Murphy Oil Corp. (MUR) Chief Executive David Wood said that the company is planning to sell its three refineries after receiving "unsolicited" inquiries, but there are no plans shut them.

In a conference call with analysts to discuss the strategy, Wood expressed confidence that the company will be able to sell its refineries by the first quarter of 2011 and said that the cash will be used to buy "oily" reserves and pay down debt.

"Our main growth vehicle and how we see ourselves valued is our upstream business," which grew 15% over the last five years, Wood said. The company will also hold on to its network of 1,070 U.S. stations and ethanol plant.

Murphy's strategy diverges from other integrated oil companies in that the company wants to maintain its retail footprint and upstream operations while carving out the refining business. Over the past decade, major oil companies such as Exxon Mobil Corp. (XOM) and BP PLC (BP) sold off their retail stations.

Historically, refineries were seen as away to offset volatility in commodity prices from exploration and production operations and boost revenues by producing higher-valued products such as gasoline and diesel. But the highly profitable plants became a drag on company profits as demand for refined fell sharply. Margins have improved but refining executives expect them to hover at these lower levels for the next few years because the recovery in demand for gasoline is being pressured by more biofuel blending and excess refining capacity.

Refiners also face greater environmental restrictions, though a push to put a price on carbon have stalled.

Given the tough margin environment and growing competition as new refining capacity comes online in the U.S. and overseas, big oil companies and independent refiners have talked about selling or shutting down their most troubled plants. But sales have been intermittent and closures limited.

Murphy is looking for one buyer to purchase its three refineries and U.K. retail network of 457 stations, but it is too early to tell if that is possible. The book value of these assets is about $1.2 billion and the tax base is $700 million, Wood said.

The process for selling the refineries are still in "phase one" as the company waits for bids, Wood said. "We are just starting the process so I don't know what the bids are."

The downstream assets for sale include a 125,000-barrel-a-day refinery in Meraux, La., its 35,000-barrel-a-day plant in Superior, Wisc., and its 108,000-barrel-a-day refinery in Wales, U.K.

The sale of these refineries, particularly the Meraux plant, is not expected to affect supplies to Murphy's U.S. retail operations.

"We sell four times gasoline than we actually make and we have a series of swaps and trades in place; the sale of Meraux would not impact that [retail] business," Wood said.

Murphy shares were recently up 2.5% at $53.10, but the stock is down 4.4% so far this year.

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