Wal-Mart Testing Company Gas Stations

CHICAGO -- Wal-Mart Stores is quietly testing company-owned gas stations at a handful of its U.S. stores, a move that could stall its partner Murphy Oil Corp.'s fast-growing gas station business, according to a Reuters report.

Wal-Mart currently has more than 800 Murphy gas stations in the parking lots of its stores, and the oil company expects to open 100 more this year. The stations account for more than one-third of Murphy's revenue, but analysts said they generate very little of the company's profit.

The world's biggest retailer opened its fifth company-owned gas station last month at a new supercenter in northwest Arkansas, just minutes from its Bentonville headquarters.

Wal-Mart opened one in Missouri earlier this year, about 15 minutes from Bentonville. The retailer has three others that it opened in Virginia about two years ago, but spokeswoman Sharon Weber said Wal-Mart wanted more locations closer to home "so that we can really keep a close eye and test them well."

Murphy signed on to build gas stations at Wal-Mart stores in 1996. The oil company has agreements with Wal-Mart ranging from 10 to 15 years, with options for two five-year extensions, according to its annual report.

The Wal-Mart gas stations accounted for 38.6% of Murphy's 2004 total revenue, according to the company's most recent annual report filed with the U.S. Securities and Exchange Commission. Murphy said it expected revenues to rise as it opens more Wal-Mart gas stations.

In 2002, the Wal-Mart stations accounted for 30.3% of Murphy's annual revenue.

Analysts said despite the hefty revenue contribution, Murphy makes the bulk of its profit from exploration and refining, not retailing, which is a low-margin business.

Murphy reported first-quarter profit of $124.9 million from continuing exploration and production operations. Its refining and marketing division -- which includes the gas stations -- recorded a quarterly loss of $5.5 million.

Wal-Mart's gas stations are concentrated in the U.S. South and Southeast.