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Murphy Oil Corp., citing “the extraordinary drop in crude oil prices,” said Wednesday that it will close its 86,000-SF El Dorado headquarters office, home to 82 employees, along with an office in Canada, and consolidate its headquarters to an existing office in Houston.
In a news release, company Chairman Claiborne Deming noted that the company had already cut capital expenditures by about 50 percent, or $700 million; lowered its dividend by 50 percent, or $76.5 million on an annualized basis; and cut executive officer salaries an average of 22 percent — but it’s not enough.
“We realize, reluctantly, that we need to consolidate our offices to capture additional cost savings to remain competitive in this unprecedented industry environment. We simply do not have a choice and came to this decision only after exhausting all other cost saving measures,” Deming said.
“The El Dorado office closure is particularly painful and difficult, because the company was founded here by C.H. Murphy Jr. and has been an integral and important part of the community for many years.”
CEO Roger W. Jenkins said the decision is one the company takes “with sadness.” He said the firm’s only path forward was to consolidate in Houston.
“The company recognizes the hardship this decision causes to many in El Dorado and Calgary, and we are committed to treating all those impacted consistent with past practices and plan to offer appropriate severance arrangements,” he said. “These actions will not impact our field operations in the US and Canada, and we anticipate these office closures to be completed early in the third quarter 2020.”
The company said it will continue to fund the El Dorado Promise, a program it founded in 2007 to pay the college tuition — up to the highest amount charged by an Arkansas public university — of every college-bound graduate of the El Dorado Public School District.
In a statement, Gov. Asa Hutchinson said he was sad to learn of the move.
“Both Murphy Oil and Murphy USA have been amazing partners for Arkansas through many decades and I’m confident they will continue to be a key part of our economic future, even though we are saddened by the news today that Murphy Oil will be moving 82 jobs to Houston as a result of this change,” Hutchinson said.
“We are very pleased with the continued presence of Murphy USA, that has 600 employees and their headquarters in El Dorado, and that they have a continued commitment to the El Dorado Promise,” the governor added. “We know that we will continue to work with both companies in the future.”
The announcement of the corporate headquarters consolidation comes as the company reports first quarter results, showing a net loss attributable to the company of $416 million, or $2.71 net loss per diluted share. Adjusted net loss, which excludes discontinued operations and other one-off items, was $46 million, or 30 cents per diluted share.
Company spokeswoman Kelly Whitley told Arkansas Business that Murphy Oil had “no choice but to relocate from El Dorado to Houston.”
The global petroleum market suffered “a precipitous drop in prices that came so fast,” she said, overwhelming the company’s budget.
“Layering on top of that was the economic impact of COVID-19, which required decisive measures and cost-cutting internally,” Whitley said.
Whitley said the company’s budget was based on much higher oil prices, “and we were hit with COVID and no demand for our product.”
She pointed to the deep cuts in capital outlays and a halved dividend to shareholders as examples of the company’s cost-trimming zeal, as well as executive salaries reduced by 25% and a 35% decrease for Jenkins. Board directors took a 30 percent cut in their retainers.
“Leaving El Dorado was painful and difficult because the company was founded there and has had deep roots for more than 70 years,” Whitley said, revealing that some of El Dorado’s 82 employees have been offered transfers to Houston. “Some will receive retirement packages, and some will receive severance benefits. But our company is following best practices in working to be fair with employees.”
‘Devastated,’ But Not Shocked
El Dorado Mayor Veronica Smith-Creer said she was devastated but not shocked by news of the move, which she said had been “alluded to previously.” She said company chairman and Murphy family member Deming had called to “break it to me gently” just before a call from Arkansas Business.
“Of course it’s a loss for the city, but unfortunately with the oil prices we’ve seen and where we’re going, I can’t say it was totally unexpected.”
She said it’s bad news, “but not the worst news because Murphy USA will remain in El Dorado.” Murphy USA Inc., spun off from Murphy Oil in 2013, is a nationwide chain of more than 1,400 fuel and convenience stores.
Smith-Creer said Murphy Oil has confirmed its commitment to the El Dorado Promise, a well-applauded college scholarship program for all graduates who came up through El Dorado’s public school system.
“The El Dorado Promise will continue to be supported after the move,” the mayor said, though she conceded there will be less financial support for the Murphy Arts District, the entertainment-fueled downtown revitalization project in the petroleum giant’s backyard.
“Whether the company was moving or not, the situation was that they were going to be receiving less support from Murphy Oil,” Smith-Creer said. “Because of oil pricing, that was going to be inevitable regardless of the move. I don’t have a ballpark figure on what that’s going to be. But because of COVID-19, entertainment across the city has been at a standstill. Restrictions are being lifted by degree, but for now there are no gatherings.”
Murphy Oil’s headquarters building in El Dorado is less than five years old. Designed by Polk Stanley Wilcox of Little Rock, the 86,000-SF building consists of a two-story lobby and gallery with meeting rooms connected to a five-story office tower by a glass stairwell that features the Murphy Oil Corp. logo.
Lumber, Banking Roots
Murphy Oil’s roots go back to a lumber and banking business in southern Arkansas and northern Louisiana. The petroleum division began in 1907, when the first oil production facility was established in Louisiana’s Caddo Field, Deming told Arkansas Business in a 2004 interview.
C.H. Murphy Sr., the company founder and Deming’s grandfather, was a shrewd and intelligent man “who had the talent to find and partner with bright individuals,” Deming said.
After oil was discovered in Union County, the commodity became an increasingly important part of Murphy’s overall business. But the oil division remained subordinate to timber operations and banking until the mid-1930s.
After World War II, C.H. Murphy Jr., Deming’s uncle, joined the family business and would eventually oversee the incorporation of Murphy Corp. in 1950. It was reincorporated in Delaware 14 years later under the name of Murphy Oil Corp.
In the years following, the company grew into a oil and natural gas power with operations over all over the world.
In Arkansas, it is preeminent among iconic companies, standing with Walmart Inc. of Bentonville, Tyson Foods Inc. of Springdale, J.B. Hunt Transport Services Inc. of Lowell in stature and influence. Murphy family members and company executives are key members of Arkansas business and political circles.
Murphy Oil was once among the top publicly traded companies in the country as ranked by Fortune magazine, though it fell off the magazine’s 500 list in 2016 after an earlier slump in fuel prices.
It spun off two publicly traded companies: timber and commercial real estate company Deltic Timber Corp. of El Dorado, which was purchased by Potlatch in 2018; and Murphy USA Inc. of El Dorado, a nationwide chain of gas stations and convenience stores.
Murphy Oil said its corporate office in Calgary, Alberta, Canada, has about 110 employees. Its Houston office has 380. In all, the company had 882 employees at the end of last year, with operations in North and South America, Southeast Asia, Australia and Mexico.