Why Murphy Oil Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Murphy Oil (NYSE: MUR  ) climbed as much as 10% after the company announced it would spin off its refining and distribution segment and focus on core functions of exploring and producing oil and gas.

So what: The board also said it would pay out a $500 million one-time dividend of $2.50 per share, and would begin a $1 billion share buyback program. Spinning off the lower-margin downstream should help Murphy unlock greater value, and echoes a similar strategy employed by oil majors like Conoco Phillips (NYSE: COP  ) , which recently separated itself from Phillips 66 (NYSE: PSX  ) , its former refining division.

Now what: Considering all the moves, shareholders might question why the stock didn't jump even higher. At a market cap near $12 billion, the buybacks alone should boost the share price by about 8%, and the dividend windfall adds another $2.50, yet shares were only up about $5 near the closing bell. Investors may want to jump on board before Nov. 16, the dividend date of record, to take advantage of the special offer.

Want to keep tabs on Murphy Oil? Just add the stock to your Watchlist here.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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