NEW YORK/SAN FRANCISCO (Reuters) - Shares of Murphy Oil Corp (MUR.N) rose more than 4 percent on Wednesday after hedge fund manager and veteran corporate agitator Daniel Loeb told investors in his Third Point fund that shares of the oil and gas company could be 60 percent higher.
Loeb has not taken an activist position in Murphy, but he sounded like an activist in his recent quarterly letter to investors, a copy of which was viewed by Reuters.
In the letter, Loeb outlined changes Murphy could make to add value, such as a spin-off of its retail business or selling its Canadian natural gas assets.
Murphy shares gained 4.1 percent on Wednesday to close at $58.21, and tacked on another 30 cents in after-hours trading.
A spokesman for the El Dorado, Arkansas-based company was not immediately available for comment.
Loeb said Third Point invested in Murphy after a three-year period in which its stock fell 15 percent while the sector climbed 49 percent, a lagging performance he blamed on a disparate asset base that makes Murphy “cumbersome” to value.
“This issue has been exacerbated by management’s decision to repeatedly delay spinning off its retail business,” Loeb wrote.
The largest independent U.S. refiner, Valero Energy Corp (VLO.N), is selling its retail business through an auction that could fetch more than $3.5 billion, people familiar with the matter said last week.
A sale of Murphy’s fuel stations would bring it closer to completing the process of shedding its downstream operations in order to sharpen its focus on exploration and production.
Other transactions Third Point believes could increase value for Murphy include selling its 5 percent stake in the Syncrude Oil Sands Project, or completing an exit from UK refining.
Murphy is one of the $9.3 billion fund’s five largest positions, a September fact sheet reviewed by Reuters showed.
Third Point said it recently applied for Hart-Scott-Rodino regulatory approval to increase its position in order to keep its options open if its talks with the board do not bear fruit.
The fund had only recently engaged in an activist battle with Yahoo Inc YHOO.O, and eventually secured board seats.
Loeb is as well known for his solid returns as he is for acerbic letters to corporate boards. He has turned his sharp tongue not only on Yahoo’s management, but also the White House, offering searing critiques of the Obama Administration in past investor notes. This time, he offered Murphy’s managers a different message: song lyrics from a 1990s hit by Boyz II Men, titled ‘End of the Road.’
The Third Point Partners fund is now up 11.3 percent for the year through the end of last month, while most hedge funds rose just over 3 percent through September 26, according to Bank of America Merrill Lynch. The broader U.S. stock market, measured by the S&P 500 index .SPX, rose 2.5 percent last month, and has risen 16.4 percent for the year so far.
Loeb said that the Murphy management’s decision not to pursue a spin-off of fuel stations appeared “sentimental” and that the Murphy family was driving a “stubborn desire” to hold on to non-strategic assets.
The Murphy family clearly believed the company was in need of some sort of shake-up too, however. Under the previous chairman, William Nolan Jr., the company founder’s nephew who died in March, Murphy launched the effort to shed downstream operations back in 2010.
Last year, it managed to sell off two refineries in Louisiana and Wisconsin, but the remaining one in Wales has now been on the block for two years.
As the business of refining in both the United States and Europe has grown more volatile, other smaller integrated oil companies have made the same split. These include Marathon Oil Corp (MRO.N) spinning off refining arm Marathon Petroleum Corp (MPC.N), and ConocoPhillips (COP.N) separating from Phillips 66 (PSX.N) earlier this year.
Reporting By Katya Wachtel; Additional reporting by Braden Reddall; Editing by Gary Hill, Tim Dobbyn and Bernard Orr