target the bonus and LTIC opportunity percentages at the median so that the percentages remain fairly constant over the period while the base increases toward the median.

Taking the design elements together, targeted total direct compensation is expected to be between the 30th and 40th percentile in most cases, a final result consistent with Mercer’s data and analysis in similar transitional situations.

In summary, Murphy USA believes the above-described approach for proposed target post-separation compensation for the NEOs and VP-level positions is consistent with the external market practice, provide an appropriate timeframe to transition officers into new roles and public company responsibilities and create the path for appropriate increases over time taking into account performance and tenure in each individual’s respective role.

Effects of the Separation on Outstanding Compensation Awards

For a summary of provisions concerning retirement, health and welfare benefits to our employees upon completion of the separation, see “The Separation—Agreements with Murphy Oil Corporation—Employee Matters Agreement.” The separation of Murphy USA is not a change-in-control and therefore will not entitle executive officers of Murphy Oil to any change-in-control benefits.

We expect that incentive compensation awards generally will be treated as follows:

 

   

Outstanding vested stock options will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation. Employees of Murphy USA will have until the earlier of two years from the date of the separation or the stated expiration date of the option to exercise these adjusted options.

 

   

Any unvested stock options and stock appreciation rights held by employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Murphy Oil common stock on the date of the separation.

 

   

Murphy USA will replace any outstanding unvested stock options and stock appreciation rights held by individuals who are or will become employees of Murphy USA with long-term Murphy USA incentive awards of generally equivalent value.

 

   

Phantom units will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

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Non-employee director RSU awards will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value of each grant on the date of the separation.

 

   

RSUs that are held by current employees of Murphy Oil who are or will become employees of Murphy USA will be equitably adjusted to preserve the intrinsic value on the date of the separation. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the RSUs will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

   

Performance units that are held by current employees of Murphy Oil who are not and will not become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the performance units will be replaced by Murphy Oil substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

   

Performance units that are held by current employees of Murphy Oil who are or will become employees of Murphy USA are valued in cash and will not be adjusted. These individuals will receive a pro rata number of units earned for performance attained as of the separation, based on the number of months worked in the performance period up to the separation. The balance portion of the performance units will be replaced by Murphy USA substitute awards of generally equivalent value. If the performance measures have been satisfied, a committee of Murphy Oil will determine the size of the award, and the individual will be paid the pro-rated award following such determination.

 

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EXECUTIVE COMPENSATION

Tabular Information for Named Executive Officers

The following table sets forth certain information regarding compensation paid in respect of specified periods to the Named Executive Officers of Murphy USA. In 2012, the Named Executive Officers (other than Mr. Clyde) were employed by, and were compensated by, Murphy Oil or its subsidiaries.

2012 SUMMARY COMPENSATION TABLE

 

Name and Principal Position

   Year      Salary
($)
     Bonus
($)
     Stock
Awards
($)(1)
     Option
Awards
($)(2)
     Non-equity
Incentive Plan
Compensation
($)(3)
     Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)
     All Other
Compensation
($)(4)
     Total ($)  

R. Andrew Clyde,
President and Chief Executive Officer
(5)

     2012       $ 0       $ 0       $ 0       $ 0       $ 0       $ 0       $ 0       $ 0   

Mindy K. West,
Executive Vice President and Chief Financial Officer

     2012         320,835         0         592,650         620,900         178,123         277,071         20,090         2,009,669   

John A. Moore,
Senior Vice President, General Counsel, and Secretary

     2012         279,113         0         355,590         177,400         109,092         264,754         17,589         1,203,538   

Jeffery A. Goodwin,
Senior Vice President, Field Operations

     2012         235,143         0         0         0         67,016         170,256         14,949         487,364   

John C. Rudolfs,
Executive Vice President, Marketing

     2012         280,600         0         0         0         79,971         49,132         44,183         453,886   

 

(1) The RSU awards are shown at grant date fair value as computed in accordance with FASB ASC Topic 718, excluding forfeiture estimates, as more fully described in Note I to Murphy Oil’s consolidated financial statements included in the 2012 Form 10-K report. RSU awards are subject to performance-based conditions and are forfeited if grantee’s employment terminates for any reason other than retirement, death or full disability. The RSU awards vest three years from the date of grant if performance conditions are met. There is no assurance that the value realized by the executive will be at or near the value included herein.
(2) The stock option awards are shown at grant date fair value as computed in accordance with FASB ASC Topic 718, excluding forfeiture estimates, as more fully described in Note I to Murphy Oil’s consolidated financial statements included in its 2012 Form 10-K report. Options granted generally vest in two equal installments on the second and third anniversaries of the grant date. The options are exercisable for a period of seven years from the date of grant. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. There is no assurance that the value realized by the executive will be at or near the value included herein.
(3) Non-Equity Incentives were awarded and paid after the end of the year in which they are reported. Because these payments related to services rendered in the year prior to payment, Murphy Oil reported these incentives as a component of compensation expense in the year for which the award was earned.
(4) The total amounts shown in this column for 2012 consist of the following: Ms. West: $19,250—Company contributions to defined contribution plans; $840—Benefit attributable to Company-provided term life insurance policy. Mr. Moore: $16,749—Company contributions to defined contribution plans; $840—Benefit attributable to Company-provided term life insurance policy. Mr. Goodwin: $14,109—Company contributions to defined contribution plans; $840—Benefit attributable to Company-provided term life insurance policy. Mr. Rudolfs: $34,723 – Travel cost grossed up in payroll related to transportation from home to work location; $7,856 – Lodging cost grossed up in payroll related to transportation from home to work location; $840—Benefit attributable to Company-provided term life insurance policy; $764 – Value of country club membership paid for by Murphy Oil Corporation.
(5) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.

 

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The following table sets forth certain information regarding Murphy Oil non-equity incentive plan awards and equity-based awards granted in 2012 to each Named Executive Officer.

2012 GRANTS OF PLAN-BASED AWARDS TABLE (1)

 

            Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
    Estimated Future Payouts Under
Equity Incentive Plan Awards
 

Name

   Grant
Date
     Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
     Target
(#)
     Maximum
(#)
 

R. Andrew Clyde (2)

     N/A       $ 0      $ 0      $ 0        0         0         0   

Mindy K. West

     1/31/12               5,000         10,000         15,000   
        100,261 (3)      160,418 (3)      401,044 (3)         

John A. Moore

     1/31/12               3,000         6,000         9,000   
        69,778 (3)      111,645 (3)      279,113 (3)         

Jeffery A. Goodwin

     1/31/12         62,500 (4)      125,000 (4)      250,000 (4)         
        58,786 (3)      94,057 (3)      235,143 (3)         
                 

John C. Rudolfs

     1/31/12         75,000 (4)      150,000 (4)      300,000 (4)         
        70,150 (3)      112,240 (3)      280,600 (3)         
                 

 

Name

   Grant
Date
     All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)
     All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)
     Exercise or
Base Price
of Option
Awards

($/Sh)(5)
     Closing
Price  on
Grant
Date

($/Sh)(5)
     Grant Date
Fair Value
of Stock
and Option
Awards ($)
 

R. Andrew Clyde (2)

     N/A         0         0       $ 0       $ 0       $ 0   

Mindy K. West

     1/31/12         0         35,000         57.155         59.60         620,900   
     1/31/12         10,000         0         0         0         592,650   

John A. Moore

     1/31/12         0         10,000         57.155        
59.60
  
     177,400   
     1/31/12         6,000         0         0         0         355,590   

Jeffery A. Goodwin

     N/A         0         0         0         0         0   

John C. Rudolfs

     N/A         0         0         0         0         0   

 

(1) See “Compensation Discussion and Analysis—Effects of the Separation on Outstanding Executive Compensation Awards” elsewhere in this Information Statement.
(2) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.
(3) The potential value of annual performance based cash compensation.
(4) The value of cash-based performance units granted pursuant to the 2007 Long Term Incentive Plan.
(5) The exercise price of options is determined using the average of the high and low of the stock price on the date of grant and reflects equitable adjustments made to reflect the special dividend paid in December 2012, which does not impact the closing price on grant date.

The following sets forth certain information regarding Murphy Oil equity-based awards held by each Named Executive Officer at December 31, 2012.

 

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2012 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE (1)

 

Name

   Number of
Securities
Underlying
Unexercised
Exercisable
Options (#)
     Number of
Securities
Underlying
Unexercised
Unexercisable
Options (#)
     Option
Exercise Price
($) (3)
     Option
Expiration
Date
 

R. Andrew Clyde (2)

     0         0       $ 0         N/A   

Mindy K. West

     17,500         0         48.570         2/6/2014   
     20,000         0         70.245         2/5/2015   
     20,000         0         41.450         2/3/2016   
     12,500         12,500         50.345         2/2/2017   
     0         27,500         65.135         2/1/2018   
     0         35,000         57.155         1/31/2019   

John A. Moore

     4,000         0         70.245         2/5/2015   
     2,500         2,500         50.345         2/2/2017   
     0         5,000         65.135         2/1/2018   
     0         10,000         57.155         1/31/2019   

Jeffery A. Goodwin

     3,000         0         57.315         1/31/2013   
     3,500         0         48.570         2/6/2014   
     4,000         0         70.245         2/5/2015   
     5,000         0         41.450         2/3/2016   
     2,500         2,500         50.345         2/2/2017   

John C. Rudolfs

     0         0         0         N/A   
     Stock Awards  

Name

   Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
     Market Value
of Shares or
Units of Stock
That Have
Not Vested

($)
     Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested

(#)
     Equity
Incentives
Plan Awards:
Market or
Payout Value
of Unearned
Shares Units
or Other
Rights That
Have Not
Vested

($)
 

R. Andrew Clyde (2)

     0       $ 0         0       $ 0   

Mindy K. West

     6,142         365,765         18,339         1,092,082   

John A. Moore

     2,935         174,780         9,173         546,277   

Jeffery A. Goodwin

     2,000         117,927         0         0   

John C. Rudolfs

     0         0         0         0   

 

(1) See “Compensation Discussion and Analysis—Effects of the Separation on Outstanding Executive Compensation Awards” elsewhere in this Information Statement.
(2) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.
(3) The exercise price disclosed above reflects equitable adjustments made to reflect the special dividend paid in December 2012.

The following table set forth certain information regarding the Murphy Oil stock option exercises by, and vesting of Murphy Oil stock awards held by, the Named Executive Officers during 2012.

2012 OPTION EXERCISES AND STOCK VESTED TABLE

 

     Option Awards      Stock Awards  

Name

   Number of Shares
Acquired on Exercise
(#)
     Value Realized on
Exercise ($)(2)
     Number of Shares
Acquired on Vesting
(#)
     Value Realized on
Vesting ($)(3)
 

R. Andrew Clyde (1)

     0       $ 0         0       $ 0   

Mindy K. West

     20,000         575,175         3,806         226,647   

John A. Moore

     2,000         21,220         1,181         70,329   

Jeffery A. Goodwin

     0         0         1,173         69,852   

John C. Rudolfs

     0         0         0         0   

 

(1) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.

 

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(2) The value shown reflects the difference between the market price on the date of exercise and the exercise price of the option.
(3) Value based on 2010 performance-based RSU award vesting date as of December 31, 2012 at $59.55 per share. Payment of net shares was settled February 5, 2013 pursuant to the terms of the award. The price on award date was $60.015 per share (average high and low price). Values as of the date of receipt were as follows: Ms. West - $228,417, Mr. Moore - $70,878 and Mr. Goodwin - $70,400.

The following table sets forth certain information regarding the qualified and non-qualified defined benefit pension benefits accrued as of December 31, 2012 by each Name Executive Officer under certain Murphy Oil pension plans.

2012 PENSION BENEFITS TABLE

 

Name

  

Plan Name

   Number of
Years
Credited
Service

(#)
     Present Value
of
Accumulated
Benefit

($)
     Payment
During Last
Fiscal Year

($)
 

R. Andrew Clyde (1)

   N/A      0       $ 0       $ 0   

Mindy K. West

   Retirement Plan of Murphy Oil Corporation      16.583         387,601         0   
   Murphy Oil Corporation Supplemental Executive Retirement Plan      16.583         481,252         0   

John A. Moore

   Retirement Plan of Murphy Oil Corporation      17.903         444,843         0   
   Murphy Oil Corporation Supplemental Executive Retirement Plan      17.903         213,978         0   

Jeffery A. Goodwin

   Retirement Plan of Murphy Oil Corporation      11.962         422,292         0   
   Murphy Oil Corporation Supplemental Executive Retirement Plan      11.962         132,996         0   

John C. Rudolfs

   Retirement Plan of Murphy Oil Corporation      2.339         48,149         0   
   Murphy Oil Corporation Supplemental Executive Retirement Plan      2.339         25,491         0   

 

(1) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.

The purpose of the Retirement Plan of Murphy Oil Corporation, a tax-qualified defined benefit retirement plan, is to provide retirement and incidental benefits for all employees who complete a period of faithful service. The purpose of the SERP is to restore defined benefit and defined contribution benefits which cannot be paid because of certain specified benefit and compensation limitations under the tax-qualified retirement plan. The pension formula used to calculate benefits is: 1.6% times final average pay (“FAP”) times years of benefit service minus 1.5% times primary social security benefit times years of benefit service (to a maximum of 33 1 /3 years). In connection with the distribution, all current participants including each Named Executive Officer will be vested as to the current accrued benefit under the Retirement Plan of Murphy Oil Corporation. The FAP used in calculating benefits under the plans is the average cash compensation (salary and annual incentive bonus) over the highest paid 36-month period during the employee’s last ten years of employment. An employee begins participating in the plan after one year of service, with 60 months of vesting service required to receive a benefit. Distribution elections for the qualified plan are made upon retirement. Benefits shown are computed on a single life annuity basis and are subject to a deduction for social security amounts. The pension benefits shown neither reflect any

 

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reductions in retirement benefits that would result from the selection of one of the plan’s various available survivorship options nor the actuarial reductions required by the plan for retirement earlier than age 62. For this purpose, Ms. West’s average compensation was $525,317, Mr. Moore’s $354,578, Mr. Goodwin’s $316,344 and Mr. Rudolfs’ $363,539.

The estimated credited years of service used are as indicated in the table.

The following assumptions were used in determining the present value amounts at December 31, 2012.

 

   

Discount Rate — 4.18%

 

   

Mortality Table — RP-2000 projected to 2017 using Scale AA

The following table sets forth certain information regarding the benefits accrued as of December 31, 2012 by each Named Executive Officer under the defined contribution portion of the SERP.

2012 NONQUALIFIED DEFERRED COMPENSATION TABLE

 

Name

   Executive
Contributions
in Last Fiscal
Year ($)(1)
     Registrant
Contributions
in Last Fiscal
Year ($)(2)
     Aggregate
Earnings in
Last Fiscal
Year ($)(3)
     Aggregate
Withdrawals/
Distributions
($) Aggregate
     Aggregate
Balance at
Last Fiscal
Year-End ($)
 

R. Andrew Clyde (4)

   $ 0       $ 0       $ 0       $ 0       $ 0   

Mindy K. West

     8,667         4,250         3,410         0         65,264   

John A. Moore

     0         1,749         95         0         2,756   

Jeffery A. Goodwin

     1,813         0         102         0         2,754   

John C. Rudolfs

     0         0         0         0         0   

 

(1) The executive contributions in the last fiscal year have been included in the “Salary” column for the Named Executive Officer in the 2012 Summary Compensation Table.
(2) The registrant contributions in the last fiscal year have been included in “All Other Compensation” column for the Named Executive Officer in the 2012 Summary Compensation Table.
(3) The unfunded SERP provides the same investment options available under the qualified 401(k) savings plan. The “Aggregate Earnings” column reflects the different investment returns based upon the Named Executive Officer’s investment selection.
(4) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements.

The purpose of the Thrift Plan for Employees of Murphy Oil Corporation, a tax-qualified defined contribution retirement plan, is to provide retirement and incidental benefits for all employees who participate in the Plan. The purpose of the defined contribution portion of the SERP is to restore defined contribution benefits which cannot be invested because of certain specified compensation limitations under the tax-qualified thrift plan. The employees are immediately vested in all employee and employer matching contributions. Murphy Oil matching contributions are limited to dollar for dollar on the first 6 percent. All employees are allowed to contribute on a pre-tax basis up to 25 percent of their eligible pay. The table above represents amounts deferred under the SERP for 2012.

2012 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE

Murphy Oil has not generally entered into employment, change in control or termination agreements with its senior executive officers. However, upon a change in control, as defined in the 2012 Murphy Oil equity-based plans all outstanding equity awards granted under such plans shall vest, become immediately exercisable or payable or have all restrictions lifted which apply to the type of award. The separation of Murphy USA is not a change-in-control and therefore will not entitle executive officers of Murphy Oil to any change-in-control benefits. Murphy Oil does not currently have any other agreement, contract, plan, or arrangement, whether written or unwritten, that provides for potential payments to its senior executive officers upon termination or a change in control. Such officers are specifically excluded from normal severance benefits offered to other employees; however, Murphy Oil has, from time-to-time, paid termination benefits to executive-level positions upon an end in service. Decisions by Murphy Oil to pay termination benefits, and in what amounts, will be determined on a case-by-case basis.

 

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The following table presents estimated amounts that would have been payable to the applicable Named Executive Officer if the described event had occurred on December 31, 2012, the last trading day of the fiscal year:

 

Name

  

Category

   Normal
Termination
($)
     Change of Control
($)
 

R. Andrew Clyde (1)

   N/A    $ 0       $ 0   

Mindy K. West

   Non-equity compensation (2)      178,123         178,123   
   Unvested & Accelerated (3)      
  

RSUs

     0         1,457,847   
  

Stock Options

     0         198,888   
   Retirement Plan (4)      0         0   
   Total      178,123         1,834,858   

John A. Moore

   Non-equity compensation (2)      123,968         123,968   
   Unvested & Accelerated (3)      
  

RSUs

     0         721,057   
  

Stock Options

     0         46,963   
   Retirement Plan (4)      0         0   
   Total      123,968         891,988   

Jeffery A. Goodwin

   Non-equity compensation (2)      67,016         67,016   
   Unvested & Accelerated (3)      
  

Performance Units

     0         125,000   
  

Restricted Stock/RSUs

     0         117,927   
  

Stock Options

     0         16,763   
   Retirement Plan (4)      0         0   
   Total      67,016         326,706   

John C. Rudolfs

   Non-equity compensation (2)      79,791         79,971   
   Unvested & Accelerated (3)      
  

Performance Units

     0         150,000   
  

Stock Options

     0         0   
   Retirement Plan (4)      0         0   
   Total      79,971         229,971   

 

(1) See Named Executive Officers table in “Compensation Discussion and Analysis” for more information about Mr. Clyde’s employment arrangements; see also “Agreement with our Chief Executive Officer”; in “Compensation Discussion and Analysis” for a summary of the proposed severance protection arrangement with Mr. Clyde.
(2) Non-equity compensation is calculated under the terms of Murphy Oil’s annual incentive plans. Although actual awards, if any, are subject to attaining certain performance-based targets, for purposes of this table, non-equity compensation is calculated based on actual awards earned in 2012 without adjustment.
(3) In the event of a change of control, all unvested outstanding long-term incentive awards shall vest, become immediately exercisable or payable or have all restrictions lifted as may apply to the type of the award. Performance-based RSUs will be deemed to be earned at the target level of performance. In the event of termination any time prior to the completion of the full three-year performance period, except in the event of death, disability, or retirement, all performance-based RSUs will be forfeited. In the event of termination, all unvested stock options will be forfeited.
(4) Named Executive Officers may receive benefits under the Murphy Oil’s defined benefit pension plan upon retirement, depending upon date of hire, age and years of service at termination. The Pension Benefits Table reports the present value of each Named Executive Officer’s accumulated benefit at December 31, 2012 unadjusted for retirement earlier than age 62, and such benefits are not accelerated or otherwise enhanced in connection with any termination scenario.

2013 Long-Term Incentive Plan

We expect to adopt a long-term incentive plan for Murphy USA. A description of the plan will be included in an amendment to the registration statement of which this Information Statement forms a part.

2013 Annual Incentive Plan

We expect to adopt an annual incentive plan for Murphy USA. A description of the plan will be included in an amendment to the registration statement of which this Information Statement forms a part.

Any awards granted under the long-term incentive plan and the annual incentive plan will be at the discretion of the Compensation Committee. Therefore, it is not possible at present to determine the amount or form of any award that will be available for grant to any individual during the term of the long-term incentive plan or the annual incentive plan or that would have been granted during the last fiscal year had the long-term incentive plan or the annual incentive plan been in effect.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

Our non-employee directors will receive compensation for their services on the board of directors. Following the separation, we expect our director compensation programs and amounts will be structured similarly to those currently in place at Murphy Oil. The primary elements of our non-employee director compensation are expected to consist of an equity compensation program and a cash compensation program. Information on Murphy Oil’s 2012 non-employee director compensation is included below.

Murphy Oil’s standard arrangement for compensation of non-employee directors has included a combination of cash and equity. In 2012, the cash component consisted of an annual retainer of $60,000, plus $2,000 for each Murphy Oil Board or committee meeting attended. Supplemental retainers were paid to the Chairman of the Board ($115,000), the Audit Committee Chairman ($15,000), the Audit Committee Financial Expert ($10,000), other members of the Audit Committee ($7,500), the Executive Compensation Committee Chairman ($15,000) and the Chair of each other committee ($10,000). Murphy Oil also reimburses directors for travel, lodging and related expenses they incur in attending Board and committee meetings.

The equity component for 2012 consisted of time-based RSUs. Dividend equivalents accumulate over the vesting period and pay out upon the vesting of the RSUs.

On November 20, 2012, Pay Governance provided the ECC information with respect to director compensation for the Murphy USA board of directors. The ECC approved a compensation package that consists of an annual retainer of $40,000, plus $2,000 for each Murphy USA Board or committee meeting attended and an annual stock award of $125,000. Supplemental retainers were approved for the Chairman of the Board ($115,000), the Audit Committee Chairman ($15,000), the Executive Compensation Committee Chairman ($12,500) and the Nominating and Governance Committee Chairman ($10,000).

We expect to adopt a long-term incentive plan for non-employee directors of Murphy USA. A description of the plan will be included in an amendment to the registration statement of which this Information Statement forms a part.

 

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STOCK OWNERSHIP

As of the date of this Information Statement, all of the outstanding shares of Murphy USA common stock are owned by Murphy Oil. After the distribution, Murphy Oil will not directly or indirectly own any of our common stock. The following tables provide information with respect to the expected beneficial ownership of Murphy USA common stock by (1) each identified director nominee of Murphy USA, (2) each Named Executive Officer, (3) all identified Murphy USA executive officers and director nominees as a group and (4) each of our stockholders who we believe will be a beneficial owner of more than 5 percent of Murphy USA outstanding common stock (assuming they maintain such ownership positions when the distribution occurs) based on current publicly available information. We based the share amounts on each person’s beneficial ownership of Murphy Oil common stock as of [•], 2013, and applying the distribution ratio of one share of our common stock for every [•] shares of Murphy Oil common stock held as of the record date, unless we indicate some other date or basis for the share amounts in the applicable footnotes.

Except as otherwise noted in the footnotes below, each person or entity identified below is expected to have sole voting and investment power with respect to such securities. Following the distribution, Murphy USA will have outstanding an aggregate of approximately [•] shares of common stock based upon approximately [•] shares of Murphy Oil common stock outstanding on [•], 2013, excluding treasury shares and assuming no exercise of Murphy Oil stock options or settlement of outstanding stock settled RSUs in shares of Murphy Oil common stock, and applying the distribution ratio of one share of our common stock for every [•] shares of Murphy Oil common stock held as of the record date.

To the extent our director nominees and executive officers own Murphy Oil common stock at the record date for the distribution, they will participate in the distribution on the same terms as other holders of Murphy Oil common stock.

The number of shares beneficially owned by each stockholder, director nominee or officer is determined according to the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose.

Holdings of Major Stockholders

The following table sets forth information regarding each stockholder who is expected, following the separation, to beneficially own more than 5 percent of our common stock following the distribution (as of the date of such stockholder’s Schedule 13G filing for Murphy Oil with the SEC):

 

Name and address of beneficial owner

   Amount and
nature of
beneficial
ownership
(1)
    Percentage  

T. Rowe Price Associates, Inc.

100 E. Pratt Street

Baltimore, Maryland 21202

     14,319,745 (2)      7.30

BlackRock, Inc.

40 East 52nd Street

New York, NY 10022

     13,646,194 (3)      7.02

 

(1) Includes common stock for which the indicated owner has sole or shared voting or investment power and is based on the indicated owner’s Schedule 13G filing for Murphy Oil for the period ended December 31, 2012.
(2) These securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. (“Price Associates”) serves as investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. Total includes 4,793,562 sole voting power shares and 14,305,045 sole dispositive power shares.
(3) A parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). All shares are sole voting power and sole dispositive power shares.

 

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Holdings of Directors and Executive Officers

The following table sets forth the number of shares of our common stock beneficially owned, based on the basis of presentation previously described, as of [•], 2013, by each of the director nominees, Named Executive Officers in the Summary Compensation Table, and all Murphy USA executive officers and director nominees as a group.

Together these individuals beneficially own less than one percent of our common stock. For purposes of this table, shares are considered to be “beneficially” owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to such shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days of [•], 2013. No executive officer, director nominee holds any class of equity securities other than Murphy Oil common stock or Murphy Oil equity awards that may give them the right to acquire beneficial ownership of Murphy Oil common stock, and it is not expected that any of them will own any class of equity securities of Murphy USA other than common stock following the distribution.

 

Name

   Personal
with Full
Voting and
Investment
Power
  Personal as
Beneficiary
of Trusts
  Voting and
Investment
Power
Only
  Options
Exercisable
Within 60
Days
  Total   Percent of
Outstanding
(if greater
than one
percent)

Claiborne P. Deming

   [•]   [•]   [•]   [•]   [•]   [•]

Thomas M. Gattle Jr.

   [•]   [•]   [•]   [•]   [•]   [•]

Robert A. Hermes

   [•]   [•]   [•]   [•]   [•]   [•]

Fred Holliger

   [•]   [•]   [•]   [•]   [•]   [•]

Christoph Keller, III

   [•]   [•]   [•]   [•]   [•]   [•]

James W. Keyes

   [•]   [•]   [•]   [•]   [•]   [•]

Diane N. Landen

   [•]   [•]   [•]   [•]   [•]   [•]

R. Madison Murphy

   [•]   [•]   [•]   [•]   [•]   [•]

Jack T. Taylor

   [•]   [•]   [•]   [•]   [•]   [•]

R. Andrew Clyde

   [•]   [•]   [•]   [•]   [•]   [•]

Mindy K. West

   [•]   [•]   [•]   [•]   [•]   [•]

John A. Moore

   [•]   [•]   [•]   [•]   [•]   [•]

Jeffery A. Goodwin

   [•]   [•]   [•]   [•]   [•]   [•]

John C. Rudolfs

   [•]   [•]   [•]   [•]   [•]   [•]

Director nominees and executive officers as a group (15)

   [•]   [•]   [•]   [•]   [•]   [•]

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Separation from Murphy Oil Corporation

The separation will be accomplished by means of the distribution by Murphy Oil of all the outstanding shares of Murphy USA common stock to holders of Murphy Oil common stock entitled to such distribution, as described under “The Separation” included elsewhere in this Information Statement. Completion of the distribution will be subject to satisfaction or waiver by Murphy Oil of the conditions to the separation and distribution described under “The Separation—Conditions to the Distribution.”

As part of our separation from Murphy Oil, we will enter into a Separation and Distribution Agreement and several other agreements with Murphy Oil to effect the separation and provide a framework for our relationships with Murphy Oil after the separation. See “The Separation—Agreements with Murphy Oil Corporation” for information regarding these agreements.

Related Party Transactions

As a current subsidiary of Murphy Oil, we engage in related party transactions with Murphy Oil. Those transactions are described in more detail in Note C “Related Party Transactions” in the accompanying audited combined financial statements for the three-year period ended December 31, 2012 and in Note B “Related Party Transactions” in the accompanying unaudited combined financial statements for the three months ended March 31, 2013.

The Nominating and Governance Committee will review annual cumulative ordinary course of business transactions with firms associated with directors and nominees for director. Our management will also monitor such transactions on an ongoing basis. Executive officers and directors will be governed by our Code of Business Conduct and Ethics, which will provide that waivers may only be granted by the board of directors and must be promptly disclosed to stockholders. Our Corporate Governance Guidelines will require that all directors recuse themselves from any discussion or decision affecting their personal, business or professional interests.

We will provide information regarding our policy on related party transactions in an amendment to the registration statement of which this Information Statement forms a part.

 

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DESCRIPTION OF CAPITAL STOCK

The following descriptions are summaries of the material terms of the amended and restated certificate of incorporation (“Certificate of Incorporation”) and the amended and restated bylaws (“Bylaws”) that we expect to adopt upon separation from Murphy Oil. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, the Certificate of Incorporation and Bylaws, copies of which will be filed with the SEC as exhibits in an amendment to the registration statement on Form 10 of which this Information Statement is a part, and applicable law.

General

Upon completion of the separation, our authorized capital stock will consist of [•] shares of common stock, par value $0.01 per share, and [•] shares of preferred stock, par value $0.01 per share.

Common Stock

Common stock outstanding. Upon completion of the separation, we expect there will be approximately [•] shares of common stock outstanding to be held of record by [•] stockholders based upon approximately [•] shares of Murphy Oil common stock outstanding as of [•], 2013, and assuming no exercise of Murphy Oil options or settlement of Murphy Oil stock settled RSUs in shares of Murphy Oil common stock, and applying the distribution ratio of one share of our common stock for every [•] shares of Murphy Oil common stock held as of the record date. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of the separation will be fully paid and non-assessable.

Voting rights. The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders (other than matters relating solely to the terms of any preferred stock or directors elected solely by the holders thereof). Our Certificate of Incorporation and Bylaws will not provide for cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting securities entitled to vote in the election of directors will be able to elect all of the directors.

Dividend rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock will be entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. See “Dividend Policy.”

Rights upon liquidation. In the event of liquidation, dissolution or winding up of Murphy USA, the holders of common stock will be entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.

Other rights. The holders of our common stock will have no preemptive or conversion rights or other subscription rights. There will be no redemption or sinking fund provisions applicable to the common stock.

Preferred Stock

Our board of directors will have the authority to issue, without further vote or action by the stockholders, the preferred stock in one or more series and to fix the designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series.

The issuance of preferred stock could adversely affect the voting power of the holders of the common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Murphy USA without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. At present, Murphy USA has no plans to issue any of the preferred stock.

 

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Election and Removal of Directors

Our board of directors will consist of ten directors as of the date our Certificate of Incorporation becomes effective, and thereafter, the number of directors will be fixed exclusively by one or more resolutions adopted from time to time solely by the affirmative vote of a majority of the “whole board” (defined as the total number of authorized directorships at any given time, whether or not there exist any vacancies in previously authorized directorships). No director will be removable by the stockholders except for cause, and directors may be removed for cause only by an affirmative vote of a majority of the total voting power of our outstanding securities generally entitled to vote in the election of directors. Any vacancy occurring on the board of directors and any newly created directorship may be filled only by a majority of the remaining directors in office (although less than a quorum) or by the sole remaining director.

Staggered Board

Upon completion of the separation, our board of directors will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will initially serve until our annual meetings of stockholders in 2014, 2015 and 2016, respectively. At each annual meeting of stockholders, directors will be elected for three-year terms to succeed the class of directors whose terms have expired. This classification of our board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors.

Limits on Written Consents

Our Certificate of Incorporation and our Bylaws will provide that holders of our common stock will not be able to act by written consent without a meeting.

Stockholder Meetings

Our Certificate of Incorporation and our Bylaws will provide that special meetings of our common stockholders may be called only by our board of directors acting pursuant to a resolution adopted by a majority of the whole board. Our Bylaws provide that business transacted at any special meeting will be limited to the purposes stated in the notice of such meeting.

Amendment of Certificate of Incorporation

Our Certificate of Incorporation will provide that the amendment of the provisions described under “—Election and Removal of Directors,” “—Staggered Board,” “—Limits on Written Consents,” and “—Stockholder Meetings” will require the affirmative vote of holders of at least 66 2/3% of the total voting power of our outstanding securities generally entitled to vote in the election of directors, voting together as a single class. Pursuant to Delaware law, the affirmative vote of holders of at least a majority of the voting power of our outstanding shares of stock will generally be required to amend other provisions of our Certificate of Incorporation.

Amendment of Bylaws

Our Bylaws will be generally subject to alteration, amendment or repeal, and new bylaws may be adopted, with:

 

   

the affirmative vote of a majority of the whole board; or

 

   

the affirmative vote of holders of 66 2/3% of the total voting power of our outstanding securities generally entitled to vote in the election of directors, voting together as a single class.

Other Limitations on Stockholder Actions

Our Bylaws will also impose some procedural requirements on stockholders who wish to make nominations in the election of directors or propose any other business to be brought before an annual or, if applicable, special meeting of stockholders.

 

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Under these procedural requirements, in order to nominate a director or bring a proposal for any other business before a meeting of stockholders, a stockholder will be required to deliver timely notice of the nomination or proposal pertaining to a proper subject for presentation at the meeting to our corporate secretary along with, among other things, the following:

 

   

information relating to each director nominee, if any, required to be disclosed in the solicitation of proxies for the election of directors pursuant to the Exchange Act;

 

   

a brief description of the business, if any, to be brought before the meeting, the reasons for conducting such business at the meeting, and any material interest of the stockholder or beneficial owner in the proposal;

 

   

the name and address of the stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made;

 

   

for each class or series of stock, the number of shares beneficially owned by the stockholder and beneficial owner and a representation that the stockholder is a holder of record entitled to vote at the meeting; and

 

   

a description of any agreement, arrangement or understanding that has been entered into by or on behalf of, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, the stockholder or beneficial owner or any nominee with respect to our securities.

To be timely, a stockholder will generally be required to deliver notice:

 

   

in connection with an annual meeting of stockholders, not less than 90 nor more than 120 days prior to the first anniversary of the annual meeting of stockholders held in the immediately preceding year, but in the event that the date of the annual meeting is more than 30 days before or more than 70 days after the anniversary date of the preceding annual meeting of stockholders, a stockholder notice will be timely if received by us no earlier than 120 days prior to the annual meeting and no later than the later of 70 days prior to the date of the annual meeting or the 10th day following the day on which we first publicly announced the date of the annual meeting; or

 

   

in connection with the election of a director at a special meeting of stockholders, not earlier than 120 days prior to the date of the special meeting nor more than the later of 90 days prior to the date of the special meeting or the 10th day following the day on which we first publicly announced the date of the special meeting.

If a stockholder fails to follow the required procedures, the stockholder’s proposal or nominee will be ineligible and will not be voted on by our stockholders.

Limitation of Liability of Directors and Officers

Our Certificate of Incorporation will provide that no director will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except as required by applicable law, as in effect from time to time. Currently, Delaware law requires that liability be imposed only for the following:

 

   

any breach of the director’s duty of loyalty to our company or our stockholders;

 

   

any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law;

 

   

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and

 

   

any transaction from which the director derived an improper personal benefit.

 

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As a result, neither we nor our stockholders have the right, including through stockholders’ derivative suits on our behalf, to recover monetary damages against a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above.

Our Certificate of Incorporation will provide that, to the fullest extent permitted by law, we will indemnify any officer or director of our company in connection with any threatened, pending or completed action, suit or proceeding to which such person is, or is threated to be made, a party, whether civil or criminal, administrative or investigative, arising out of the fact that the person is or was our director or officer, or served any other enterprise at our request as a director or officer. We will reimburse the expenses, including attorneys’ fees, incurred by a person indemnified by this provision in connection with any proceeding, including in advance of its final disposition, to the fullest extent permitted by law. Amending this provision will not reduce our indemnification obligations relating to actions taken before an amendment.

We expect to maintain insurance for our officers and directors against certain liabilities, including liabilities under the Securities Act of 1933, under insurance policies, the premiums of which will be paid by us. The effect of these will be to indemnify any officer or director of the Company against expenses, judgments, attorney’s fees and other amounts paid in settlements incurred by an officer or director arising from claims against such persons for conduct in their capacities as officers or directors of the Company.

Anti-Takeover Effects of Some Provisions

Some of the expected provisions of our Certificate of Incorporation and Bylaws (as described above) could make the following more difficult:

 

   

acquisition of control of us by means of a proxy contest or otherwise, or

 

   

removal of our incumbent officers and directors.

These provisions, including our ability to issue preferred stock, will be designed to discourage coercive takeover practices and inadequate takeover bids. These provisions will also be designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection will give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection will outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.

Delaware Business Combination Statute

We will elect to be subject to Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions. Section 203 prevents an “interested stockholder,” which is defined generally as a person owning 15% or more of a corporation’s voting stock, or any affiliate or associate of that person, from engaging in a broad range of “business combinations” with the corporation for three years after becoming an interested stockholder unless:

 

   

the board of directors of the corporation had, prior to the person becoming an interested stockholder, approved either the business combination or the transaction that resulted in the stockholder’s becoming an interested stockholder;

 

   

upon completion of the transaction that resulted in the stockholder’s becoming an interested stockholder, that person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, other than statutorily excluded shares; or

 

   

following the transaction in which that person became an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

 

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Under Section 203, the restrictions described above also do not apply to specific business combinations proposed by an interested stockholder following the announcement or notification of designated extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s directors, if such extraordinary transaction is approved or not opposed by a majority of the directors who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors.

Section 203 may make it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period. Section 203 also may have the effect of preventing changes in our management and could make it more difficult to accomplish transactions which our stockholders may otherwise deem to be in their best interests.

Distributions of Securities

Murphy USA was formed on March 1, 2013, and since its formation, it has not sold any securities, including sales of reacquired securities, new issues (other than to Murphy Oil in connection with its formation), securities issued in exchange for property, services or other securities, and new securities resulting from the modification of outstanding securities.

Listing

We intend to have our shares of common stock listed on the NYSE under the ticker symbol “MUSA.”

Transfer Agent and Registrar

The transfer agent and registrar for the common stock will be Computershare Trust Company, N.A.

 

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WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form 10 with the SEC with respect to the shares of our common stock that Murphy Oil stockholders will receive in the distribution. This Information Statement is a part of that registration statement and, as allowed by SEC rules, does not include all of the information you can find in the registration statement or the exhibits to the registration statement. For additional information relating to our Company and the distribution, reference is made to the registration statement and the exhibits to the registration statement. Statements contained in this Information Statement as to the contents of any contract or document referred to are not necessarily complete and in each instance, if the contract or document is filed as an exhibit to the registration statement, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each such statement is qualified in all respects by reference to the applicable document.

Following the distribution, we will file annual, quarterly and special reports, proxy statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by an independent registered public accounting firm. The registration statement of which this Information Statement forms a part is, and any of these future filings with the SEC will be, available to the public over the Internet on the SEC’s website at www.sec.gov. You may read and copy any filed document at the SEC’s public reference rooms in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference rooms.

We maintain an Internet website at www.murphyusa.com. Our website and the information contained on that site, or connected to that site, are not incorporated into this Information Statement or the registration statement on Form 10.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined financial statements presented below have been derived from our historical combined financial statements included in this Information Statement. While the historical combined financial statements reflect the past financial results of Murphy Oil’s U.S. marketing business, these pro forma statements give effect to the separation of that business into an independent, publicly traded company. The pro forma adjustments to reflect the separation include:

 

   

the distribution of our common stock to Murphy Oil stockholders;

 

   

the expected issuance of $650 million of new debt; and

 

   

the expected cash dividend of approximately $650 million to Murphy Oil.

A final determination regarding our capital structure has not yet been made, and the separation and distribution, tax sharing, transition services, employee matters, trademark license, lease and aircraft agreements have not been finalized, and as such the pro forma statements will be revised in future amendments to reflect the impact of our actual capital structure and the final form of those agreements, to the extent any such revisions would be deemed material.

The pro forma adjustments are based on available information and assumptions we believe are reasonable; however, such adjustments are subject to change as the costs of operating as a stand-alone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The unaudited pro forma condensed combined financial statements do not reflect all of the costs of operating as a stand-alone company, including possible higher information technology, tax, accounting, treasury, legal, investor relations, insurance and other similar expenses associated with operating as a stand-alone company. Only costs that we have determined to be factually supportable and recurring are included as pro forma adjustments to our pro forma income statement, including the items described above. Our pro forma balance sheet includes pro forma adjustments both for items that have a continuing impact on our business and for non-recurring items that are factually supportable and directly attributable to the separation, such as those related to our capital structure described above.

Subject to the terms of the Separation and Distribution Agreement, Murphy Oil will generally pay all nonrecurring third-party costs and expenses related to the separation and incurred prior to the separation date. Such nonrecurring amounts are expected to include costs to separate and/or duplicate information technology systems, investment banker fees (other than fees and expenses in connection with the debt financing), third-party legal and accounting fees, and similar costs in each case, incurred prior to the separation date. After the separation, subject to the terms of the Separation and Distribution Agreement, all costs and expenses related to the separation incurred by either Murphy Oil or us will be borne by the party incurring the costs and expenses.

The unaudited pro forma condensed combined statement of income for the three months ended March 31, 2013 and for the year ended December 31, 2012, have been prepared as though the separation occurred on January 1, 2012. The unaudited pro forma condensed combined balance sheet at March 31, 2013, has been prepared as though the separation occurred on March 31, 2013. The unaudited pro forma condensed combined financial statements are for illustrative purposes only, and do not reflect what our financial position and results of operations would have been had the separation occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations.

Our retained cash balance and the amount of the cash dividend to Murphy Oil are subject to working capital adjustments. The following pro forma statements do not reflect any impact of such working capital adjustments, as the amount of the adjustment at the separation date is not currently determinable and would represent a financial projection. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity” included elsewhere in this Information Statement.

The unaudited pro forma condensed combined financial statements should be read in conjunction with our historical combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Information Statement. The unaudited pro forma condensed combined financial statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Statement Regarding Forward-Looking Statements” included elsewhere in this Information Statement.

 

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Murphy USA Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

March 31, 2013

(Thousands of dollars)

 

     As Reported      Pro Forma
Adjustments
    Pro Forma  

ASSETS

       

Current Assets

       

Cash and cash equivalents

   $ 74,322       $ (15,000 )(1)    $ 59,322   

Accounts receivable, less allowance for doubtful accounts

     388,053         —          388,053   

Inventories, at lower of cost or market

     161,379         —          161,379   

Prepaid expenses

     17,482         —          17,482   
  

 

 

    

 

 

   

 

 

 

Total current assets

     641,236         (15,000     626,236   
  

 

 

    

 

 

   

 

 

 

Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization

     1,218,103         —          1,218,103   

Deferred charges and other assets

     434         15,000 (2)      15,434   
  

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,859,773       $ —        $ 1,859,773   
  

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Current liabilities

       

Current maturities of long-term debt

   $ 46       $ —        $ 46   

Accounts payable and accrued liabilities

     556,001         —          556,001   

Income taxes payable

     19,259         —          19,259   

Deferred income taxes

     11,778         —          11,778   
  

 

 

    

 

 

   

 

 

 

Total current liabilities

     587,084         —          587,084   
  

 

 

    

 

 

   

 

 

 

Long-term debt

     1,112         650,000 (3)      651,112   

Deferred income taxes

     127,605         —          127,605   

Asset retirement obligations

     15,670         —          15,670   

Deferred credits and other liabilities

     7,356         —          7,356   

Net investment/stockholders’ equity

       

Common stock, $0.01 par value per share

     —           636 (5)      636   

Additional paid-in capital

     —           470,310 (6)      470,310   

Net investment by parent

     1,120,946         (1,120,946 )(6)      —     
  

 

 

    

 

 

   

 

 

 

Total net parent investment/stockholders’ equity

     1,120,946         (650,000     470,946   
  

 

 

    

 

 

   

 

 

 

Total liabilities and net parent investment/stockholders’ equity

   $ 1,859,773       $ —        $ 1,859,773   
  

 

 

    

 

 

   

 

 

 

See Notes to Unaudited Pro Forma Condensed Financial Statements.

 

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Murphy USA Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

Three Months Ended March 31, 2013

(Thousands of dollars, except per share amounts)

 

     As Reported     Pro Forma
Adjustments
    Pro Forma  

REVENUES

      

Total revenues

   $ 4,455,815      $ —        $ 4,455,815   
  

 

 

   

 

 

   

 

 

 

COSTS AND EXPENSES

      

Fuel and ethanol costs of goods sold

     3,783,531        —          3,783,531   

Merchandise cost of goods sold

     448,796        —          448,796   

Station and other operating expenses

     133,481        —          133,481   

Depreciation and amortization

     19,324        —          19,324   

Selling, general and administrative expenses

     33,366        —          33,366   

Accretion of asset retirement obligations

     269        —          269   
  

 

 

   

 

 

   

 

 

 

Total costs and expenses

     4,418,767        —          4,418,767   
  

 

 

   

 

 

   

 

 

 

Other (expense) income

      

Interest income

     281        —          281   

Interest expense

     (156     (9,320 )(4)      (9,476

(Loss) gain on sale of assets

     8        —          8   

Other nonoperating income

     16        —          16