Raymond James 38 th Institutional Investors Conference Orlando, FL - - PowerPoint PPT Presentation

Raymond James 38th Institutional Investors Conference

Orlando, FL ● March 6, 2017

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, 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 combined financial statements of Murphy USA, Inc. for the years ended December 31, 2016 2015, 2014, 2013, and 2012. Please reference our latest 10-K, 10-Q, and 8-K filings for the latest information. This presentation also 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 Joe Van Cavage, CFA Director, Investor Relations Investor Relations Analyst Office: 870-875-7683 Office: 870-875-7522 christian.pikul@murphyusa.com joe.vancavage@murphyusa.com

Murphy USA Inc. 3

• 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 have a very bright future ahead

Murphy USA has a proven and differentiated strategy

MUSA Relative Stock Performance

Indexed From Spinoff to February 28, 2017

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

164 144 144

100 125 150 175 200 Spin Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

Murphy USA Inc. 4

We compete against three distinct retail models

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 Speedway CST Couche-Tard (Circle K) 7-Eleven Casey’s 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

Murphy USA Inc. 5

MUSA creates value through a simple formula—and executes

EPS Growth Organic Growth Fuel Contribution Fuel Breakeven Shares Outstanding

5% unit growth

2016 Proof Point Corporate Costs

* +

• /

MUSA Value Creation Drivers Details

• 67 new sites
• 10 Raze-and-Rebuilds
• 300 refresh; 180 super coolers

5% all-in contribution growth

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

Improved by 0.9-cpg to 1.6-cpg

• +120 bps merchandise margins
• +11.2% merchandise contribution
• -4.1% site opex* APSM

4.9M shares repurchased (11% of float) SG&A** per- store down 10%

• $6.6 million decline in total SG&A
• Investment in people, capabilities
• Tax-efficient non-core asset sale
• $323 million share repurchases
• $201 million growth capital
• $38 million in sustaining capital

EPS increased 39% to $5.59

*Site Opex excludes credit card fees **SG&A per-store excludes stock-based compensation

Murphy USA Inc. 6

Disciplined growth continues through Express stores

67 73 20 10

2019e 2017e 2016a 2018e

1

2015a New Stores Raze & Rebuild

Estimated New Store Growth

2015 - 2019 Estimated Year End Total Site Count (excluding Raze & Rebuild) Total 1,335 1,401 1,451 1,501 1,551 Express Format 224 249 291 341 391 USA Format 1,111 1,152 1,160 1,160 1,160

74 77 70 70 70

Up to 20 Up to 50 45 to 50 Up to 50 Up to 20

Organic Growth

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Raze and Rebuild Program

• Refresh Program initiated to revitalize aging sites
• In addition to updating and standardizing the look and

feel of our stores, the program helps increase customer retention and lowers maintenance costs

• Refreshed 300 stores each in 2015 and 2016 with

plans to continue at that pace in 2017

• Pace of refresh will moderate beginning in 2018

Refresh Program

• 80-100 potential sites have been identified
• 11 sites completed through 2016
• Program success translating to 20 stores in 2017
• 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%

Reinvestment programs enhance existing network quality

Organic Growth

Murphy USA Inc. 8

Advantaged supply mix reflects differentiated capabilities

3rd Party Rack (spot) 8% 3rd Party Contract 37% Proprietary Supply 55%

2016 Supply Mix

Percent of Retail Volumes

Proprietary Supply 3rd Party Contract 3rd Party Rack (spot)

Purchase and deliver products purchased in bulk Purchase product from 3rd party on a ratable basis Purchase product from 3rd party on posted unbranded price (not ratable)

• Access to line space / terminals
• RIN capture through blending
• Wholesale marketing function
• Risk management
• Working capital
• Scale / level of retail volume
• Credit
• Consistent supply balancing
• Market intelligence
• Network depth / options
• Supplier negotiations

Definition Capabilities Required Low-cost ratable supply to Retail

   Sources of differentiation for MUSA    

Fuel Contribution

Murphy USA Inc. 9

Fuel differentiates MUSA from its peers

2,060 7,260 1,952 4,195 6,094 Speedway MUSA CST (US) ATD (US) CASY Total Chain Fuel Volume (MMgal)

Last Fiscal Year

Annual Fuel Volumes (Kgal) / Avg Store

Last Fiscal Year

1,368 1,905 5,317* 1,108** 2,750 Average Store Count By Chain

Last Fiscal Year

2,216 1,859 1,366 1,025 3,067 Speedway CST (US) MUSA ATD (US) CASY

* Excludes franchised stores from store count ** Core US Stores

Fuel Contribution

Murphy USA Inc. 10

Total fuel margins consistently generate 14-16 cpg

3.4 2.7 3.8 1.5 18.5

2014 2013 2012

14.4 16.4

2015

2.4

2016

15.4 14.9

LT Guidance (low) Retail Product Supply & Wholesale + RINs LT Guidance (high)

MUSA Total Fuel Margin

CPG

CPG

2014

$647 $616 $737

2016

$161 $106

2013

$624 $128

2015

$101 $538

2012

$47

Product Supply & Wholesale + RINs Retail

MUSA Total Fuel Contribution

($MM)

16.0 14.0

Fuel Contribution

15.8 11.6 12.5 13.0 12.9 $631 $486 $515 $496 $491

Murphy USA Inc. 11

MUSA’s fuel margins are less volatile than its peers

Company Average (cpg) Standard Deviation

Before Payment Fees MUSA 16.3 2.7 CASY 17.9 3.1 ATD (US) 19.9 3.2 After Payment Fees CST (US) 16.8 6.6 Speedway 16.4 3.4 3.4 6.6 3.2 3.1 2.7 CASY ATD CST Speedway MUSA

Average and Standard Deviation

• f Total Fuel Margins

Last 16 Fiscal Quarters

Standard Deviation

• f Total Fuel Margins

Last 16 Fiscal Quarters

Source: Company SEC Filings

Fuel Contribution

Murphy USA Inc. 12

Retail margin changes from price swings dampened by PS&W

CPG

Correlation between Retail Margins and Product Supply Inventory Gain/Loss = -0.93 Quarterly Margin Contribution by Driver

2014-2016 CPG

• 10
• 5

5 10 15 20 25 Product Supply Inventory Gain/Loss Retail Margins CPG

Combined Contribution from Retail And PS&W Inventory Gain/Loss

2014-2016 CPG Fuel Contribution

2 4 6 8 10 12 14 16 18 Q4 Q1 Q3 Q1 Q2 Q4 Q2 Q3 Q1 Q2 Q3 Q4 50 100 150 200 250 300 Q3 Q2 Q1 Q4 Q3 Q1 Q4 Q3 Q2 Q2 Q1 Q4 US Gulf Coast Spot Price (right) CPG

2014 2015 2016 2014 2015 2016

Murphy USA Inc. 13

Similarly, spot-to-rack margin changes offset by RINs

92 122 2016 110 2015 2014

• 71
• 26

29 181 118 93 2016 2015 2014 RINs Spot-to-Rack

Combined Spot-to-Rack Plus RIN Contribution ($MM)

2014 - 2016

Spot-to-Rack vs. RIN Contribution ($MM)

Average RIN Price $0.48 $0.54 $0.82

Fuel Contribution

Murphy USA Inc. 14

We actively make our business more competitive

Note: Site OPEX excludes credit card fees; G&A and Other Costs includes field admin, allocated Marketing and Corporate G&A, misc income/expense, and franchise taxes

1.6 2.5 2.8 3.4 2.8 2013 2012 2016 2015 2014 Fuel Breakeven = (Merchandise Margin - Site Opex - Allocated Field G&A) Fuel Gallons

Fuel Breakeven Requirement

CPG (2012 – 2016) Fuel Breakeven

Murphy USA Inc. 15

Merchandise margins and contribution expanding

13.8 12.4 12.5 13.3 7.3 8.8 9.2 12.4 8.0 7.5 5 10 15 20 25 30 21.3 2014 20.4 2013 19.9 2012 21.1 2016 22.5 2015

Merchandise APSM GM ($K)

2012 – 2016

Tobacco Non-Tobacco

Merchandise Margin % 13.5% 13.0% 14.0% 14.4% 15.6% Non-Tobacco % of GM$ 34% 37% 39% 41% 41%

Drivers

Core-Mark Benefits

• New distribution relationship in

2016 provided step-change margin improvement

Super Coolers

• Super Coolers provide additional

shelf facings for higher margin products, 15% uplift in beverage sales, and higher levels of vendor rebates

• Based on performance, we

accelerated our Super Cooler program in 2016 to 180 locations and will add 240 locations in 2017

New Initiatives

• Promotion effectiveness
• Assortment optimization
• Tobacco pricing
• Loyalty

Fuel Breakeven

Murphy USA Inc. 16

Operating costs declining, bucking the industry trend

21.4 22.3 22.4 22.1 21.7 42.5 38.2 36.1 33.7 5 10 15 20 25 30 35 40 45

2013 2015 2014 2016 2012

Site Opex APSM ($K)

2012 – 2016

Note: MUSA Site OPEX excludes credit card fees; Industry Site Opex sourced from NACS: State of the Industry reports (2016 data not yet available)

Industry MUSA

Fuel Breakeven

Murphy USA Inc. 17

SG&A costs scaling with growth

Major Initiatives

Corporate Costs

• Talent acquisition and leadership development
• ASAP program and continuous improvement
• IT strategy and road map (data, applications, infrastructure and security)
• Retail capabilities to drive decision-making and growth

113 120 109 2015 2014 2016

Total SG&A Expenses ($MM)

(Excluding Stock-based Compensation) 2014 – 2016

81 90 86 2015 2014 2016

SG&A Per Store* ($K)

(Excluding Stock-based Compensation) 2014 – 2016

*Using end-of-year store count

Murphy USA Inc. 18

Capital allocation balances growth and shareholder returns

113 175 201 190 28 38 65 25 20 2015 $216 13 2014 $139 18 8 2016 2017e $264 $275 Retail Maintenance Retail Growth Corporate

Annual Capital Expenditure ($MM)

Total 2014 - 2016 = $619MM

2014 2015 2016 2017e

Sites Added

62 73 67 50

$323 $248 $52 2016 2014 2015 2017 $177*

Share Repurchase Activity ($MM)

Total 2014 - 2016 = $623MM Up to

* Currently authorized through 2017

Cash Generated Post-Spin From:

• Non-core asset sales**:

$279MM

• Reduction of Working Capital:

$161MM

Shares Outstanding

**After-tax cash generated on $362MM of gross divestitures

Murphy USA Inc. 19

Balance sheet supported strategic capital allocation in 2016

• Announced up to $500 million share

repurchase authorization through 2017 based on increased capital allocation flexibility with Independent Growth Plan

• Executed $323 million of repurchases

during 2016 for 4.9MM shares or 11%

• f float
• Reinstated $200 million term loan at

an advantaged rate

• Divested remaining non-core asset

(CAM pipeline) for $85 million in gross proceeds

• Allocated $264 million to combined

growth, maintenance, and corporate capital initiatives

1) Includes restricted cash balance of $69 at Dec. 31st 2015. 2) Net of unamortized discount of $6.7, unamortized issuance costs of $3.5, and $0.6 of capital leases in 2015. Net of unamortized discount of $5.8, unamortized issuance costs of $5.4, and $1.5 of capital leases in 2016. 3) Cash balance at Dec. 31st plus credit facility available

Capitalization ($MM)

As of December 31st

Shares Outstanding

2016 Highlights

As Adjusted 2015 2016 Cash and equivalents1 $172 $154 Debt Outstanding $0 $180 $490 $490 Total Debt $490 $670 Total Stockholders' Equity $792 $697 Total Book Capitalization $1,282 $1,367 Credit Metrics LTM Adjusted EBITDA $354 $414 Total Debt / LTM Adjusted EBITDA 1.39X 1.62X Fixed Charge Coverage Ratio 0.6X 0.6X Debt to Book Capital 38% 49% Liquidity3 $237 $370 Term Loan Due 2020 Senior Unsecured Notes due 20232

Murphy USA Inc. 20

Balance sheet remains highly flexible

1.6 2.5x Target Remaining Capacity Under Target Current Debt / EBITDA

MUSA Debt / EBITDA

As of December 31, 2016

• Sustain debt / EBITDA ratio prudently below

< 2.5x target to maintain business model resilience and restricted payment flexibility

• Add appropriate debt financing to:

– Leverage improvements to the business for shareholder’s benefit – Optimize our balance sheet in tandem with anticipated growth

• Additional debt will be cost-efficient, long-term

in nature, and at the corporate level

• Alternative leverage vehicles such as MLP’s

and sale/leasebacks encumber

• ur assets and expose the business

to inflation

Shares Outstanding

0.9

Ongoing Strategy

Murphy USA Inc. 21

Murphy USA shareholders have a bright future ahead

Commitment to Share Repurchase Modest Organic Unit Growth

High return on capital unit growth versus paying M&A premium Actively manage

• pportunity from

valuation mismatch to enhance EPS

Sustained Operational Improvements

Driving top-line sales, margins and cost improvements to the bottom line

High EBITDA and FCF per Store

Highest per store economics of stand-alone public peers

Disciplined Capital Allocation

Balance of

• rganic growth

and shareholder returns

Murphy USA Inc. 22

Appendix

Murphy USA Inc. 23

Murphy USA’s Management Team

Andrew Clyde, President and Chief Executive Officer Mindy West, Executive VP and Chief Financial Officer

• Appointed President and Chief Executive Officer of Murphy USA on

January 8, 2013

• Leads the development and execution of our strategy for creating long-term

shareholder value

• Oversees corporate-wide strategic initiatives enabling Murphy USA’s growth,

margin expansion and cost leadership

• Spent 20 years at Booz & Company leading downstream and retail
• rganizations on strategy, organization, and performance initiatives
• Joined Murphy USA at spin-off after transitioning from Vice President and

Treasurer of Murphy Oil Corporation

• Oversees key resource allocation programs, including site builds, network

re-investment and shareholder distributions

• Leads corporate-wide strategic initiatives driving operational efficiencies and

systems/processes enhancements

• Spent seventeen years with Murphy Oil Corporation in Accounting,

Employee Benefits, Planning, Investor Relations and Treasury roles

• Licensed Certified Public Accountant and Certified Treasury Professional

Murphy USA Inc. 24

Our 2017 guidance reflects continuous improvement

24

2016 Results 2017 Guidance

Retail fuel gallons (Billions) 4.2 4.3 to 4.5 Retail gallons (APSM) 259.1 255 to 265 Retail fuel unit margin (cpg) 11.6 N/A Total Fuel Contribution (cpg) N/A 14 to 16 Total Merchandise Sales (Millions) $2,339 $2,400 to $2,450 Merchandise contribution (Millions) $364 $380 to $390 Retail Site OPEX excluding credit cards (APSM % YOY change)

• 4.1%

Flat to -2% SG&A (Millions) $123 $135 to $140 Store Openings 67 45 to 50 Capital Expenditures (Millions) $264 $250 to $300 Adjusted EBITDA (Millions, non-GAAP) $400 $400 to $450

Murphy USA Inc. 25

MUSA’s business strategy generates attractive returns

10.7% ATD 13.1% CASY 10.7% MUSA CST 15.9% Return on Invested Capital (ROIC)

(Average of Past 3 Fiscal Years)

* Excludes franchised stores from store count

MUSA ATD* CASY

$230 $306 $253

CST

$210

Total EBITDA ($K) Per Average Store

(Average of Past 3 Fiscal Years)

Murphy USA Inc. 26

ROIC calculations – supporting data

MUSA CASY ATD CST

(excluding CAPL)

Fiscal Year

2016 2015 2014 2016 2015 2014 2016 2015 2014 2016 2015 2014

Inventory 184 136 138 205 197 205 817 828 848 237 208 209 Receivables 153 156 157 28 23 26 1,416 1,265 1,726 158 117 138 Prepaid Expenses & Other 25 41 12 17 21 13 101 72 128 12 10 11 Net PP&E 1,533 1,369 1,248 2,252 2,019 1,779 6,405 5,600 5,131 1,916 1,533 1,475 Goodwill & Intangibles (net) 129 127 120 2,483 2,325 1,912 264 56 44 (Current Operating Liabilities) (474) (390) (400) (372) (349) (390) (2,677) (2,449) (2,643) (472) (393) (388) Invested Capital 1,420 1,312 1,156 2,259 2,038 1,754 8,545 7,641 7,104 2,115 1,531 1,489 Adjusted EBIT1 302 256 367 389 323 234 1,614 1,356 985 199 256 307 NOPAT2 190 162 231 253 210 152 1,211 1,107 739 130 166 200 ROIC3 13.9% 13.1% 20.7% 11.8% 11.1% 9.1% 15.0% 13.8% 10.4% 7.1% 11.0% 14.1%

1) Adjustments to reported EBIT are made for one-time items such as gain/loss on sale of assets, asset impairments, etc. 2) Tax rates assumed: 37% (MUSA), 35% (CASY), 25% (ATD), and 35% (CST). 3) ROIC calculated using average invested capital of past two fiscal years.

Murphy USA Inc. 27

USA and Express locations achieve similar unlevered returns

USA 1200 Sq Ft Format Economics Express 1200 Sq Ft Format Economics

Source: MUSA internal analysis

$K, APSM Fuel Contribution 53.3 Merchandise Contribution 26.5 Total Contribution 79.8 Site Operating Expense 42.2 Site Contribution (EBITDA) 37.6 D&A 11.9 EBIT 25.8 After Tax Cash Flow (EBIT-Tax)+D&A 27.6 Gross Investment, $M 2,693 Annual Return on Invested Capital Unlevered ROIC: ((EBIT - Tax) + D&A) / Investment 12.3% $K, APSM Fuel Contribution 46.0 Merchandise Contribution 25.4 Total Contribution 71.3 Site Operating Expense 37.5 Site Contribution (EBITDA) 33.8 D&A 10.3 EBIT 23.5 After Tax Cash Flow (EBIT-Tax)+D&A 24.6 Gross Investment, $M 2,442 Annual Return on Invested Capital Unlevered ROIC: ((EBIT - Tax) + D&A) / Investment 12.1%

2015 Performance From Stores in Top 3 Market Clusters