Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary - - PowerPoint PPT Presentation

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Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary - - PowerPoint PPT Presentation

MUSA Annual Shareholder Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary Statement This presentation contains forward-looking statements. These statements, which express managements current views concerning future events or


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Murphy USA Inc. 1

MUSA Annual Shareholder Meeting

Andrew Clyde - CEO May 2018

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Murphy USA Inc. 2

Cautionary Statement

This presentation contains forward-looking statements. These statements, which express management’s current views concerning future events or results, are subject to inherent risks and uncertainties. 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 and gasoline prices, the pace and success of our expansion plan, our relationship with Walmart, political and regulatory uncertainty, uncontrollable natural hazards, and adverse market conditions or tax consequences, among other things. For further discussion of risk factors, see “Risk Factors” in the Murphy USA registration statement on our latest form 10-K. Murphy USA undertakes no duty to publicly update or revise any forward-looking statements. The Murphy USA financial information in this presentation is derived from the audited and unaudited consolidated financial statements of Murphy USA, Inc. from the years ended December 31, 2013 through

  • 2017. Please reference our most recent 10-K, 10-Q, and 8-K filings for the latest information.

If this presentation contains non-GAAP financial measures, we have provided a reconciliation of such non- GAAP financial measures to the most directly comparable measures prepared in accordance with U.S. GAAP in the Appendix to this presentation. Christian Pikul, CFA Senior Director, Investor Relations Office: 870-875-7683 Christian.pikul@murphyusa.com

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Murphy USA Inc. 3

The convenience store industry and players continue to evolve

Notable Firms Objectives

  • Customer

Acquisition

  • Product

Introduction

  • Customer

Acceptance

  • Proof of

Concept

  • Buc-ee’s
  • Walmart

Neighborhood Markets

  • Customer

Retention

  • Product

Expansion

  • QuikTrip
  • Wawa
  • Customer

Attrition

  • Product

Competition

  • 7-Eleven
  • EZ Mart
  • New Strategy

Implementation

  • Product

Extinction

  • The Pantry
  • Getty
  • Amazon Go
  • Filld, WeFuel
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Murphy USA Inc. 4

3. EXPANSION

  • 2. EMERGENCE

4. CONSOLIDATION

  • 1. / 5.

EQUILIBRIUM

  • Firms with the same format compete
  • A new format emerges
  • Concentrates first on the most

switchable customers

  • New format enjoys extraordinary profits
  • Others seek to imitate and/or expand to new markets

Conceptual Framework of Retail Format Evolution

  • New format moves up market
  • New-format players compete among

themselves

  • New format dominates

Retail format evolution occurs in a predictable manner

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Murphy USA Inc. 5

7-Eleven

Winners and losers by format emerge

Hypermarkets

Supermarkets and mass merchants with small-box forecourts Strength: Low fuel prices and integrated loyalty programs/ promotions tied to in-store purchases

Big-Box C-Stores

Large stores with comprehensive offerings including food offer Strength: Destination for merchandise offer supported by low fuel prices

Kroger Safeway Costco Murphy USA CST Couche-Tard (Circle K) QuikTrip Wawa Sheetz Sunoco

Stand-alone public peer

Consolidation Model

Franchises with distinctive C-store brand and capabilities Strength: Store uplift from franchise and scale advantages that support acquisition premiums Susser (Stripes) The Pantry Walmart 784 C-Stores EG GPM Empire Speedway Casey’s

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Murphy USA Inc. 6

MUSA has transitioned to the maturity phase since spin

Metrics Focus

  • First stores in

front of Walmart

  • Positioned as

low-cost fuels retailer

  • Pilot

Economics

  • Market

Launch

  • Rapid Growth
  • f >100 stores

per year

  • Expansion

strategy

  • Kiosk

evolution

  • Unit

Growth

  • Volume

per Store

  • Operating

discipline

  • Format

evolution

  • Contribution
  • ptimization
  • Customer

loyalty

  • EBITDA per

Store

  • NTI ROIC
  • EPS growth
  • Portfolio/G&A

rationalization

  • Margin

maximization

  • Cash

generation

  • Total

Shareholder Return

  • ROACE
  • Acquire Capabilities

for new format entry?

  • Expand into

Adjacencies?

  • Harvest Terminal

Value?

  • M&A Accretion

Potential

  • Free Cash

Flow Dividend 1996 2007 2018 1999

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Murphy USA Inc. 7

Investor sentiment has shifted accordingly

12/31/2013 12/31/2017 14% 32% 48% 6% 14% 18% 14% 54% Investor Praise

  • Consistent Strategy for Long-term

Value Creation with Tangible Proof Points

  • Disciplined Capital Allocation
  • Credible Management Team

Investor Concerns

  • Competitive Impact on Fuel Volume /

Merch Traffic

  • Margin Volatility and Stability of PS&W

+ RINs Contribution

  • Future Value Estimation? How to

Maximize Terminal Value? Growth GARP Value Blend Percent of Outstanding MUSA Shares Owned by Investor Type

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Murphy USA Inc. 8

Lifecycle stage informs capital allocation decisions

Growth

  • Quality versus quantity of

stores important to investors

  • Returns drive capital

allocation

  • Internal investments in

productivity can generate strong returns given the force multiplier of a large network Earnings Growth

  • Organic growth through

new stores

  • Improvements to the core

business: – Lower cost structure – Margin optimization

  • Scaling corporate costs to

leverage growth capital

  • Share repurchase

leverages EPS potential Shareholder Distributions

  • Competition for capital

balances growth and repurchase opportunities

  • Volatility makes

commitment to meaningful dividend difficult at this stage of lifecycle

  • Internal efficiency

improvements will drive greater future shareholder distribution potential

Capital Allocation

MUSA Capital Allocation Focus

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Murphy USA Inc. 9

Raze and Rebuild Program

  • 32 sites completed through 2017 with goal of up to 25

stores in 2018

  • Kiosks replaced with 1,200 sq ft stores along with more

dispensers and increased fuel offer

  • Given the premium locations, we estimate per site

unlevered IRR’s between 15% and 35%

Mature firms must continue to reinvest in their assets

After 6 months

+10%

Baseline (Prior FY) 443,338 403,184

APSM Fuel Gallons*

After 6 months $159,350 $188,011

+18%

Baseline (Prior FY)

APSM Merchandise Sales $*

* 2016 & 2017 Raze & Rebuild Class Average

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Murphy USA Inc. 10

Murphy Drive Rewards is a customer appreciation program that:

  • Engages and motivates current

customers

  • Attracts new customers
  • Incentivizes all customers

to buy more fuel and more merchandise

And innovate to grow customers

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Murphy USA Inc. 11

While remaining disciplined with capital allocation

$139 $216 $264 $274 $52 $248 $323 $206 $587 2014 $480 2016 2015 $191 $464 2017

Capital Allocation ($MM)

2014 - 2017 48%

Retail Maintenance Capital

8%

Corporate Capital

5%

Retail Growth Capital

39%

Share Repurchases

Capital Allocation

2014 - 2017

Share Repurchases Capital Expenditures

$829 4-Year Total $1,722 $893

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Murphy USA Inc. 12

MUSA has become distinctive for increasing its productivity

EPS Growth Organic Growth Fuel Contribution Fuel Breakeven Shares Outstanding

5% unit growth

  • 67 new sites; 10 R&R
  • 300 refresh; 180 super

coolers

2016 Proof Point Corporate Costs

* +

  • /

MUSA Value Creation Drivers 2017 Proof Point

3% unit growth

  • 45 new sites; 21 R&R
  • 300 refresh; 244 super

coolers 5% contribution $ growth

  • +1.7% volume growth
  • 15.4 cpg total margin
  • 3.8 cpg from PS&W/RINs

Reduced to 1.3 cpg from 2.3

  • +120 bps merchandise
  • +11.2% merch contrib $
  • -4.1% site opex* APSM

Repurchased 4.9M shares

  • $323 million of capital
  • 11% of shares outstanding

SG&A per store down 10%

  • $6.6 million decline in

total SG&A

  • Tax-efficient non-core

asset sale

*Site Opex excludes credit card fees **SG&A per-store excludes stock-based compensation; 2017 proof points exclude $10mm charitable contribution

4.7% contribution $ growth

  • -1.3% volume growth
  • 16.4 cpg total margin
  • 2.4 cpg from PS&W/RINs

Reduced to 1.2 cpg from 1.3

  • +50 bps merchandise
  • +4.7% merch contrib $
  • -2.6% site opex* APSM

SG&A per store up 3%

  • $8.5 million increase in

total SG&A**

  • Investing in people and

capabilities Repurchased 3.0M shares

  • $206 million of capital
  • 8% of shares outstanding
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Murphy USA Inc. 13

The business is resilient, but not immune, to headwinds

Tobacco

  • Managing decline curve

in cigarettes

  • Taxes accelerating

decline in volumes Non-Tobacco

  • Managing decline curve

in CSD’s

  • Consumer spending
  • Beneficiary of tax

reform (25% v 38%)

  • Higher FCF to deploy
  • Industry unlikely to

compete away benefits Labor Costs

  • FLSA
  • Minimum Wage

Increases

  • Lower unemployment

rate

  • Wage inflation

Refined Products & RINs

  • Product flow patterns

shift across value chain

  • Regulatory and political

uncertainty with RFS Tax Reform

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Murphy USA Inc. 14

Macro industry fuel trends are favorable near-term

Mileposts

2025 CAFE Short-Term Long-Term EV VMT Autonomous

  • VMT highly correlated

with GDP

  • Tax reform boosting GDP

growth

  • Production ability and

adoption rates volatile

  • Dependent on tax

subsidy

  • OEMs fear being left

behind if India and China leapfrog US

  • Trump says current

CAFÉ targets too aggressive

  • Consumers and

manufacturers abandoning sedans for less efficient SUVs

  • Innovators are agnostic

between EV and ICE

  • Safety issues could

impede pace of consumer adoption

2027 Fuel Demand (2017 Estimate) (Light Duty, Indexed to 2016) 1.70% 99.3% 99.8% 103.1% 1.45% 96.6% 97.2% 100.3% 1.20% 94.0% 94.6% 97.6% 49.7 44.5 37.0

1 2 3 2027 CAFE Standard VMT Growth (%/year)

MUSA States

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Murphy USA Inc. 15

  • Murphy USA is uniquely positioned as a

low-cost fuel and convenience retailer

  • Our strategy to compete has five coherent

elements: – Grow Organically – Diversify Merchandise Mix – Sustain Cost Leadership Position – Create Advantage from Market Volatility – Invest for the Long-Term

  • Our business model is resilient to, and takes

advantage of, volatile market conditions

  • Our independent growth plan combines

efficient unit-growth and shareholder-friendly capital allocations

  • Murphy USA has a proven track record of

execution since our 2013 spin-off

  • We believe we have a very bright future ahead

Murphy USA continues its proven and differentiated strategy

MUSA Relative Stock Performance

Indexed From Spinoff to April 27, 2018

Murphy USA Inc. S&P 500 Index S&P 400 Midcap Index

120 140 100 200 220 160 180

Q3, 2013

Spin

Q3, 2017 Q4, 2015 Q4, 2017 Q4, 2016 Q3, 2015 Q1, 2016 Q3, 2016 Q1, 2018 Q2, 2017 Q2, 2016 Q2, 2018 Q1, 2015 Q2, 2014 Q4, 2013 Q3, 2014 Q2, 2015 Q4, 2014 Q1, 2014 Q1, 2017

170 179 165

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Murphy USA Inc. 16

Through our formula, we continue to build a bright future

Corporate Costs

* + − /

MUSA Formula for EPS Growth

Commitment to Share Repurchase Modest Organic Unit Growth Sustained Operational Improvements High EBITDA and FCF per Store Disciplined Capital Allocation

MUSA Value Creation Drivers Shares Outstanding Fuel Breakeven Fuel Contribution Organic Growth EPS Growth