NOTICE OF ANNUAL MEETING
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Date:
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May 10, 2017
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Time:
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10:00 a.m. CDT
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Place:
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South Arkansas Arts Center
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110 East 5th Street
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El Dorado, Arkansas 71730
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AGENDA:
1.
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Election of Directors;
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2.
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Advisory vote on executive compensation;
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3.
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Advisory vote on the frequency of an advisory vote on executive compensation;
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4.
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Approval or disapproval of the proposed 2012 Long-Term Incentive Plan Performance Metrics;
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5.
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Approval or disapproval of the action of the Audit Committee of the Board of Directors in appointing KPMG LLP as the Companys independent registered public accounting firm for 2017; and
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6.
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Such other business as may properly come before the meeting.
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Only stockholders of record at the close of business on
March 13, 2017, the record date fixed by the Board of Directors of the Company, will be entitled to notice of and to vote at the meeting or any adjournment thereof. A list of all stockholders entitled to vote is on file at the office of the
Company, 300 Peach Street, El Dorado, Arkansas 71730.
Your vote is very important to us and to our business. Prior to the meeting, you may submit your vote and
proxy by telephone, mobile device, the internet, or, if you received your materials by mail, you can sign and return your proxy card. Instructions on how to vote begin on page 1.
E. Ted Botner
Vice President, Law and Corporate
Secretary
El Dorado, Arkansas
March 24, 2017
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Proxy Statement
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Table of
Contents
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The solicitation of the enclosed proxy is made on behalf of the Board of Directors of Murphy Oil Corporation (the
Board) for use at the Annual Meeting of Stockholders to be held on May 10, 2017. It is expected that this Proxy Statement and related materials will first be provided to stockholders on or about March 24, 2017. The complete
mailing address of the Companys principal executive office is 300 Peach Street, P.O. Box 7000, El Dorado, Arkansas 71731-7000. References in this Proxy Statement to we, us, our, the
Company, Murphy Oil and Murphy refer to Murphy Oil Corporation and its consolidated subsidiaries.
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Proxy Summary
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Proposals to be Voted On
The following proposals
will be voted on at the Annual Meeting of Stockholders.
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For More
Information
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Board
Recommendation
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Proposal 1Election of Directors
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Page 5
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FOR
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Claiborne P. Deming
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James V. Kelley
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T. Jay Collins
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Walentin Mirosh
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Steven A. Cossé
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R. Madison Murphy
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Lawrence R. Dickerson
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Jeffrey W. Nolan
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Roger W. Jenkins
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Neal E. Schmale
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Elisabeth W. Keller
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Laura A. Sugg
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Proposal 2
Advisory Vote to Approve Executive Compensation
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Page 17
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FOR
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Proposal 3
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Page 18
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ONE YEAR
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Advisory Vote to Approve the Frequency of an Advisory Vote on Executive Compensation
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Proposal 4
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Page 19
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FOR
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Approval of the proposed 2012 Long-Term Incentive Plan Performance Metrics
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Proposal 5
Approval of Appointment of Independent Registered Public Accounting Firm
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Page 44
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FOR
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You may cast your vote in the following ways:
The 2017 Murphy Oil Corporation Annual Meeting will begin at 10:00 a.m. CDT on May 10, 2017,
at the South Arkansas Arts Center located at 110 East 5
th
Street in El Dorado, Arkansas 71730.
INTERNET
Go to www.proxyvote.com. You will need the 12 digit number included in your proxy card or notice.
MOBILE
You can scan this QR code to vote with your mobile phone. You will need the 12 digit number included in your proxy card or notice.
PHONE
Call 1-800-690-6903. You will need the 12 digit number included in your proxy card.
MAIL
Send your completed and signed proxy card to: Vote Processing c/o Broadridge 51 Mercedes Way Edgewood, NY
11717
IN PERSON
See page 2 regarding meeting attendance.
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Proxy Summary
(continued)
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS:
We have elected to take advantage of the U.S. Securities and Exchange Commission (the SEC) rules that allow us to furnish proxy materials to the
Companys stockholders via the internet. These rules allow us to provide information that the Companys stockholders need while lowering the costs and accelerating the speed of delivery and reducing the environmental impact of the Annual
Meeting. This Proxy Statement, along with the Companys Annual Report to Stockholders, which includes the Companys Form
10-K
report for the year ended December 31, 2016, are available via the
internet at
http://ir.murphyoilcorp.com/phoenix.zhtml?c=61237&p=proxy
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Q&AQuestions and Answers about the Annual
Meeting
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When and where is the Annual Meeting?
The Companys 60th Annual Meeting
will be held at 10:00 a.m. CDT on Wednesday, May 10, 2017, at the South Arkansas Arts Center, located at 110 East 5
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Street, in El Dorado, Arkansas 71730.
May I attend the meeting?
Attendance at the meeting is open to stockholders of record as of March 13, 2017, Company employees and certain guests. If you are a stockholder, regardless of the
number of shares you hold, you may attend the meeting.
Who may vote?
You
may vote if you were a holder of record of Murphy Oil Corporation common stock as of the close of business on March 13, 2017. Each share of common stock is entitled to one vote at the Annual Meeting. You may vote in person at the meeting, or by
proxy via the methods explained on page 1 of this document.
Why should I vote?
Your vote is very important regardless of the amount of stock you hold. The Board strongly encourages you to exercise your right to vote as a stockholder of the Company.
Why did I receive a Notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?
We are providing access to our proxy materials via the internet. As a result, we have sent a Notice of availability instead of a paper copy of the proxy materials to most
of our stockholders. The Notice contains instructions on how to access the proxy materials via the internet and how to request a paper copy. In addition, the website provided in the Notice allows stockholders to request future proxy materials in
printed form by mail or electronically by email. A stockholders election to receive proxy materials by mail or email will remain in effect until the stockholder terminates it.
Why didnt I receive a Notice in the mail regarding the internet availability of proxy materials?
We are providing certain stockholders, including those who have previously requested paper copies of the proxy materials, with paper copies of the proxy materials instead
of a Notice. If you would like to reduce the costs incurred by Murphy in mailing proxy materials and conserve natural resources, you can consent to receive all future proxy statements, proxy cards and annual reports electronically via email. To sign
up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card. When prompted, indicate that you agree to receive or access stockholder communications electronically in
the future.
May I vote my stock by filling out and returning the Notice?
No. Instructions are in the email sent to you and on the Notice.
How can I access
the proxy materials through the internet?
Your Notice or proxy card will contain instructions on how to view our proxy materials for the Annual Meeting via the
internet. The Proxy Statement and Annual Report are also available at
http://ir.murphyoilcorp.com/phoenix.zhtml?c=61237&p=proxy
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Proxy Statement
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The affirmative vote
of a majority of the shares present in person or represented by proxy at the Annual Meeting is required for approval of matters presented at the meeting. Your proxy will be voted at the meeting unless you (i) revoke it at any time before the
vote by filing a revocation with the Corporate Secretary of the Company, (ii) duly execute a proxy card bearing a later date or (iii) appear at the meeting and vote in person. If you voted via the Internet, mobile device or telephone, you
can change your vote with a timely and valid later vote or by voting by ballot at the meeting. Proxies returned to the Company, votes cast other than in person and written revocations will be disqualified if received after commencement of the
meeting. If you elect to vote your proxy card or as directed on the Notice or vote by telephone, mobile device or internet as described in the telephone/mobile device/internet voting instructions on your proxy card or Notice, the Company will vote
your shares as you direct. Your telephone/mobile device/internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned your proxy card.
Votes cast by proxy or in person at the meeting will be counted by the persons appointed by the Company to act as Judges of Election for
the meeting. The Judges of Election will treat shares represented by proxies that reflect abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum and for purposes of determining the outcome of
any other business submitted at the meeting to the stockholders for a vote. Abstentions, however, do not constitute a vote against any matter.
The Judges of Election will treat shares referred to as broker
non-votes
(i.e.,
shares held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote and that the broker or nominee does not have discretionary power to vote on a
non-routine
matter) as shares that are present and entitled to vote on routine matters and for purposes of determining the presence of a quorum. The proposal to approve or disapprove the appointment of KPMG
LLP as the Companys independent registered public accounting firm for the current fiscal year should be considered a routine matter. However, for purposes of determining the outcome of any
non-routine
matter as to which the broker does not have discretionary authority to vote, those shares will be treated as not present and not entitled to vote with respect to that matter (even though those shares are considered entitled to vote for quorum
purposes and may be entitled to vote on other matters). Accordingly, broker
non-votes
will be disregarded in the calculation of votes cast and will have no effect on the vote. Notably, the election
of directors, the advisory vote to approve executive compensation, the advisory vote on the frequency of an advisory vote on executive compensation and the proposal to approve or disapprove the proposed 2012 Long-Term Incentive Plan Performance
Metrics should be considered
non-routine
matters.
Unless specification to the contrary is
made, the shares represented by the enclosed proxy will be voted FOR all the nominees for director, FOR the approval of the advisory vote for the compensation of the Companys Named Executive Officers, for the option of ONE YEAR as the
frequency with which stockholders are provided an advisory vote on executive compensation, FOR approval of the proposed 2012 Long-Term Incentive Plan Performance Metrics and FOR approval of the action of the Audit Committee of the Board of Directors
in appointing KPMG LLP as the Companys independent registered public accounting firm for 2017.
The expenses of printing and
distributing proxy material, including expenses involved in forwarding materials to beneficial owners of stock, will be paid by the Company. The Companys officers or employees, without additional compensation, may solicit the return of proxies
from certain stockholders by telephone or other means.
On March 13,
2017, the record date for the meeting, the Company had 172,544,891 shares of Common Stock outstanding, all of one class and each share having one vote with respect to all matters to be voted on at the meeting. This amount does not include 22,510,833
shares of treasury stock. Information as to Common Stock ownership of certain beneficial owners and management is set forth in the tables on pages 14 and 15 (Security Ownership of Certain Beneficial Owners and Security Ownership of
Management).
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Proposal 1Election of Directors
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The Board recognizes that it is important for the Companys directors to possess a diverse array of backgrounds and
skills, whether in terms of executive management leadership or educational achievement. When considering new candidates, the Nominating & Governance Committee, with input from the Board, takes into account these factors as well as other
appropriate characteristics, such as sound judgment, honesty, and integrity. In addition, the Nominating & Governance Committee, when searching for nominees for directors, relies on the Companys Corporate Governance Guidelines, which
state, The Company endeavors to have a board representing diverse experience at policy-making levels in business areas that are relevant to the Companys global activities. The goal is to assemble and maintain a Board comprised of
individuals that not only bring to bear a wealth of business and/or technical expertise, but that also demonstrate a commitment to ethics in carrying out the Boards responsibilities with respect to oversight of the Companys operations.
To the extent authorized by the proxies, the shares represented by the proxies will be voted in favor of the election of the twelve nominees for director whose names
are set forth herein. If for any reason any of these nominees is not a candidate when the election occurs, the shares represented by such proxies will be voted for the election of the other nominees named and may be voted for any substituted
nominees or the Board may reduce its size. However, management of the Company does not expect this to occur.
All nominees other than Ms. Elisabeth Keller were elected at the last Annual Meeting of Stockholders. Ms. Keller, recommended by members of the Companys Board of Directors, was
elected to the Board of Directors effective December 6, 2016. One director, Ms. Caroline G. Theus, has attained retirement age and will not stand for
re-election.
All directors other than Mr. Roger Jenkins have been deemed independent by the Board based on the rules of the New York Stock Exchange (NYSE) and the
standards of independence included in the Companys Corporate Governance Guidelines. As part of its independence recommendation to the Board, the Nominating & Governance Committee at its February meeting considered familial
relationships (Mr. Deming, Mr. Murphy and Ms. Keller are first cousins). The Committee also considered a hangar rental agreement with Union Holdings LLC (Mr. Murphy) which was determined to be a fair market value transaction at
the rate of $6,000 annually.
Mr. Deming, the independent
non-employee
Chairman of the Board serves as presiding director
at regularly scheduled board meetings as well as at no less than three meetings solely for
non-employee
directors. The meetings for
non-employee
directors are held in
conjunction with the regularly scheduled February, August and December board meetings, at least one of which includes only independent
non-employee
directors.
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Proposal 1Election of Directors
(continued)
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The Corporate Governance Guidelines provide that stockholders and other interested parties may send communications to the Board, specified individual directors and the
independent directors as a group c/o the Corporate Secretary, Murphy Oil Corporation, P.O. Box 7000, El Dorado, Arkansas 71731-7000. All such communications will be kept confidential unless otherwise required by law and relayed to the specified
director(s). The names of the Director nominees and certain information as to them, are as follows:
DIRECTOR
NOMINEES
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T. JAY COLLINS
Houston,
Texas
Age:
70
Director Since:
2013
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Board Committees
Executive
Compensation
Nominating &
Governance
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Certain other directorships
Oceaneering
International, Inc.
Houston, Texas
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Principal occupation or employment
President and Chief Executive Officer, Retired, Oceaneering International,
Inc., since May 2011; President and Chief Executive Officer, Oceaneering International, Inc., from May 2006 to May 2011
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Mr. Collins
has extensive knowledge of international management and corporate development. As a prior
President and Chief Executive Officer of Oceaneering International, Inc., he has substantial knowledge and experience in the oil and gas industry. Among other qualifications, Mr. Collins brings to the Board experience in field operations,
executive management and finance.
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STEVEN A. COSSÉ
El Dorado, Arkansas
Age:
69
Director Since:
2011
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Board Committees
Executive
Health, Safety &
Environmental
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Certain other directorships
Simmons First National
Corporation
Pine Bluff,
Arkansas
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Principal occupation or employment
President and Chief Executive Officer of the Company from June 2012 to
August 2013, retired from the Company December 2013; previously Executive Vice President and General Counsel of the Company from February 2005 through February 2011, retired from the Company February 2011 to May 2012
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Mr. Cossés
long service in several capacities with the Company has helped him gain a proficient
understanding of many areas, including environmental laws and regulations. Among other qualifications, Mr. Cossé brings to the Board expertise in corporate governance, banking and securities laws and executive leadership.
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CLAIBORNE P. DEMING
El Dorado, Arkansas
Age:
62
Director Since:
1993
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Board Committees
Chairman of the Board
Chair, Executive
Health, Safety &
Environmental
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Certain other directorships
Murphy USA Inc.
El Dorado, Arkansas
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Principal occupation or employment
President and Chief Executive Officer of the Company from October 1994
through December 2008, retired from the Company June 2009
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Mr. Demings
experience as former President and Chief Executive Officer of Murphy Oil Corporation
gives him insight into the Companys challenges, opportunities and operations. Among other qualifications, Mr. Deming brings to the Board executive leadership skills and over 30 years experience in the oil and gas industry.
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Proposal
1Election of Directors
(continued)
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LAWRENCE R. DICKERSON
Houston,
Texas
Age:
64
Director Since
: 2014
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Board Committees
Audit
Nominating &
Governance
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Certain other directorships
Oil States International,
Inc.
Houston, Texas
Great Lakes Dredge &
Dock Company Oak
Brook, Illinois
Hercules Offshore, Inc.
Chairman
Houston, Texas
Until
2016
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Principal occupation or employment
President and Chief Executive Officer, Retired, Diamond Offshore Drilling,
Inc., an offshore drilling company, since March 2014; President and Chief Executive Officer, Diamond Offshore Drilling, Inc., from May 2008 through March 2014
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Mr. Dickersons
experience as the President and a director of Diamond Offshore Drilling, Inc. from
March 1998 and as Chief Executive Officer from May 2008 until his retirement in March 2014 brings to the Board broad experience in leadership and financial matters. Among other qualifications, he brings to the Board expertise as a Certified Public
Accountant and in international drilling operations.
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ROGER W. JENKINS
El
Dorado, Arkansas
Age:
55
Director Since:
2013
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Board Committees
Executive
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Certain other directorships
None
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Principal occupation or employment
President and Chief Executive Officer of the Company since August 2013 and
President of Murphy Exploration & Production Company since June 2012; previously Chief Operating Officer & Executive Vice President, Exploration & Production of the Company from June 2012 to August 2013; Executive Vice President,
Exploration & Production of the Company and President of Murphy Exploration & Production Company from August 2009 to June 2012
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Mr. Jenkins
leadership as President and Chief Executive Officer of Murphy Oil Corporation allows
him to provide the Board with his detailed perspective of the Companys global operations. With a Bachelors degree in Petroleum Engineering, a Masters degree in Business Administration and over 30 years of industry experience, he
has played a critical leadership role in Murphys worldwide exploration and production operations, including the development of the Kikeh field in Malaysia and the Eagle Ford Shale in South Texas.
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ELISABETH W. KELLER
Cambridge, Massachusetts
Age:
59
Director Since:
2016
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Board Committees
None
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Certain other directorships
None
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Principal occupation or employment
President, Inglewood Plantation, LLC, since 2014; CEO, Keller Enterprises,
LLC, from 2008 to 2014
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Ms. Keller
is the President of Inglewood Plantation, LLC and is responsible for the development of
strategic vision and oversight of operations of the largest organic farm in Louisiana. She brings to the Board extensive knowledge in health and environmental issues, both domestically and internationally.
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Proposal 1Election of Directors
(continued)
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JAMES V. KELLEY
Little Rock, Arkansas
Age:
67
Director Since:
2006
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Board Committees
Executive
Chair, Nominating &
Governance
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Certain other directorships
BancorpSouth, Inc. Tupelo,
Mississippi Until 2014
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Principal occupation or employment
President and Chief Operating Officer, Retired, BancorpSouth, Inc. (a NYSE
bank holding company) since August 2014; President and Chief Operating Officer, BancorpSouth, Inc. from 2001 to August 2014
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Mr. Kelley
has extensive knowledge of capital markets and accounting issues. As former President and
Chief Operating Officer of BancorpSouth, Inc., he understands the fundamentals and responsibilities of operating a large company. Among other qualifications, Mr. Kelley brings to the Board experience in banking, finance and accounting, as well
as executive management.
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WALENTIN MIROSH
Calgary, Alberta
Age
: 71
Director Since:
2011
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Board Committees
Executive Compensation
Health, Safety &
Environmental
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Certain other directorships
TC PipeLines GP, Inc.
Calgary, Alberta
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Principal occupation or employment
President, Mircan Resources Ltd., a private consulting company since January
2010
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Mr. Mirosh
, with his accomplishments in the chemical, natural gas, and investment industries, is able to
provide the Board with dependable input in many areas. He brings to the Board experience in energy, regulatory and international law as well as skills in business development and corporate strategy.
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R. MADISON MURPHY
El
Dorado, Arkansas
Age:
59
Director Since:
1993
(Chairman, 1994-2002)
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Board Committees
Chair, Audit
Executive
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Certain other directorships
Deltic Timber Corporation
El Dorado, Arkansas
Murphy USA Inc.
Chairman
El Dorado, Arkansas
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Principal occupation or employment
Managing Member, Murphy Family Management, LLC, which manages investments,
farm, timber and real estate, since 1998;
President, The Murphy
Foundation;
Owner, The Sumac Company, LLC, which manages investments,
timber and vineyard operations; and
Owner, Presquile Winery
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Mr. Murphy
served as Chairman of the Board of Murphy Oil Corporation from 1994 to 2002. This background,
along with his current membership on the Board of Directors of Deltic Timber Corporation and Murphy USA Inc., brings to the Board and to the Audit Committee a unique business and financial perspective.
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Proposal
1Election of Directors
(continued)
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JEFFREY W. NOLAN
Little Rock, Arkansas
Age:
48
Director Since:
2012
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Board Committees
Executive Compensation
Nominating &
Governance
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Certain other directorships
None
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Principal occupation or employment
President & Chief Executive Officer, Loutre Land and Timber Company, a
natural resources company with a focus on the acquisition, ownership and management of timberland and mineral properties, since 1998
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Mr. Nolans
experience as President and Chief Executive Officer of a natural resources company, in
addition to his former legal practice focused on business and corporate transactions, allows him to bring to the Board expertise in legal matters, corporate governance, corporate finance, acquisitions and divestitures and the management of mineral
properties.
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NEAL E. SCHMALE
La Jolla,
California
Age:
70
Director Since:
2004
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Board Committees
Audit
Chair, Executive
Compensation
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Certain other directorships
WD-40
Company
San Diego, California
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Principal occupation or employment
President and Chief Operating Officer, Retired, Sempra Energy, an energy
services holding company, since October 2011; President and Chief Operating Officer, Sempra Energy, from February 2006 to October 2011
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Mr. Schmale
, as former Chief Operating Officer of Sempra Energy, brings to the Board the perspective of
a corporate leader having faced external economic, social and governance issues. He also brings specific experience in financial matters from his prior service as Chief Financial Officer of Sempra Energy. He holds degrees in petroleum engineering
and law, and has a vast knowledge in different fields concerning the oil industry.
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LAURA A. SUGG
Montgomery,
Texas
Age:
56
Director Since:
2015
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Board Committees
Audit
Health, Safety &
Environmental
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Certain other directorships
Denbury Resources
Plano, Texas
Williams Companies Inc.
Tulsa, Oklahoma
Until 2016
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Principal occupation or employment
Senior Executive, Retired, ConocoPhillips, then an international, integrated
oil company, since 2010
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Ms. Suggs
broad background in capital allocation and accomplishments in the energy industry allow
her to bring to the Board expertise in industry, operational and technical matters. Among other qualifications, she brings to the Board specific experience in executive leadership, human resources, compensation and financial matters. As a former
leader at ConocoPhillips, Ms. Sugg has a proficient understanding of an oil companys challenges and opportunities.
The Board recommends a vote FOR each of the persons nominated
by the Board.
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Proposal 1Election of Directors
(continued)
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BOARD LEADERSHIP STRUCTURE
The positions of Chairman of the Board and the Chief Executive Officer of the Company are held by two individuals. Mr. Deming serves as the Chairman of the Board as
a
non-executive
and independent director. Mr. Jenkins is the Companys President and Chief Executive Officer. Along with the Chairman of the Board of Directors and the Chief Executive Officer, other
directors bring different perspectives and roles to the Companys management, oversight and strategic development. The Companys directors bring experience and expertise from both inside and outside the company and industry, while the
Chief Executive Officer is most familiar with the Companys business and industry, and most capable of leading the execution of the Companys strategy. The Board believes that separating the roles of Chairman and Chief Executive Officer is
currently in the best interest of stockholders because it provides the appropriate balance between strategy development and independent oversight of management. The Board will, however, maintain its flexibility to make this determination at any
given point in time to provide appropriate leadership for the Company.
RISK MANAGEMENT
The Board exercises risk management oversight and control both directly and indirectly, the latter through various Board Committees. The Board regularly reviews
information regarding the Companys credit, liquidity and operations, including the risks associated with each. The Executive Compensation Committee is responsible for overseeing the management of risks relating to the Companys executive
compensation plans and arrangements. The Audit Committee is responsible for oversight of financial risks and the ethical conduct of the Companys business, including the steps the Company has taken to monitor and mitigate these risks. The
Nominating & Governance Committee, in its role of reviewing and maintaining the Companys corporate governance guidelines, manages risks associated with the independence of the Board and potential conflicts of interest. The Health,
Safety & Environmental Committee oversees management of risks associated with environmental, health and safety issues. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire
Board is regularly informed through committee reports and by management about the known risks to the strategy and the business of the Company.
COMMITTEES
The standing committees of the Board are the Executive Committee, the Audit Committee, the Executive Compensation
Committee, the Nominating & Governance Committee and the Health, Safety & Environmental Committee.
The Executive Committee,
in accordance with the Companys
by-laws,
is vested with the authority to exercise certain
functions of the Board when the Board is not in session. The Executive Committee is also in charge of all financial, legal and general administrative affairs of the Company, subject to any
limitations prescribed by the
by-laws
or by the Board.
The Audit
Committee
has the sole authority to appoint or replace the Companys independent registered public accounting firm, which reports directly to the Audit Committee. The Audit Committee also assists the
Board with its oversight of the integrity of the Companys financial statements, the independent registered public accounting firms qualifications, independence and performance, the performance of the Companys internal audit
function, the compliance by the Company with legal and regulatory requirements, and the review of programs related to compliance with the Companys Code of Business Conduct and Ethics. The Audit Committee meets with representatives of the
independent registered public accounting firm and with members of the internal Auditing Department for these purposes. The Board has designated Neal E. Schmale as its Audit Committee Financial Expert as defined in Item 407 of
Regulation S-K.
All of the members of the Audit Committee including Mr. Schmale are independent under the rules of the NYSE and the Companys independence standards.
The Executive Compensation Committee
oversees the compensation of the
Companys executives and directors and administers the Companys annual incentive compensation plan, the long-term incentive plan and the stock plan for
non-employee
directors. All of the members of
the Executive Compensation Committee are independent under the rules of the NYSE and the Companys independence standards. The Compensation Discussion and Analysis section contains additional information about the Executive Compensation
Committee. In carrying out its duties, the Executive Compensation Committee will have direct access to outside advisors, independent compensation consultants and others to assist them.
The Nominating & Governance Committee
identifies and recommends
potential Board members, recommends appointments to Board committees, oversees evaluation of the Boards performance and reviews and assesses the Corporate Governance Guidelines of the Company. All of the members of the Nominating &
Governance Committee are independent under the rules of the NYSE and the Companys independence standards. Information regarding the process for evaluating and selecting potential director candidates, including those recommended by
stockholders, is set out in the Companys Corporate Governance Guidelines.
Stockholders desiring to recommend candidates for membership on the Board for
consideration by the Nominating & Governance Committee should address their recommendations to: Nominating & Governance Committee of the Board of Directors, c/o Corporate Secretary, Murphy Oil
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10
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Murphy Oil Corporation
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Proposal
1Election of Directors
(continued)
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Corporation, P.O. Box 7000, El Dorado, Arkansas 71731-7000. As a matter of policy, candidates recommended by stockholders are evaluated on the same basis as candidates recommended by Board
members, executive search firms or other sources.
The Health,
Safety
& Environmental Committee
assists the Board and management in monitoring compliance with applicable environmental, health and safety
laws, rules and regulations as well as the Companys Worldwide Health, Safety & Environmental Policy. Review of policies, procedures and practices regarding security of the Companys people and property is also within the purview
of this committee. The Committee assists the Board on matters relating to the Companys response to evolving public issues affecting the Company in the realm of health, safety and the environment. The Committee has benefitted from the
Companys involvement with groups such as the American Petroleum Institute (API) and sponsorship of initiatives like the Massachusetts Institute of Technologys Joint Program on the Science and Policy of Global Change, which keeps abreast
of emerging issues with respect to climate change.
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Proposal 4Approval of the Proposed 2012 Long-Term
Incentive Plan Performance Metrics
(continued)
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respect to any such Award. Any one or more of the Performance Measures may apply to the Grantee, a department, unit, division, or function within the Company or any one or more affiliates; and
may apply either alone or relative to the performance of other businesses or individuals (including industry or general market indices). The Committee shall have the discretion to adjust the determination of the degree of attainment of the
pre-established
performance goals; provided that Awards which are designed to qualify for the Performance-Based Exception may not be adjusted upward (the Committee shall retain the discretion to adjust
such Awards downward). The Committee may not delegate any responsibility with respect to Awards intended to qualify for the Performance-Based Exception. All determinations by the Committee as to
the achievement of the Performance Measure(s) shall be in writing prior to payment of the Award.
RESOLVED, that the Companys stockholders approve, the
performance measures of the 2012 Long-Term Incentive Plan, as disclosed in the Companys Proxy Statement for the 2017 Annual Meeting of Stockholders.
The Board recommends that stockholders vote FOR the
performance measures of the 2012 Long-Term Incentive Plan.
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20
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Murphy Oil Corporation
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Compensation Discussion and Analysis
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BACKGROUND
Murphy Oil
Corporation is an independent exploration and production (E&P) company with a portfolio of global offshore and onshore assets delivering
oil-weighted
production. Murphy produces oil and natural
gas in the United States, Canada and Malaysia. The Companys long-term strategy as an independent E&P company is focused on the following key priorities that management believes will drive value for its stockholders: (1) develop
differentiated perspectives in underexplored basins and plays; (2) continue to be a preferred partner to national oil companies and regional independents; (3) provide balance to the global offshore business by developing unconventional
onshore plays in North America; (4) develop and produce fields in a safe, responsible, timely and cost effective manner; and (5) achieve and maintain a sustainable, profitable, oil weighted portfolio.
This Compensation Discussion and Analysis (CD&A) provides stockholders with an understanding of the Companys compensation philosophy, objectives,
policies and practices in place during 2016, as well as factors considered by the Executive Compensation Committee of the Board of Directors (the Committee) in making compensation decisions for 2016. For your reference, the
Companys CD&A is outlined in the following sections:
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Executive Summary
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Page
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The Companys 2016 Operational and Financial Highlights
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22
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Impact of 2016 Company Performance on Executive Compensation
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22
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Actions Related to 2016 Performance
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23
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CEO Compensation
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24
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Other NEO Compensation
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24
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Stockholder Engagement
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24
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Compensation and Corporate Governance Policies What We Do and What
We Dont Do
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25
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Introduction
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26
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Guiding Principles
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27
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Risk Evaluation
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28
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Elements of Compensation
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28
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A. Base Salary
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28
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B. Annual Incentive Plan
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28
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C. Long-Term Incentive Compensation
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30
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D. Employee Benefits and Perquisites
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32
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Actions Related to 2017 Executive Compensation
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33
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Executive Compensation Committee Report
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34
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EXECUTIVE SUMMARY
This CD&A focuses on the compensation of the Companys Named Executive Officers (NEOs) listed below, whose compensation is set forth in the Summary
Compensation table and other compensation tables contained in the proxy statement.
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Name
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Title
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Roger W. Jenkins
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President & Chief Executive Officer
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John W. Eckart
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Executive Vice President & Chief Financial
Officer
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Eugene T. Coleman
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Executive Vice President, Offshore
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Walter K. Compton
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Executive Vice President & General Counsel
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Michael K. McFadyen
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Executive Vice President, Onshore
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On December 7, 2016, the Company announced the elections of Eugene T. Coleman as Executive Vice President, Offshore and Michael K.
McFadyen as Executive Vice President, Onshore.
The Companys compensation plans and practices are designed to align the financial interests of the above NEOs
with the financial interests of its stockholders. To that end, NEOs are provided with a competitive base salary, an annual cash bonus opportunity based on the achievement of specific goals aligned with stockholder value creation and long-term
incentives.
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Murphy Oil Corporation
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21
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Compensation Discussion and Analysis
(continued)
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OUR 2016 OPERATIONAL AND FINANCIAL HIGHLIGHTS
During fiscal year 2016, the
energy industry was faced with numerous challenges. The commodity price collapse, which began in 2014, continued with a severity and duration greater than anticipated. In response, the Company took decisive actions to manage the challenges
head-on
and is emerging a stronger company. In 2016, Murphy delivered stabilized production following
non-core
asset divestitures, high-graded its portfolio, strengthened its
financial health, and streamlined its organization. All of this was accomplished while achieving a record year in safety performance. Over the long-term, attaining the Companys key business objectives is fundamental to delivering shareholder
returns. Murphys specific achievements in 2016 include:
HIGHGRADING THE PORTFOLIO
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Murphy increased its long-term growth opportunities by high-grading its onshore portfolio by acquiring lands in the Kaybob Duvernay and Placid Montney at the trough in the commodity price cycle.
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Murphy divested
non-core
synthetic and heavy oil assets as well as natural gas processing plants in Canada generating $1.2 billion cash.
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The Company expanded its offshore exploration portfolio by farming into a successful exploration prospect in the Gulf of Mexico as well as capturing a highly competitive block in Mexicos deepwater bid round.
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STABILIZING PRODUCTION AT LOWER CAPEX
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Murphy produced over 175 Mboepd in 2016, at the top end of the annual guidance of 174 to 175 Mboepd.
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Capital expenditures, excluding acquisitions, were $604.8 million, over a 72% reduction from 2015 levels.
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REDUCING COSTS
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In 2016, Murphy lowered lease operating expenses, excluding Syncrude, to $7.87 per boe, a 15% reduction from 2015.
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Murphy decreased selling and general expenses by 14% year-over-year, as a result of focusing on Company-wide cost reductions and streamlining the organization.
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MAINTAINING SHAREHOLDER FOCUS
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Murphy adjusted its dividend due to lower oil and natural gas prices, while maintaining a top quartile yield during 2016.
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Murphy did not issue equity at the bottom of the cycle and stabilized the Company through lower capital spending and cost reductions.
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MAINTAINING BALANCE SHEET STRENGTH
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Murphy issued $550.0 million of eight year notes, holding the proceeds as cash on the balance sheet.
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The Company entered into a new $1.1 billion unsecured guaranteed revolving credit facility, which remained undrawn at year end.
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Finished the year with $1.0 billion of cash and invested cash on the balance sheet.
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OUTSTANDING
SAFETY AND ENVIRONMENTAL PERFORMANCE
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Murphy achieved record safety performance in 2016 by reporting a total recordable incident rate (number of accidents per 200,000 work hours; TRIR) of 0.19 including all employees and contractors, a 32%
improvement year-over-year, and exceeded the Companys TRIR goal of 0.38 for 2016.
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The spill rate (number of reportable spills greater than one barrel per million barrels of oil equivalent of operated production) for 2016 was an exceptional 0.09 as compared to 0.21 in 2015.
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IMPACT OF 2016 COMPANY PERFORMANCE ON EXECUTIVE COMPENSATION
Murphy has
structured its cash and equity-based compensation program to position approximately 90% of the CEOs and
75%-80%
of the other NEOs target total direct compensation opportunity in
at-risk
compensation components tied to the
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22
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Murphy Oil Corporation
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Compensation
Discussion and Analysis
(continued)
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achievement of short- and long-term performance criteria aligned with the Companys business objectives. Actual
at-risk
compensation was lower than
targeted opportunity in 2016 due to reductions in long-term incentives received. Short-term incentives are paid in the form of annual cash bonus opportunities tied to the achievement of specific performance goals aligned with stockholder value
creation. Long-term incentives combine performance-based and time-based restricted stock units and stock options to provide a compensation opportunity aligned with the Companys long-term stock performance, delivered through awards that are
performance based in absolute and relative terms, while also encouraging retention.
ACTIONS RELATED TO 2016 PERFORMANCE
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Base Salary
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Annual Incentives
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Long-Term Equity Incentives
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No Adjustments to NEO Base Salaries
The Company provides base
salaries to its NEOs which are structured to reward executives for the performance of their regular duties and responsibilities associated with their management of the organization.
Murphy targets the
50
th
percentile (median) level of base salaries paid by a select group of 10 peer companies in the exploration and production sector.
During 2016, the Company made no adjustments to the base salaries of its CEO and NEOs. This was
the second consecutive year in which the Company elected to keep executive base salaries fixed at current levels in recognition of the difficult economic environment for oil and gas exploration and production companies.
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Exercised Negative Discretion on Annual Incentive Plan (AIP) Awards
The Murphy AIP is a performance-driven plan intended to comply with the requirements of a performance
plan pursuant to Section 162(m) of the Internal Revenue Code. The Plan, which establishes threshold, target, and maximum levels of financial, strategic, and operational goals within the first 90 days of the fiscal year, is formulaic in its
application and the Committee is permitted to adjust calculated awards by means of negative discretion.
For the fiscal year 2016, the AIP measured performance in the following areas:
EBITDA/BOE;
Lease Operating Expense/BOE;
Safety (Total Recordable Incident Rate);
Environmental (Spill Rate);
Production (BOEPD); and
Produced Proved Reserve Replacement
Based upon the Companys performance during fiscal year 2016, Murphy met or exceeded the
performance goals in four of the six areas measured. The Company failed to achieve its threshold performance level of produced reserves replacement, and the AIP formula for the NEO positions resulted in an earned performance score of 138.76% of
target.
Because the Company failed to reach a level of profitability during 2016 despite meeting
or exceeding most of its key operating and strategic goals, the Executive Compensation Committee elected to exercise negative discretion bringing NEO payouts to a level commensurate with those of other plan participants.
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Reduced Value of Long-Term Incentive Grants for 2016
In February 2016, the Executive
Compensation Committee approved long-term incentive grants to the NEOs and all other long-term incentive plan participants for 2016. The Committee awarded grants in the form of: 50% of value in the form of performance-based restricted stock units;
25% of value in the form of fixed-price stock options; and 25% of value in the form of time-based restricted stock units. Due to the oil prices collapses impact on the Company, the Committee elected to award the same absolute number of shares
for the 2016 grants for each NEO and all other participants as to the number of shares granted in 2015. This decision resulted in an approximate 63% decrease in the grant date fair value of the 2016 grants. In the judgment of the Committee, this
grant strategy fairly addressed the significant oil price collapses impact on the Company and still provided management with an opportunity to earn competitive long-term award values.
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Murphy Oil Corporation
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23
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Compensation Discussion and Analysis
(continued)
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ACTIONS RELATED TO 2016 PERFORMANCE (CONTINUED)
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Base Salary
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Annual Incentives
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Long-Term Equity Incentives
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The following provides a summary of the results for fiscal year 2016
based on relative TSR performance and the impact of such performance upon grants occurring in 2014, 2015, and 2016. The 2016 grants of awards were compared to a different peer group than the 2014 and 2015 awards.
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2014
RSUs
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2015
RSUs
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2016
RSUs
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Year 1
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74.00%
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50.60%
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122.00%
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Year 2
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50.60%
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131.40%
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TBD
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Year 3
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131.40%
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TBD
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TBD
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Cumulative Years
1-3
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59.00%
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TBD
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TBD
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Total
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78.75%
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TBD
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TBD
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CEO COMPENSATION
The CEO
recognized a reduction in his 2015 total target direct compensation for fiscal year 2016 in consideration of the Companys performance during the year. In February 2016, the Committee elected to hold the CEOs base salary fixed at the
level established at the end of fiscal year 2014, $1,300,000. Mr. Jenkins annual incentive award (cash bonus, payable in first quarter 2017) was paid at the level of $1,950,000, which represents 111% of his target award opportunity. In
February 2016, the Committee granted the CEO long-term incentive compensation with a grant date fair value of $3,517,415, which represents a 63% reduction in the target value of long-term compensation compared to 2015. In aggregate,
Mr. Jenkins total direct compensation for 2016 was $6,767,415 which is a 44.27% reduction in total compensation from his 2015 level.
OTHER NEO COMPENSATION
In
February 2016, the Committee approved the recommendation from the CEO to hold base salaries fixed at current levels for the other NEOs.
STOCKHOLDER ENGAGEMENT
The Company values the feedback and insights that it receives from its stockholders through ongoing dialogue. At the 2016 Annual Meeting, a proposal seeking an
advisory vote on executive compensation for the Companys NEOs (see Tabular Information for Named Executive Officers) was submitted to stockholders. Stockholders endorsed the Companys NEO compensation, with over 97% of the
votes cast indicating approval.
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24
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Murphy Oil Corporation
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|
Compensation
Discussion and Analysis
(continued)
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COMPENSATION AND CORPORATE GOVERNANCE POLICIES What We Do and What We Dont Do
Murphy is committed to developing and implementing executive compensation and corporate governance policies which are directly aligned with the best interests of our
stockholders. In this regard, we have adopted executive compensation practices which are considered to be best practices and which will ensure that we have put stockholder interests in the forefront. The following table lists the
practices that Murphy has implemented which describe the best practices we have adopted as What We Do as well as a listing of practices identified as What We Dont Do that we consider not to be aligned with our
stockholders interests.
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What We Do
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What We Dont Do
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✓
Stock Ownership Guidelines
The Company has
adopted director and officer stock ownership guidelines which state that directors are to own and hold Company shares equal in value to five times the directors annual cash retainer within five years of commencing Board service, whereas
officers of the Company or any of its operating subsidiaries are expected to own and hold a number of shares at least equal in value to a multiple of base salary, depending upon the officers position (5.0 times for the CEO, 2.5 times for EVPs,
2.0 times for SVPs, and 1.0 times for VPs).
✓
Pay for Performance
Murphys executive compensation program is driven by its pay for performance strategy and which is directly aligned with the achievement of Company business
objectives, business strategies, and financial results. The Company has structured its executive compensation program such that more than 75% of a NEOs direct compensation is in the form of variable compensation tied to Company performance
through the annual incentive and long-term incentive compensation plans.
✓
Restrictive Pledging Policy
The Company has adopted
corporate governance guidelines which apply to directors and officers. A director or officer may not pledge Company securities, including the purchasing of Company securities on margin or holding Company securities in a margin account, until he or
she has achieved the applicable stock ownership target specified in the guidelines above. Once such stock ownership target has been achieved, such director or officer is permitted to pledge Company securities in compliance with applicable law
(including disclosure of such pledging in the Companys Proxy Statement as required by SEC regulations), as long as all stock owned to satisfy the applicable stock ownership target remains unpledged. Any pledging of shares should be disclosed
to the Company in advance.
✓
Anti-Hedging Policy
The Company has implemented corporate governance guidelines that state: Directors, officers, and employees are prohibited from engaging in any hedging
transactions (including transactions involving options, puts, calls, prepaid variable forward contracts, equity swaps, collars and exchange funds, or other derivatives) that are designed to hedge or speculate on any change in the market value of the
Companys securities.
✓
Limited Perquisites
The Companys executive officers, including the NEOs, receive no perquisites or special executive benefits, unless such benefits serve a reasonable purpose, such
as limited use of Company aircraft by the CEO.
✓
Clawback Provision
In connection with the Dodd-Frank Act, the Company has adopted a policy allowing for the recovering of incentive-based compensation under certain circumstances
including a potential restatement of Company financial statements.
✓
Independent Compensation Advisor
The Executive Compensation
Committee of the Board of Directors has retained the services of Pay Governance LLC as its independent advisor regarding executive compensation issues facing the Committee. The Committee retains the right to engage, retain, and/or terminate the
services of its advisory consultant in its full discretion. Pay Governance LLC provides no other services to Murphy or the Committee beyond its executive compensation advisory services.
✓
Annual Stockholder
Say-on-Pay
Vote
Since the inception of the stockholder advisory vote regarding
Say-on-Pay,
Murphy has allowed for such
a vote annually and has received a highly favorable (95% or higher) voting result each year.
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X
No
Employment Agreements
The Company does not have written employment agreements specifying compensation levels and practices for its NEOs or any Company employee. The only written agreement in effect is the Companys change in control
protection for its CEO in the CEOs Severance Protection Agreement which is only operative in the event that the CEO is involuntarily terminated without cause or terminates for specified good reason following a change in control
transaction.
X
No Tax
Gross-Up
Payments
The Company does not provide its CEO or other NEOs with tax
gross-up
payments for any form of executive compensation, including the change in
control severance compensation for the CEO.
X
No Backdating of Stock Options
Murphy has never engaged in the practice of backdating stock options or other forms of equity compensation.
X
No Payment of Dividends on Unearned Performance Awards
With respect of unearned long-term performance awards measured or paid in Company stock, the grantee will not receive dividends pursuant
to such granted awards until such stock is earned and/or paid.
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Murphy Oil Corporation
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25
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Compensation Discussion and Analysis
(continued)
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INTRODUCTION
The Committee oversees and approves the compensation of the Companys NEOs. The Committee currently consists of four
members, all of whom have been determined by the Board to satisfy the heightened independence requirements of the NYSE and the Companys categorical independence standards. The Nominating & Governance Committee recommends nominees for
appointment to the Committee annually and as vacancies or newly created positions occur. Committee members are appointed and approved by the Board and may be removed by the Board at any time. Members of the Committee during 2016 were Neal E. Schmale
(Chair), T. Jay Collins, Walentin Mirosh and Jeffrey W. Nolan.
The Committee reviews and approves corporate goals and objectives relevant to the Chief Executive
Officer and other NEO compensation and evaluates the CEOs performance in light of these goals and objectives. Any decisions regarding the CEOs compensation are made solely by the Committee based on that evaluation. For NEOs other than
the CEO, the Committee considers the performance evaluations made by the CEO and the recommendations of the CEO.
The Committee administers and makes recommendations
to the Board with respect to the Companys incentive and equity-based compensation plans, and it reviews and approves awards granted under such plans.
As set
forth in its charter, which can be found on the Companys website, the Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of director, CEO or senior executive compensation
and has the sole authority to approve the consultants fees and other retention terms. Advice and assistance from internal or external legal, accounting or other advisors is also available to the Committee. In 2016, the Committee retained Pay
Governance LLC as an independent compensation consultant. All Pay Governance invoices were approved by the Committees Chair prior to payment. In its role as an advisor to the Committee, Pay Governance attended three Committee meetings and
provided the Committee with objective and expert analyses, independent advice and information with respect to executive and director compensation. Pay Governance does not provide any other consulting services to the Committee or to the Company,
other than those dealing with executive compensation and the compensation of
non-employee
directors. The Committee periodically evaluates the performance and independence of Pay Governance. In 2016, Pay
Governance delivered a letter to the Committee that provided full disclosure relating to Pay Governance LLCs relationship to the Company, taking into account the SECs Consultant Independence Factors and Pay Governances Independence
Policy. The Committee has determined that there are no business or personal relationships between Pay Governance and the members of the Committee or the Companys executive officers that may create a conflict of interest impairing Pay
Governances ability to provide independent objective advice to the Committee.
Pay Governance provides the Committee with, among other things, an analysis of trends and compensation data for general
industry, the oil and gas industry and a select group of comparator companies within the oil and gas industry. In 2016 the Committee used two separate peer groups in designing the compensation programs for the Company: the compensation peer group
and the TSR peer group.
In late 2015, as well as in early 2016, the Committee conducted a detailed assessment of the peer group compositions. In February 2016, the
Committee ultimately concluded that bifurcating the peer group into a separate group of companies which have more complex global operations with commensurate employee skill sets are those types of organizations with which Murphy competes for
executive and management talent and are more appropriate for compensation benchmarking purposes. However, the Committee further determined that ConocoPhillips had grown to a size and scope of operations that far exceeded the magnitude of
Murphys operations, and that Encana Corporation was a more appropriate comparator company for inclusion within Murphys peer group. Therefore, for 2016, the Committee removed ConocoPhillips from the Murphy peer comparison and benchmarking
process and replaced ConocoPhillips with Encana Corporation in both the full TSR peer group and the compensation comparator group. In October 2016, the Committee again reviewed the composition of the peer companies and determined that the 2016
bifurcated peer group remains representative of Murphys operations. Therefore, it approved utilizing the same peer groups for 2017. The table below sets forth the 2016 historical and 2017 peer groups for Murphy.
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Company Name
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2016
Compensation
Peer
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|
2016
TSR
Peer
|
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2017
Compensation
Peer
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|
2017
TSR
Peer
|
Anadarko Petroleum Corporation
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X
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X
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X
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X
|
Apache Corporation
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X
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X
|
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X
|
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X
|
Cabot Oil & Gas Corporation
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X
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X
|
Chesapeake Energy Corporation
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X
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X
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X
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X
|
Cimarex Energy Co.
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X
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X
|
Devon Energy Corporation
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X
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X
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X
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X
|
Encana Corporation
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X
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X
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X
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X
|
EOG Resources, Inc.
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|
X
|
|
X
|
|
X
|
|
X
|
Hess Corporation
|
|
X
|
|
X
|
|
X
|
|
X
|
Marathon Oil Corporation
|
|
X
|
|
X
|
|
X
|
|
X
|
Newfield Exploration Company
|
|
|
|
X
|
|
|
|
X
|
Noble Energy, Inc.
|
|
X
|
|
X
|
|
X
|
|
X
|
Pioneer Natural Resources Corporation
|
|
X
|
|
X
|
|
X
|
|
X
|
Range Resources Corporation
|
|
|
|
X
|
|
|
|
X
|
Southwestern Energy Corporation
|
|
|
|
X
|
|
|
|
X
|
Whiting Petroleum Corporation
|
|
|
|
X
|
|
|
|
X
|
|
|
|
|
|
26
|
|
Murphy Oil Corporation
|
|
|
|
Compensation
Discussion and Analysis
(continued)
|
|
|
In addition to comparator company information, the Committee uses Mercer Human Resource Consulting Energy 27 survey
information to determine competitive market pay levels for the NEOs. The Committee also reviews a special analysis of the competitive pay levels of the Companys compensation peer group in establishing pay levels for the CEO and NEOs.
The Committee generally takes action on compensation matters, including the grant of long-term incentive awards, at its meeting held in conjunction with the February
Board meeting. The exercise price of stock options is based on the average of the high and the low market price for the Companys shares on the date of grant. At this meeting the Committee also considers adjustments to NEO base salary, annual
incentive bonus opportunities and grants of long-term incentive awards. The Committee also meets at other times during the year as necessary and, in 2016, met four times. A copy of the Committees charter can be found on the Companys
website,
http://ir.murphyoilcorp.com/phoenix.zhtml?c=61237&p=irol-govHighlights
.
GUIDING PRINCIPLES
The Committee bases its executive compensation decisions on principles designed to align the interests of executives with those of stockholders. The Committee intends
compensation to provide a direct link with the Companys objectives, business strategies and financial results. In order to motivate, attract and retain key executives who are critical to its long-term success, the Company believes that its pay
package should be competitive with others in the oil and gas industry. In addition, the Company believes that executives should be rewarded for both the short-term and long-term success of the Company and, conversely, be subject to a degree of
downside risk in the event that the Company does not achieve its performance objectives. In order to promote the long-term, as well as short-term interests of the Company, and to more closely align the interests of its key employees to those of its
stockholders, the Company uses a mix of short-term and long-term incentives in its compensation packages. Individuals in primary positions to influence the growth of stockholder wealth have larger portions of their total compensation delivered in
the form of equity-based long-term incentives. To this end, executives have a compensation package which includes a base salary, participation in a cash-based annual incentive plan, participation in an equity-based long-term incentive plan and
certain other compensation, including customary benefits as discussed in Section D of
Elements of Compensation
. In addition, the compensation package for the CEO includes limited personal use of Company aircraft. The Company believes that
this combination of base salary, short-term incentives, long-term incentives and employee benefits provides the best balance between the need for the Company
to provide executive compensation which is competitive in the marketplace and therefore necessary for recruiting and retention, and the desire to have managements interests, motivations and
prosperity aligned with the interests of the Companys stockholders.
The Company had no employment agreements with the NEOs in effect in 2016. In connection
with his appointment to President and CEO, Mr. Jenkins has a Severance Protection Agreement dated August 7, 2013. The Company had no other severance protection, change in control or termination agreements with the NEOs in effect in 2016.
Under the terms of the Companys incentive plans, in the event of a change in control, each NEO would retain his earned compensation and all outstanding equity awards held by each NEO would vest, become immediately exercisable or
payable, or have all restrictions lifted as may apply to the type of the award. Entry into employment or other agreements with the NEOs may be considered from time to time.
At the Companys Annual Meeting of stockholders held on May 11, 2016, the Companys stockholders had the opportunity to cast an advisory vote (a
say-on-pay
proposal) to approve the compensation of the NEOs, as disclosed in the Proxy Statement for the meeting. Stockholders approved the
say-on-pay
proposal by the affirmative vote of over 97% of the shares cast on that proposal. While the Committee believes this affirms stockholders support of the
Companys approach to executive compensation during 2015, and therefore did not materially change the overall approach to executive compensation in 2016, the Committee will continue to consider the outcome of the Companys
say-on-pay
votes when making future compensation decisions for the NEOs.
At the 2011 Annual
Meeting, the Companys stockholders had the opportunity to cast an advisory vote (a
say-on-frequency
proposal) on how often the Company should include a
say-on-pay
proposal in its proxy statements for future annual meetings. Stockholders had the choice of voting to have the
say-on-pay
vote every year, every two years or every three years. The frequency receiving the highest number of votes was every year. In accordance with this vote, the Board decided to hold the
say-on-pay
advisory vote every year.
The Committee generally seeks to structure executive
compensation in a tax efficient manner. The 2012 Annual Incentive Plan (the 2012 Plan), the 2017 Annual Incentive Plan (the 2017 Plan) and the 2012 Long-Term Incentive Plan (the 2012 LTI Plan) are intended to
provide performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code. The Committee has not elected to adopt a policy requiring compensation to be tax deductible to maintain flexibility in structuring
executive compensation to attract highly qualified executive talent and to further our business goals and compensation philosophy.
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
27
|
|
|
|
|
|
|
Compensation Discussion and Analysis
(continued)
|
RISK EVALUATION
In order to
monitor the risk associated with executive compensation, in October 2016, the Committee reviewed a report from Pay Governance assessing the risks arising from the Companys compensation policies and practices. The Committee agreed with the
reports findings that these risks were within the Committees ability to effectively monitor and manage and the programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a
material adverse effect on the Company.
ELEMENTS OF COMPENSATION
The Companys executive compensation program includes a base salary, participation in an annual cash-based incentive plan, long-term incentive compensation,
employee benefits and limited perquisites. The Committee believes that a majority of an executive officers total direct compensation opportunity should be performance-based. The Committee determines an executives total direct
compensation opportunity based on compensation peer company information and survey data provided by Pay Governance to ensure the program is competitive with the compensation peer group in order to attract and retain talented executives.
The elements of the Companys executive compensation program are outlined herein.
A. Base Salary
The objectives of the base salary
component of compensation include:
1)
|
to provide a fixed level of compensation to reward the executive for
day-to-day
execution of primary duties and responsibilities;
|
2)
|
to assist the Company in the attraction and retention of a highly skilled competitive leadership team by paying base salaries competitive with those paid by the Companys compensation peer group; and
|
3)
|
to provide a foundation level of compensation upon which incentive opportunities can be added to provide the motivation to deliver superior performance.
|
The Company targets the median (50
th
percentile) of competitive market pay levels for the base salary of the NEOs. The Company targets the 50th percentile because it believes that it allows the organization to recruit, attract, and retain qualified management talent having the
requisite skills and competencies to manage the Company and to deliver additional value for stockholders. In practice, some executives
are paid above or below the 50th percentile because of their individual job performance, time in the position, and/or tenure with the Company, and in some cases, potential for advancement.
Executives salaries are ultimately determined based on the market pay levels, as well as a combination of experience, duties and responsibilities, individual performance, Company performance, general economic conditions and marketplace
compensation trends. In consideration of the downturn in the oil and gas market and general economic conditions, the Committee made no adjustments to the base salaries of its Named Executive Officers in 2016 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2015
Base Salary
|
|
|
2016
Base Salary
|
|
|
Adjustment
for 2016
|
|
Roger W. Jenkins
|
|
$
|
1,300,000
|
|
|
$
|
1,300,000
|
|
|
|
0
|
%
|
John W. Eckart
|
|
$
|
515,000
|
|
|
$
|
515,000
|
|
|
|
0
|
%
|
Eugene T. Coleman
|
|
$
|
562,000
|
|
|
$
|
562,000
|
|
|
|
0
|
%
|
Walter K. Compton
|
|
$
|
541,000
|
|
|
$
|
541,000
|
|
|
|
0
|
%
|
Michael K. McFadyen*
|
|
$
|
422,289
|
|
|
$
|
422,289
|
|
|
|
0
|
%
|
*
|
Mr. McFadyen is paid in Canadian dollars. His base salary is C$566,938 and he received no increase in 2016. The currency conversation factor utilized throughout this compensation discussion and analysis is 0.74486
Canadian dollars to one U.S. dollar.
|
B. Annual Incentive Plan
The objectives of the Companys annual incentive program are:
1)
|
to provide cash-based incentive compensation linked to Company performance to those officers, executives, and key employees who contribute significantly to the growth and success of the Company;
|
2)
|
to attract and retain individuals of outstanding ability;
|
3)
|
to align the interests of those who hold positions of major responsibility in the Company with the interests of the Companys stockholders; and
|
4)
|
to promote excellent operational performance by rewarding executives when they achieve it.
|
The Committee targets the 50
th
percentile (median) of competitive market pay levels for its annual target incentive compensation because the Committee believes
it allows the Company to motivate its executives. Executives have the opportunity to be compensated above the median of market pay levels when the Company has above market performance based on established performance measures. In February 2016, the
Committee reviewed an analysis of the top executives prepared by Pay Governance. For 2016, the target bonus percentages of the Companys NEOs were at the median of the competitive market and no adjustments were made.
|
|
|
|
|
28
|
|
Murphy Oil Corporation
|
|
|
|
Compensation
Discussion and Analysis
(continued)
|
|
|
The Companys current cash-based annual incentive plans, the 2012 Plan, was approved by stockholders at the 2012 annual meeting. Amounts earned under the 2012 Plan
are intended to qualify as
tax-deductible
performance-based compensation under Section 162(m) of the Internal Revenue Code (the Code). The 2012 Plan provides the Committee with a
list of performance criteria to be used for determination of performance-based awards. The Company submitted to shareholders in its 2016 proxy a request for approval of the 2017 Annual Incentive plan so that the Companys annual plan will
continue to be considered a performance plan pursuant to Section 162(m). Shareholders approved the 2017 plan as submitted at the 2016 Annual Meeting of Stockholders.
For 2016, the performance criteria utilized by the Committee included a mixture of a safety performance metric, an environmental performance metric, financial metrics,
and operating metrics designed to work across the Company.
|
|
|
2016 Performance Criteria
|
Safety: Total Recordable Incident Rate (TRIR)
|
|
The Companys TRIR is calculated as the number of incidents for both contractors and employees worldwide per 200,000 work hours. The health and safety of the Companys employees
and contractors is important to the Company. Inclusion of a safety metric reflects the Companys emphasis on safe operations by both employees and contractors.
|
Environmental: Spill Rate
|
|
The Companys global spill rate is calculated as number of spills equal to or greater than one barrel per million BOEs
(1)
produced. Inclusion of a spill metric reflects the Companys commitment to environmentally sound operations.
|
Financial:
EBITDA/BOE
(1)
Lease Operating Expense
(LOE/BOE
(1)
)
|
|
These financial goals focus on financial discipline and encourage employees to manage costs relative to gross margins and the commodity price environment.
|
Operational:
Reserves
Replacement
Production (BOEPD)
(2)
|
|
The primary business objectives for an exploration and production company are to find oil and gas reserves at a competitive cost while generating economic value for its stockholders and
assuring that reserves are prudently converted into production and ultimately cash flow. Including specific operational goals on reserves additions (excluding acquisitions and divestitures) and production volumes provides a direct line of sight for
the Companys employees of their impact in the Companys operational success.
|
(1)
|
A barrel of oil equivalent (BOE) is a term used to summarize the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. One barrel of oil is generally deemed to have the same amount
of energy content as 6,000 cubic feet of natural gas.
|
(2)
|
Barrels of oil equivalent per day (BOEPD) is a term that is used in conjunction with the production or distribution of oil and natural gas.
|
With respect to the NEOs, the following table summarizes the performance metrics, respective weighting of performance metrics and weighted performance scores based on
actual performance, used in determining their respective annual incentive awards for 2016. The targets for performance metrics were primarily based on historical data, budgets and forecasts. Under the terms of the 2012 Plan, achievement of 100% of
the target rate results in the payment of 100% of individual target awards. For NEOs, achievement of the minimum of the performance range results in the payment of 62.5% of individual target awards and achievement of the maximum results in the
payment of 250% of individual target awards, in each case subject to a discretionary downward adjustment by the Committee of up to 100%. Upward adjustments are not permitted for NEOs and no awards are payable if performance falls below the minimum.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 AIP Metrics and Results
|
|
Metric
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Actual
Results
|
|
|
Payout
Achieved
(%)
|
|
|
Weighting
|
|
|
Result
|
|
Total Recordable Incident Rate
|
|
|
0.50
|
|
|
|
0.38
|
|
|
|
0.00
|
|
|
|
0.19
|
|
|
|
187.50
|
%
|
|
|
7.50
|
%
|
|
|
14.06%
|
|
Spill Rate
|
|
|
0.26
|
|
|
|
0.19
|
|
|
|
0.00
|
|
|
|
0.09
|
|
|
|
190.79
|
%
|
|
|
7.50
|
%
|
|
|
14.31%
|
|
EBITDA/BOE
|
|
$
|
9.12
|
|
|
$
|
9.60
|
|
|
$
|
10.56
|
|
|
$
|
12.59
|
|
|
|
250.00
|
%
|
|
|
15.00
|
%
|
|
|
37.50%
|
|
LOE/BOE
|
|
$
|
10.05
|
|
|
$
|
9.57
|
|
|
$
|
8.61
|
|
|
$
|
7.87
|
|
|
|
250.00
|
%
|
|
|
15.00
|
%
|
|
|
37.50%
|
|
Reserves Replacement
|
|
|
90.00
|
%
|
|
|
100.00
|
%
|
|
|
140.00
|
%
|
|
|
68.00
|
%
|
|
|
0
|
%
|
|
|
25.00
|
%
|
|
|
0.00%
|
|
Production (BOEPD)
|
|
|
165,034
|
|
|
|
183,371
|
|
|
|
220,045
|
|
|
|
181,312
|
|
|
|
117.98
|
%
|
|
|
30.00
|
%
|
|
|
35.39%
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138.76%
|
|
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
29
|
|
|
|
|
|
|
Compensation Discussion and Analysis
(continued)
|
Negative discretion in the amount of 16% to 20% was applied to each NEOs earned award, resulting in the actual payouts set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2016 Base
Salary
Earnings
|
|
|
Target Bonus as
a Percentage of
Base Salary
Earnings*
|
|
|
Earned
Award (at
% of
Target)
|
|
|
Negative
Discretion
Applied
|
|
|
Actual
Amount
Awarded
|
|
Roger W. Jenkins
|
|
$
|
1,300,013
|
|
|
|
135
|
%
|
|
$
|
2,435,262
|
|
|
|
19.93
|
%
|
|
$
|
1,950,000
|
|
John W. Eckart
|
|
$
|
515,011
|
|
|
|
85
|
%
|
|
$
|
607,434
|
|
|
|
19.99
|
%
|
|
$
|
486,000
|
|
Eugene T. Coleman
|
|
$
|
562,011
|
|
|
|
75
|
%
|
|
$
|
584,885
|
|
|
|
15.88
|
%
|
|
$
|
492,000
|
|
Walter K. Compton
|
|
$
|
541,006
|
|
|
|
65
|
%
|
|
$
|
487,955
|
|
|
|
19.87
|
%
|
|
$
|
391,000
|
|
Michael K. McFadyen*
|
|
$
|
422,289
|
|
|
|
75
|
%
|
|
$
|
439,476
|
|
|
|
15.93
|
%
|
|
$
|
369,451
|
|
*
|
Mr. McFadyen is paid in Canadian dollars. His base salary earnings for 2016 were C$566,938. His earned award was C$590,012. Negative discretion in the amount of 15.93% was applied. The actual amount awarded to
Mr. McFadyen was C$496,000.
|
C. Long-term Incentive Compensation
The objectives of the Companys long-term incentive program include:
1)
|
to align executives interests with the interests of stockholders;
|
2)
|
to reinforce the critical objective of building stockholder value over the long term;
|
3)
|
to assist in the long-term attraction, motivation, and retention of an outstanding management team;
|
4)
|
to complement the short-term performance metrics of the 2012 Plan and the 2017 Plan; and
|
5)
|
to focus management attention upon the execution of the long-term business strategy of the Company.
|
Long-term incentive
NEO compensation for 2016 included the grant of fixed-price stock options, time-based restricted stock units and performance-based restricted stock units under the Companys 2012 LTI Plan. Stock options are designed to align the interests of
executives with the performance of the Company over the long term. The exercise or grant price of fixed-priced stock options equals the average of the high and the low of the Companys common stock on the date of the grant. Fixed-price stock
options are inherently performance-based because option holders realize no economic benefit
unless the Companys stock price increases in value subsequent to the grant date. This aligns the optionees interests with that of stockholders. The vesting of performance-based
restricted stock units is based upon the Companys TSR relative to that of the TSR peer group (as described above).
On February 2, 2016, the Committee
granted equity awards pursuant to the 2012 LTI Plan to each of the NEOs at that time. The value was split 50% in performance-based restricted stock units, 25% in stock options and 25% in time-based restricted stock units on an expected value basis.
The Committee believes these awards are effective and appropriate methods of equity compensation. Stock options are particularly effective at aligning the interests of management and stockholders, but results can be skewed by movements in the stock
market as a whole. Conversely, performance unit awards value is largely based on the Companys performance relative to that of its peers, but does not necessarily equate with shareholder return.
On April 6, 2016, the Committee granted time-based restricted stock units to Mr. Coleman and Mr. McFadyen as a retention tool pursuant to the 2012 LTI Plan
which will vest on April 6, 2021, and pay out as soon as practicable thereafter. They will be forfeited if the individual resigns or is terminated for cause prior to this date.
|
|
|
|
|
30
|
|
Murphy Oil Corporation
|
|
|
|
Compensation
Discussion and Analysis
(continued)
|
|
|
The Company generally targets the median of competitive market pay levels for the annual grant value of long-term incentive
compensation. When determining the size of the equity-based awards to the executives and the total number of shares available for equity-based award grants for all management employees for the fiscal year, the Committee considers survey data
provided by the Committees compensation consultant, overall Company performance, internal equity, and individual performance, as well as the proportion of the total shares outstanding used for annual equity-based award grants and the potential
dilution to the Companys stockholders. In 2016, due to the continued low commodity prices, the Company made long-term incentive grants to the NEOs at the same number of equity-based
awards grants as made in 2015, equating to approximately 36% of the value of each individuals long-term incentive target guideline. To maintain parity with the other operational EVP,
Mr. McFadyens 2016 long-term incentive grants equaled approximately 47% of his 2015 equity-based grants due to the exchange rate disparity between the U.S. and Canadian dollar. These guidelines, provided by the Committees
independent consultant from the Mercer Human Resource Consulting Energy 27 Survey, were constructed around the 50th percentile (median) competitive data. Total grants to all 2012 LTI Plan participants made in 2016 equaled 0.95% of the Companys
outstanding shares. NEO grants were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Number of
Stock Options
|
|
|
Number of
Time-Based
Restricted
Stock Units
|
|
|
Number of
Performance-
Based Restricted
Stock Units
|
|
Roger W. Jenkins
|
|
|
220,000
|
|
|
|
51,000
|
|
|
|
101,000
|
|
John W. Eckart
|
|
|
41,000
|
|
|
|
9,000
|
|
|
|
19,000
|
|
Eugene T. Coleman
|
|
|
57,000
|
|
|
|
38,000
|
|
|
|
26,000
|
|
Walter K. Compton
|
|
|
43,000
|
|
|
|
10,000
|
|
|
|
20,000
|
|
Michael K. McFadyen
|
|
|
57,000
|
|
|
|
38,000
|
|
|
|
26,000
|
|
The Company has never engaged in the process of backdating stock options and does not intend to do so in the future. The
exercise price for all stock options is equal to the fair market value (average of daily high and low) on the date of the grant.
The Companys stock option
awards granted from 2006 onward provide for payment of the aggregate exercise price to be automatically net settled in stock, which reduces dilution. Thus upon exercise, shares having an aggregate fair market value equal to both the exercise price
and the amount of statutory minimum withholding taxes are withheld by the Company, and only net shares are delivered to the holder of the option. The Companys stock options, all of which are
non-qualified,
vest in two equal installments on the second and third anniversaries of the grant date, and unless otherwise forfeited or exercised, expire seven years from the date of the grant.
Time-based restricted stock units awarded in February 2016 vest on the third anniversary of the grant date. Dividend equivalents are accumulated during the performance
period and pay out only if the underlying units vest and are earned. Holders of time-based restricted stock units do not have any voting rights.
Performance-based
restricted stock units awarded in 2016 will be eligible to vest in three years based on how the Companys TSR compares to the TSR of an index of the comparator group of energy companies (identified above).
The 2016 performance unit awards contain four equally weighted measurement periods: year 1; year 2; year 3; and years
1-3
combined. Achievement of the 50th
percentile TSR of the TSR peer group is required for vesting and payment of 100% of the target performance-based restricted stock units awarded, achievement of the 90th percentile TSR of the TSR peer group is required for vesting and payment of 150%
of the target performance-based restricted stock units awarded, and achievement of the 25th percentile TSR of the TSR peer group is required for the vesting and payment of 50% of the target performance-based restricted stock units awarded. A
prorated percentage of performance-based restricted stock units can vest and be paid for performance between the 25th and 90th TSR percentiles. No payment is made for achievement below the 25th percentile TSR of the TSR peer group. Dividend
equivalents are accumulated during the performance period and pay out only to the extent that the underlying units vest and are earned. Holders of performance-based restricted stock units do not have any voting rights.
Fixed-price stock options and performance-based restricted stock units granted under the 2012 LTI Plan are intended to qualify as
tax-deductible
performance-based compensation under Section 162(m) of the Code. Time-based restricted stock units, which are time-based awards, do not quality as performance-based compensation
pursuant to Section 162(m). As noted above, the Committee currently uses three principal forms of long-term incentive compensation: fixed-price stock options, time-based restricted
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
31
|
|
|
|
|
|
|
Compensation Discussion and Analysis
(continued)
|
stock units and performance-based restricted stock units. While the Committee expects to continue to use these same three principal forms of equity-based incentives going forward, it is possible
that the Committee may adopt a different long-term incentive compensation strategy in future years in response to changes in the competitive marketplace, regulatory actions, and/or changes to business strategy. In order to provide for flexibility
going forward, the 2012 LTI Plan provides possible alternative long-term equity incentive vehicles in addition to stock options and restricted stock units, including stock appreciation rights, performance shares, phantom units, dividend equivalents,
and other stock-based incentives. The 2012 LTI Plan includes a list of other performance criteria that could be used for determination of performance-based awards.
During 2016, the Company granted 811,500 shares as Full Value Awards. As of December 31, 2016, the number of shares available for future grants of Full Value Awards
under the 2012 LTI Plan was 2,209,556.
D. Employee Benefits and Perquisites
The objectives of the Companys employee benefits and perquisites program are:
1)
|
to provide an employee benefit package with the same level of benefits provided to all Company employees which is competitive within the Companys industry sector;
|
2)
|
to offer executives indirect compensation which is efficient and supplemental to their direct compensation to assist with retirement, health, and welfare needs for individuals and their families; and
|
3)
|
to provide only limited benefits to selected executives as deemed appropriate under the circumstances.
|
The Companys
executives are provided usual and customary employee benefits available to all employees. These include thrift savings (401(k)), life insurance, accidental death and dismemberment insurance, medical/dental insurance, vision insurance, long-term
disability insurance, and a Company-sponsored pension plan. Effective with the
spin-off
of
Murphys former U.S. retail marketing operation, Murphy USA Inc. (MUSA) on August 30, 2013, significant modifications were made to the U.S. defined benefit pension plan. Certain Company
employees benefits under the U.S. plan were frozen at that time. No further benefit service will accrue for the affected employees; however, the plan will recognize future earnings after the
spin-off.
In
addition, all previously unvested benefits became fully vested at the
spin-off
date. For those affected active employees of the Company, additional U.S. retirement plan benefits will accrue in future periods
under a cash balance formula. The NEOs are excluded from the Companys Employee Stock Purchase Plan (the ESPP) because they are eligible for long-term stock incentives and the ESPP was established as a vehicle for employees to
acquire stock.
Tax regulations adversely affect certain highly compensated employees by restricting their full participation in qualified pension and defined
contribution (thrift) plans. In an effort to provide the same level of retirement benefit opportunity for all employees, the Company maintains a Supplemental Executive Retirement Plan (the SERP). The purpose of the SERP is to restore
pension plan and thrift plan benefits which are not payable under such plans because of certain specified benefit and compensation limitations under tax regulations. The benefit to the Company of this arrangement is the retention and long-term
service of employees who are otherwise unprotected by employment contracts. The SERP is unfunded and is subject to general credit of the Company. Other than the SERP, the Company does not offer a deferred compensation alternative to the NEOs. The
Committee also provides to Mr. Jenkins a maximum of 50 flight hours each year in the continental United States on Company aircraft as part of his total compensation package. Mr. Jenkins utilized 48.2 hours out of the 50 approved hours with
an aggregate incremental cost to the Company of $154,745, as reported in the 2016 Summary Compensation Table. The Standard Industry Fare Level rate was used to determine the income reportable to Mr. Jenkins for these trips, and the Company has
not provided any tax
gross-up
or other tax assistance with respect to the income recognized for use of the Company aircraft.
|
|
|
|
|
32
|
|
Murphy Oil Corporation
|
|
|
|
Compensation
Discussion and Analysis
(continued)
|
|
|
ACTIONS RELATED TO 2017 COMPENSATION
At its
meeting on January 31, 2017, the Committee met to discuss executive compensation issues reflecting the Companys 2016 performance results and executive pay matters for fiscal year 2017. The Committee reviewed and analyzed the Murphy
executive compensation program as well as considered the past years performance and proper positioning of compensation opportunities for fiscal year 2017. Key decisions and actions related to 2017 executive compensation reached by the
Committee include:
Modest Adjustments to Base Salaries
For fiscal
year 2017, the Committee approved minimal adjustments to base salary for four of the five NEOs effective as of February 1, 2017. Messrs. Coleman and McFayden each received 2.5% base salary increases for 2017; Mr. Compton received a 3.0%
increase for 2017; and Mr. Eckart received a 10.0% increase for 2017. Mr. Eckarts salary increase included a market-based adjustment to bring his salary rate closer to the 50
th
percentile market benchmark for the CFO position. The base salary for Mr. Jenkins was not increased.
Exercise Negative Discretion with Respect to 2016 Annual Incentives
The
Committee exercised its negative discretion in adjusting annual cash payments under the AIP for NEOs for 2016 bonuses, which were payable in the first quarter of 2017. These downward adjustments included an
across-the-board
cut by 16% to 20% for all earned awards to the NEOs bringing NEO payouts to a level commensurate with those of other plan participants, even though the Company met or exceeded four of the six
2016 operational, safety, and strategic performance goals. In aggregate, the Company paid total bonus awards for 2016 performance for all employees, including the NEOs and other AIP participants, equal to approximately $27,700,000.
Granted 2017 Long-Term Incentives at 50
th
Percentile
Target Levels
The Committee deliberated regarding the subject of long-term incentive compensation to be granted to the Company NEOs in 2017. Based
upon an analysis of competitive market data, the recent grant practices of Murphys peer companies in the most recent market environment, and the performance of the Companys top management during 2016, the Committee awarded long-term
incentive grants equal to approximately 84% of the target award opportunities for each NEO based upon the 50
th
percentile
(median) competitive market practice and the reduction of the number of stock options calculated to remain compliant under the 2012 Plan. Long-term incentive grants for each NEO were awarded 50% in the value of performance-based restricted stock
units, 25% in the value of
7-year
fixed-price stock options, and 25% in the value of time-lapse restricted stock units. It is the judgment of the Committee that these long-term grants are fully competitive
with current market competitive practices while serving as the proper alignment of managements long-term interests with Murphy shareholder interests.
Target versus Realizable Compensation ChartCEO Compensation
The
Target bars represent Mr. Jenkins base salary, target AIP opportunity and the grant-date fair value of his LTIP awards for 2014, 2015 and 2016. The Realizable bars represent each years base salary paid, AIP
earned and paid, and the value of those LTIP awards as of December 31, 2016.
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
33
|
|
|
|
|
|
|
Compensation Discussion and Analysis
(continued)
|
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee has reviewed and discussed with management the foregoing Compensation Discussion and Analysis.
Based on the review and discussions, the Executive Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys Proxy Statement.
EXECUTIVE COMPENSATION COMMITTEE
Neal E. Schmale (Chair)
T. Jay Collins
Walentin Mirosh
Jeffrey W. Nolan
|
|
|
|
|
34
|
|
Murphy Oil Corporation
|
|
|
|
Executive Compensation
|
|
|
Tabular Information for Named Executive Officers
Further information with respect to the individuals who served as the Companys Principal Executive Officer, Principal Financial Officer and the three other most
highly compensated executive officers serving at the end of the last completed fiscal year is set forth in the following tables:
2016 SUMMARY COMPENSATION TABLE
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|
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|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(3)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
(4)
|
|
|
Total
($)
|
|
Roger W. Jenkins
|
|
|
2016
|
|
|
|
1,300,013
|
|
|
|
|
|
|
|
2,410,310
|
|
|
|
1,106,600
|
|
|
|
1,950,000
|
|
|
|
1,501,179
|
|
|
|
233,645
|
|
|
|
8,501,747
|
|
President and Chief
Executive Officer
|
|
|
2015
|
|
|
|
1,300,000
|
|
|
|
|
|
|
|
7,192,723
|
|
|
|
2,413,400
|
|
|
|
1,237,714
|
|
|
|
1,742,060
|
|
|
|
197,720
|
|
|
|
14,083,617
|
|
|
|
2014
|
|
|
|
1,295,833
|
|
|
|
|
|
|
|
5,284,440
|
|
|
|
1,540,800
|
|
|
|
2,200,000
|
|
|
|
2,204,998
|
|
|
|
252,497
|
|
|
|
12,778,568
|
|
|
|
|
|
|
|
|
|
|
|
John W.
Eckart
(5)
|
|
|
2016
|
|
|
|
515,011
|
|
|
|
|
|
|
|
442,990
|
|
|
|
206,230
|
|
|
|
486,000
|
|
|
|
547,018
|
|
|
|
31,800
|
|
|
|
2,229,049
|
|
Executive Vice
President and Chief
Financial Officer
|
|
|
2015
|
|
|
|
506,333
|
|
|
|
|
|
|
|
1,323,437
|
|
|
|
449,770
|
|
|
|
289,922
|
|
|
|
52,062
|
|
|
|
31,280
|
|
|
|
2,652,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene T.
Coleman
(6)
|
|
|
2016
|
|
|
|
562,011
|
|
|
|
|
|
|
|
1,220,090
|
|
|
|
286,710
|
|
|
|
492,000
|
|
|
|
381,326
|
|
|
|
34,620
|
|
|
|
2,976,757
|
|
Executive Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter K. Compton
|
|
|
2016
|
|
|
|
541,006
|
|
|
|
|
|
|
|
475,550
|
|
|
|
216,290
|
|
|
|
391,000
|
|
|
|
508,648
|
|
|
|
33,360
|
|
|
|
2,165,854
|
|
Executive Vice
President and
General
Counsel
|
|
|
2015
|
|
|
|
541,000
|
|
|
|
|
|
|
|
1,419,360
|
|
|
|
471,710
|
|
|
|
248,001
|
|
|
|
(25,556
|
)
|
|
|
33,360
|
|
|
|
2,687,875
|
|
|
|
2014
|
|
|
|
538,108
|
|
|
|
|
|
|
|
1,027,530
|
|
|
|
295,320
|
|
|
|
405,199
|
|
|
|
1,401,045
|
|
|
|
33,421
|
|
|
|
3,700,623
|
|
|
|
|
|
|
|
|
|
|
|
Michael K.
McFadyen
(6)(7)
|
|
|
2016
|
|
|
|
422,289
|
|
|
|
100,000
|
|
|
|
1,220,090
|
|
|
|
286,710
|
|
|
|
369,451
|
|
|
|
318,445
|
|
|
|
26,354
|
|
|
|
2,743,339
|
|
Executive Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The restricted stock unit awards are shown at grant date fair value as computed in accordance with FASB ASC Topic 718, excluding forfeiture estimates, as more fully described in Note J to the consolidated financial
statements included in the 2016 Form
10-K
report. Performance-based restricted stock unit awards are subject to performance-based conditions and are forfeited if the grantees employment terminates for
any reason other than retirement, death or full disability. The performance-based restricted stock unit awards vest three years from the date of grant if performance conditions are met. Time-based restricted stock unit awards vest three years from
the date of grant and are forfeited if the grantees employment terminates for any reason other than retirement, death or full disability. There is no assurance that the value realized by the executive will be at or near the value included
herein.
|
(2)
|
The stock option awards are shown at grant date fair value as computed in accordance with FASB ASC Topic 718, excluding forfeiture estimates, as more fully described in Note J to the consolidated financial statements
included in the 2016 Form
10-K
report. Options granted generally vest in two equal installments on the second and third anniversaries of the grant date. The options are exercisable for a period of seven years
from the date of grant. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. There is no assurance that the value realized by the executive will
be at or near the value included herein.
|
(3)
|
Non-Equity
Incentives were awarded and paid after the end of the year in which they are reported. Because these payments related to services rendered in the year prior to payment,
the Company reported these incentives as a component of compensation expense in the year for which the award was earned.
|
(4)
|
The total amounts shown in this column for 2016 consist of the following:
|
|
Mr. Jenkins $78,000Company contributions to defined contribution plans; $900benefit attributable to Company-provided term life insurance policy;
|
|
$154,745Company airplane usage based on aggregate incremental cost to the Company. The aggregate incremental cost to the Company for airplane usage is calculated by multiplying, for each trip, the statutory miles
for each trip times the
12-month
average direct cost per statutory mile for the airplane used. The direct costs utilized in the calculation include: travel expenses for the aviation crew, communications
expenses, landing fees, fuel and lubrication, contract maintenance and repairs, and the provision allocated for the overhaul of the engines.
|
|
Mr. Eckart: $30,900Company contributions to defined contribution plans; $900Benefit attributable to Company-provided term life insurance policy.
|
|
Mr. Coleman: $33,720Company contributions to defined contribution plans; $900Benefit attributable to Company-provided term life insurance policy.
|
|
Mr. Compton: $32,460Company contributions to defined contribution plans; $900Benefit attributable to Company-provided term life insurance policy.
|
|
Mr. McFadyen: $25,337Company contributions to defined contribution plans; $1,017Benefit attributable to Company-provided term life insurance policy (Mr. McFadyens benefits are a Canadian
Dollar benefit converted to US Dollar).
|
(5)
|
Mr. Eckart was not a Named Executive officer in 2014.
|
(6)
|
Mr. Coleman and Mr. McFadyen were not Named Executive Officers in 2014 and 2015.
|
(7)
|
The currency conversation factor for the Canadian dollar utilized in this table for Mr. McFadyens salary,
non-equity
incentive plan compensation is 0.74486 Canadian
dollars to one U.S. dollar.
|
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
35
|
|
|
|
|
|
|
Executive Compensation
(continued)
|
2016 GRANTS OF PLAN-BASED AWARDS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
|
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/Sh)
(1)
|
|
|
Closing
Price on
Grant Date
($/Sh)
|
|
|
Grant Date
Fair Value
of Stock
and Option
Awards
($)
(2)
|
|
|
Grant Date
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
|
Roger W.
|
|
|
|
|
|
|
1,096,886
|
|
|
|
1,755,017
|
|
|
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jenkins
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,500
|
|
|
|
101,000
|
|
|
|
151,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,514,495
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895,815
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,000
|
|
|
|
17.565
|
|
|
|
17.430
|
|
|
|
1,106,600
|
|
John W.
|
|
|
|
|
|
|
273,599
|
|
|
|
437,759
|
|
|
|
1,094,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eckart
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
|
|
19,000
|
|
|
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284,905
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,085
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,000
|
|
|
|
17.565
|
|
|
|
17.430
|
|
|
|
206,230
|
|
Eugene T.
|
|
|
|
|
|
|
263,443
|
|
|
|
421,508
|
|
|
|
1,053,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coleman
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
26,000
|
|
|
|
39,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389,870
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,345
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
17.565
|
|
|
|
17.430
|
|
|
|
286,710
|
|
|
|
|
4/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601,875
|
|
Walter K.
|
|
|
|
|
|
|
219,784
|
|
|
|
351,654
|
|
|
|
879,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compton
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
299,900
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,650
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,000
|
|
|
|
17.565
|
|
|
|
17.430
|
|
|
|
216,290
|
|
Michael K.
|
|
|
|
|
|
|
201,972
|
|
|
|
323,155
|
|
|
|
807,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McFadyen
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
26,000
|
|
|
|
39,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389,870
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,345
|
|
|
|
|
2/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
17.565
|
|
|
|
17.430
|
|
|
|
286,710
|
|
|
|
|
4/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601,875
|
|
(1)
|
The exercise price of options is determined using the average of the high and low of the stock price on the date of grant.
|
(2)
|
The grant date fair value of the Companys performance-based restricted stock units is determined using a Monte-Carlo valuation model, as further described in Note J to the consolidated financial statements
included in the Form
10-K
report.
|
|
|
|
|
|
36
|
|
Murphy Oil Corporation
|
|
|
|
Executive
Compensation
(continued)
|
|
|
2016 OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
|
Number of Securities
Underlying Unexercised
Exercisable Options
(#)
(1)
|
|
|
Number of Securities
Underlying Unexercised
Unexercisable Options
(#)
(1)
|
|
|
Option
Exercise Price
($)
|
|
|
Option
Expiration
Date
|
|
Roger W. Jenkins
|
|
|
71,955
|
|
|
|
|
|
|
|
58.8392
|
|
|
|
2/1/2018
|
|
|
|
|
71,955
|
|
|
|
|
|
|
|
51.6305
|
|
|
|
1/31/2019
|
|
|
|
|
55,350
|
|
|
|
|
|
|
|
39.0244
|
|
|
|
6/20/2019
|
|
|
|
|
129,519
|
|
|
|
|
|
|
|
54.2141
|
|
|
|
2/5/2020
|
|
|
|
|
96,785
|
|
|
|
|
|
|
|
62.9765
|
|
|
|
8/7/2020
|
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
55.8200
|
|
|
|
2/4/2021
|
|
|
|
|
|
|
|
|
220,000
|
|
|
|
49.6500
|
|
|
|
2/3/2022
|
|
|
|
|
|
|
|
|
220,000
|
|
|
|
17.5650
|
|
|
|
2/2/2023
|
|
John W. Eckart
|
|
|
27,675
|
|
|
|
|
|
|
|
45.4788
|
|
|
|
2/2/2017
|
|
|
|
|
30,443
|
|
|
|
|
|
|
|
58.8392
|
|
|
|
2/1/2018
|
|
|
|
|
38,745
|
|
|
|
|
|
|
|
51.6305
|
|
|
|
1/31/2019
|
|
|
|
|
43,394
|
|
|
|
|
|
|
|
54.2141
|
|
|
|
2/5/2020
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
55.8200
|
|
|
|
2/4/2021
|
|
|
|
|
|
|
|
|
41,000
|
|
|
|
49.6500
|
|
|
|
2/3/2022
|
|
|
|
|
|
|
|
|
41,000
|
|
|
|
17.5650
|
|
|
|
2/2/2023
|
|
Eugene T. Coleman
|
|
|
38,745
|
|
|
|
|
|
|
|
58.8392
|
|
|
|
2/1/2018
|
|
|
|
|
44,280
|
|
|
|
|
|
|
|
51.6305
|
|
|
|
1/31/2019
|
|
|
|
|
62,546
|
|
|
|
|
|
|
|
54.2141
|
|
|
|
2/5/2020
|
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
55.8200
|
|
|
|
2/4/2021
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
49.6500
|
|
|
|
2/3/2022
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
17.5650
|
|
|
|
2/2/2023
|
|
Walter K. Compton
|
|
|
22,140
|
|
|
|
|
|
|
|
45.4788
|
|
|
|
2/2/2017
|
|
|
|
|
27,675
|
|
|
|
|
|
|
|
58.8392
|
|
|
|
2/1/2018
|
|
|
|
|
33,210
|
|
|
|
|
|
|
|
51.6305
|
|
|
|
1/31/2019
|
|
|
|
|
47,048
|
|
|
|
|
|
|
|
54.2141
|
|
|
|
2/5/2020
|
|
|
|
|
11,500
|
|
|
|
11,500
|
|
|
|
55.8200
|
|
|
|
2/4/2021
|
|
|
|
|
|
|
|
|
43,000
|
|
|
|
49.6500
|
|
|
|
2/3/2022
|
|
|
|
|
|
|
|
|
43,000
|
|
|
|
17.5650
|
|
|
|
2/2/2023
|
|
Michael K. McFadyen
|
|
|
11,070
|
|
|
|
|
|
|
|
45.4788
|
|
|
|
2/2/2017
|
|
|
|
|
27,675
|
|
|
|
|
|
|
|
58.8392
|
|
|
|
2/1/2018
|
|
|
|
|
44,280
|
|
|
|
|
|
|
|
51.6305
|
|
|
|
1/31/2019
|
|
|
|
|
62,546
|
|
|
|
|
|
|
|
54.2141
|
|
|
|
2/5/2020
|
|
|
|
|
11,500
|
|
|
|
11,500
|
|
|
|
55.8200
|
|
|
|
2/4/2021
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
49.6500
|
|
|
|
2/3/2022
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
17.5650
|
|
|
|
2/2/2023
|
|
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
37
|
|
|
|
|
|
|
Executive Compensation
(continued)
|
2016 OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
TABLE (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
or Units of
Stocks That Have
Not
Vested
(#)
(2)
|
|
|
Market Value
of Shares or
Units of Stocks
That Have
Not Vested
($)
(3)(4)(5)
|
|
|
Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units
or Other Rights
That Have
Not Vested
(#)
(2)
|
|
|
Equity Incentive
Plan
Awards:
Market or Payout
Value of Unearned
Shares Units or
Other Rights
That
Have Not Vested
($)
(3)(4)(5)
|
|
Roger W. Jenkins
|
|
|
126,022
|
|
|
|
3,923,067
|
|
|
|
272,890
|
|
|
|
8,495,077
|
|
John W. Eckart
|
|
|
23,076
|
|
|
|
718,368
|
|
|
|
50,632
|
|
|
|
1,576,184
|
|
Eugene T. Coleman
|
|
|
36,500
|
|
|
|
1,136,231
|
|
|
|
93,872
|
|
|
|
2,922,243
|
|
Walter K. Compton
|
|
|
24,851
|
|
|
|
773,596
|
|
|
|
53,920
|
|
|
|
1,678,520
|
|
Michael K. McFadyen
|
|
|
34,670
|
|
|
|
1,079,266
|
|
|
|
90,928
|
|
|
|
2,830,593
|
|
(1)
|
Stock options are 50% vested after two years and 100% after three years.
|
(2)
|
Includes accrued
in-kind
dividend equivalents on performance-based restricted stock units.
|
(3)
|
Performance-based restricted stock units vest if the Company achieves specific performance objectives at the end of the three-year performance period.
|
(4)
|
Generally, time-based restricted stock units vest on the third anniversary of the date of grant.
|
(5)
|
Value was determined based on a December 31, 2016 closing stock price of $31.13 per share.
|
2016 OPTION
EXERCISES AND STOCK VESTED TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
(1)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized
on Vesting
($)
(2)
|
|
Roger W. Jenkins
|
|
|
|
|
|
|
|
|
|
|
52,989
|
|
|
|
1,649,548
|
|
John W. Eckart
|
|
|
|
|
|
|
|
|
|
|
8,146
|
|
|
|
253,585
|
|
Eugene T. Coleman
|
|
|
|
|
|
|
|
|
|
|
14,586
|
|
|
|
454,062
|
|
Walter K. Compton
|
|
|
|
|
|
|
|
|
|
|
13,175
|
|
|
|
410,138
|
|
Michael K. McFadyen
|
|
|
|
|
|
|
|
|
|
|
10,473
|
|
|
|
326,024
|
|
(1)
|
The value shown reflects the difference between the market price on the date of exercise and the exercise price of the option.
|
(2)
|
Value based on 2014 performance-based and time-based restricted stock unit award vesting date as of December 31, 2016, at $31.13 per share. Payment of the performance-based net shares was settled on
January 31, 2017, pursuant to the terms of the award. The price on award date was $28.505 per share (average high and low price). Payment of the time-based net shares was settled on February 3, 2017, pursuant to the terms of the award. The
price on award date was $29.485 per share (average high and low price). Combined values as of the dates of receipt were as follows: Mr. Jenkins$1,530,618, Mr. Eckart$235,082, Mr. Coleman$420,670,
Mr. Compton$380,526 and Mr. McFadyen$302,518.
|
|
|
|
|
|
38
|
|
Murphy Oil Corporation
|
|
|
|
Executive
Compensation
(continued)
|
|
|
2016 PENSION BENEFITS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)
|
|
|
Present Value
of Accumulated
Benefit
($)
|
|
|
Payments
During Last
Fiscal Year
($)
|
|
Roger W. Jenkins
|
|
Retirement Plan of Murphy Oil Corporation
|
|
|
15.210
|
|
|
|
605,117
|
|
|
|
|
|
|
|
Murphy Oil Corporation Supplemental Executive Retirement Plan
|
|
|
15.210
|
|
|
|
7,199,420
|
|
|
|
|
|
John W. Eckart
|
|
Retirement Plan of Murphy Oil Corporation
|
|
|
26.250
|
|
|
|
1,187,302
|
|
|
|
|
|
|
|
Murphy Oil Corporation Supplemental Executive Retirement Plan
|
|
|
26.250
|
|
|
|
2,971,596
|
|
|
|
|
|
Eugene T. Coleman
|
|
Retirement Plan of Murphy Oil Corporation
|
|
|
15.167
|
|
|
|
681,192
|
|
|
|
|
|
|
|
Murphy Oil Corporation Supplemental Executive Retirement Plan
|
|
|
15.167
|
|
|
|
2,253,226
|
|
|
|
|
|
Walter K. Compton
|
|
Retirement Plan of Murphy Oil Corporation
|
|
|
29.000
|
|
|
|
1,152,406
|
|
|
|
|
|
|
|
Murphy Oil Corporation Supplemental Executive Retirement Plan
|
|
|
29.000
|
|
|
|
3,475,654
|
|
|
|
|
|
Michael K. McFadyen
|
|
Retirement Plan of Murphy Oil Company Ltd.
|
|
|
8.200
|
|
|
|
182,491
|
|
|
|
|
|
|
|
Murphy Oil Company Ltd. Supplemental Executive Retirement Plan
|
|
|
8.200
|
|
|
|
1,789,154
|
|
|
|
|
|
|
|
Retirement Plan of Murphy Oil Corporation
|
|
|
5.950
|
|
|
|
158,228
|
|
|
|
|
|
|
|
Murphy Oil Corporation Supplemental Executive Retirement Plan
|
|
|
5.950
|
|
|
|
53,232
|
|
|
|
|
|
The purpose of the Retirement Plan of Murphy Oil Corporation, a
tax-qualified
defined benefit retirement plan, is to provide retirement and incidental benefits for all employees who complete a period of faithful service. The purpose of the Supplemental Executive Retirement Plan (SERP) is to restore defined benefit and defined
contribution benefits which cannot be paid because of certain specified benefit and compensation limitations under the
tax-qualified
retirement plan. The pension formula used to calculate benefits is: 1.6%
times final average pay (FAP) times years of benefit service minus 1.5% times primary social security benefit times years of benefit service (to a maximum of 33 1/3 years).
The FAP used in calculating benefits under the plans is the average cash compensation (salary and annual incentive bonus) over the highest paid
36-month
period during the
employees last ten years of employment. Distribution elections for the qualified plan are made upon retirement. Benefits shown are computed on a single life annuity basis and are subject to
a deduction for social security amounts. The pension benefits shown neither reflect any reductions in retirement benefits that would result from the selection of one of the plans various available survivorship options nor the actuarial
reductions required by the plan for retirement earlier than age 62. For this purpose, Mr. Jenkins average compensation was $3,077,853; Mr. Eckarts $853,462; Mr. Colemans $1,043,287; Mr. Comptons $989,747
and Mr. McFadyens $1,055,974 (Under the retirement plan for Murphy Oil Company Ltd., the average final pay of C$1,036,000 was converted to US$771,749 using a currency conversion factor of 0.74486 Canadian dollars to U.S. dollar).
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
39
|
|
|
|
|
|
|
Executive Compensation
(continued)
|
The estimated credited years of service used are as indicated in the table.
Effective with the
spin-off
of Murphys former U.S. retail marketing operation, Murphy USA Inc. (MUSA), on August 30,
2013, significant modifications were made to the U.S. defined benefit pension plan. All current NEOs continue to accrue benefits in this plan, however, certain Murphy employees benefits under the U.S. plan were frozen at that time. No further
benefit service will accrue for the affected employees, however, the plan will recognize future earnings after the
spin-off.
In addition, all previously unvested benefits became fully vested at the
spin-off
date. For those affected
active employees of the Company, additional U.S. retirement plan benefits will accrue in future periods under a cash balance formula.
The following assumptions were used in determining the present value amounts at December 31, 2016.
|
|
Mortality
TableMRP-2007
(The
RP-2014
no-collar
annuitant table, adjusted to remove post-2007
projection factors, then projected generationally using the
MMP-2007
projection scale as developed by Mercer).
|
2016 NONQUALIFIED DEFERRED COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last
Fiscal
Year
($)
(1)
|
|
|
Registrant
Contributions
in Last
Fiscal
Year
($)
(2)
|
|
|
Aggregate
Earnings
in Last
Fiscal
Year
($)
(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance at
Last Fiscal
Year-End
($)
|
|
Roger W. Jenkins
|
|
|
138,000
|
|
|
|
62,100
|
|
|
|
141,595
|
|
|
|
|
|
|
|
1,224,849
|
|
John W. Eckart
|
|
|
33,530
|
|
|
|
15,000
|
|
|
|
46,388
|
|
|
|
|
|
|
|
437,141
|
|
Eugene T. Coleman
|
|
|
66,300
|
|
|
|
17,820
|
|
|
|
66,757
|
|
|
|
|
|
|
|
697,060
|
|
Walter K. Compton
|
|
|
25,280
|
|
|
|
16,560
|
|
|
|
53,151
|
|
|
|
|
|
|
|
418,367
|
|
Michael K. McFadyen
|
|
|
|
|
|
|
|
|
|
|
382
|
|
|
|
|
|
|
|
7,771
|
|
(1)
|
The executive contributions in the last fiscal year have been included in the Salary column for the Named Executive Officer in the 2016 Summary Compensation Table.
|
(2)
|
The registrant contributions in the last fiscal year have been included in All Other Compensation column for the Named Executive Officer in the 2016 Summary Compensation Table.
|
(3)
|
The unfunded SERP provides the same investment options available under the qualified 401(k) savings plan. The Aggregate Earnings column reflects the different investment returns based upon the Named
Executive Officers investment selection.
|
The purpose of the Thrift Plan for Employees of Murphy Oil Corporation, a
tax-qualified
defined contribution retirement plan, is to provide retirement and incidental benefits for all employees who participate in the Plan. The purpose of the Supplemental Executive Retirement Plan
(SERP) is to restore defined benefit and defined contribution benefits which cannot be invested because of certain specified benefit and
compensation limitations under the
tax-qualified
Thrift/401(k) Plan. The employees are immediately vested in all employee and Company matching
contributions. The Company matching contributions are limited to dollar for dollar on the first 6%. All employees are allowed to contribute on a
pre-tax
basis up to 25% of their eligible pay. The table above
represents amounts deferred under the SERP for 2016.
2016 POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL TABLE
In connection with his appointment to President and CEO in 2013, Mr. Jenkins has a Severance Protection Agreement which provides for
the payment of severance benefits in a lump sum equal to three times the sum of Mr. Jenkins base salary and his average annual bonus over the prior three fiscal years. The Agreement also contains customary restrictive covenants applicable
during the twelve-month period following termination under the Agreement. The Company has no other employment, change in control or termination agreements with its NEOs. However, upon a change in control, as defined in the 2012 LTI Plan, all
outstanding equity awards granted under such plans shall vest, become immediately exercisable or payable or have all restrictions lifted which apply to the type of award. The Company has no other agreement, contract, plan, or arrangement, whether
written or unwritten, that provides for potential payments to NEOs upon termination or a change in control. NEOs are specifically excluded from normal severance benefits offered to other employees; however, the Company has, from
time-to-time,
paid termination benefits to executive-level positions upon an end in service. Decisions by the Company whether to pay termination benefits, and, if so, in what
amounts, are determined on a
case-by-case
basis.
|
|
|
|
|
40
|
|
Murphy Oil Corporation
|
|
|
|
Executive
Compensation
(continued)
|
|
|
The following table presents estimated amounts that would have been payable to the applicable Named Executive Officer if the described event had occurred on
December 30, 2016, the last trading day of the fiscal year:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Category
|
|
Normal Termination
($)
|
|
|
Change of Control
($)
|
|
Roger W. Jenkins
|
|
Severance
|
|
|
|
|
|
|
9,950,000
|
|
|
|
Non-equity
compensation
(1)
|
|
|
1,950,000
|
|
|
|
1,950,000
|
|
|
|
Unvested & Accelerated
(2)
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units
|
|
|
2,423,659
|
|
|
|
9,242,884
|
|
|
|
Time-Based Restricted Stock Units
|
|
|
1,499,408
|
|
|
|
3,175,260
|
|
|
|
Stock Options
|
|
|
|
|
|
|
2,984,300
|
|
|
|
Retirement Plan
(3)
|
|
|
740,225
|
|
|
|
740,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,613,292
|
|
|
|
28,042,669
|
|
John W. Eckart
|
|
Non-equity
compensation
(1)
|
|
|
486,000
|
|
|
|
486,000
|
|
|
|
Unvested & Accelerated
(2)
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units
|
|
|
453,763
|
|
|
|
1,734,212
|
|
|
|
Time-Based Restricted Stock Units
|
|
|
264,605
|
|
|
|
560,340
|
|
|
|
Stock Options
|
|
|
|
|
|
|
556,165
|
|
|
|
Retirement Plan
(3)
|
|
|
346,626
|
|
|
|
346,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,550,994
|
|
|
|
3,683,343
|
|
Eugene T. Coleman
|
|
Non-equity
compensation
(1)
|
|
|
492,000
|
|
|
|
492,000
|
|
|
|
Unvested & Accelerated
(2)
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units
|
|
|
637,310
|
|
|
|
2,470,844
|
|
|
|
Time-Based Restricted Stock Units
|
|
|
498,921
|
|
|
|
1,587,630
|
|
|
|
Stock Options
|
|
|
|
|
|
|
773,205
|
|
|
|
Retirement Plan
(3)
|
|
|
246,626
|
|
|
|
246,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,874,857
|
|
|
|
5,570,305
|
|
Walter K. Compton
|
|
Non-equity
compensation
(1)
|
|
|
391,000
|
|
|
|
391,000
|
|
|
|
Unvested & Accelerated
(2)
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units
|
|
|
479,573
|
|
|
|
1,829,516
|
|
|
|
Time-Based Restricted Stock Units
|
|
|
294,023
|
|
|
|
622,600
|
|
|
|
Stock Options
|
|
|
|
|
|
|
583,295
|
|
|
|
Retirement Plan
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,164,596
|
|
|
|
3,426,411
|
|
Michael K. McFadyen
|
|
Non-equity
compensation
(1)
|
|
|
369,453
|
|
|
|
369,453
|
|
|
|
Unvested & Accelerated
(2)
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units
|
|
|
600,206
|
|
|
|
2,353,359
|
|
|
|
Time-Based Restricted Stock Units
|
|
|
479,060
|
|
|
|
1,556,500
|
|
|
|
Stock Options
|
|
|
|
|
|
|
773,205
|
|
|
|
Retirement Plan
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,448,719
|
|
|
|
5,052,517
|
|
(1)
|
Non-equity
compensation is calculated under the terms of the 2012 Plan.
|
(2)
|
In the event of a change of control, all unvested outstanding equity awards shall vest, become immediately exercisable or payable or have all restrictions lifted as may apply to the type of the award. This amount
includes the incremental value of the current unvested outstanding awards. In the event of a termination, the exercise period for stock options is reduced to the lesser of the expiration date of the award or two years from date of termination.
|
(3)
|
Named Executive Officers may receive benefits under the Companys defined benefit pension plan upon retirement, depending on date of hire, age and years of service at termination. The Pension Benefits Table reports
the present value of each Named Executive Officers accumulated benefit at December 31, 2016 unadjusted for retirement earlier than age 62, and such benefits are not accelerated or otherwise enhanced in connection with any termination
scenario. Messrs. Jenkins, Eckart and Coleman would have been eligible to receive retirement benefits following a termination of employment by reason of retirement on December 31, 2016. Monthly pension benefits are payable in one of the
following options: 50% Joint and Survivor; 75% Joint and Survivor; 100% Joint and Survivor; and 10 Years Certain. For purposes of this table, the annual payment of the monthly pension benefits is shown.
|
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
41
|
|
|
|
|
|
|
Executive Compensation
(continued)
|
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information
about the securities authorized for issuance under the Companys equity compensation plans as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and
rights
(1)
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
the first
column)
(2)
|
|
Equity compensation plans approved by stockholders
|
|
|
5,757,435
|
|
|
$
|
48.46
|
|
|
|
3,821,789
|
|
(1)
|
Amounts in this column do not take into account outstanding restricted stock units.
|
(2)
|
Number of shares available for issuance includes 3,240,732 available shares under the 2012 LTI Plan, plus 318,204 available shares under the 2013 Stock Plan for
Non-Employee
Directors and 262,853 available shares under the Employee Stock Purchase Plan. Assumes each restricted stock unit is equivalent to one share.
|
|
|
|
|
|
42
|
|
Murphy Oil Corporation
|
|
|
|
Audit Committee Report
|
|
|
In connection with the Companys December 31, 2016 consolidated financial statements, the Audit Committee reviewed and discussed the audited financial
statements with management and the specific disclosures contained in the Companys
Form 10-K,
including Managements Discussion and Analysis of Financial Condition and Results of
Operations, discussed with KPMG LLP the matters required by Statement on Auditing Standards No. 61 and independence standards, and considered the compatibility of
non-audit
services with KPMG
LLPs independence. The Audit Committee also reviewed written independence disclosures from KPMG LLP as required under applicable standards regarding such independent accountants communications with the Audit Committee concerning
independence and has discussed the independence with the accountant. The Committee met six times during 2016. Fees for services provided by the Companys principal independent registered public accounting firm, KPMG LLP, for the years ended
December 31, 2016 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Audit fees
|
|
$
|
3,993,728
|
|
|
$
|
3,857,486
|
|
Audit-related fees
(1)
|
|
|
169,000
|
|
|
|
49,583
|
|
Audit and audit-related fees
|
|
|
4,162,728
|
|
|
|
3,907,069
|
|
Tax fees
(2)
|
|
|
95,065
|
|
|
|
291,720
|
|
All other fees
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
4,257,793
|
|
|
$
|
4,198,789
|
|
(1)
|
Audit-related fees consisted principally of fees for reviews of registration statements filed with the U.S. Securities and Exchange Commission, audits of financial statements for foreign employee benefit plans, and
assurance reports required by U.K. government agencies.
|
(2)
|
Tax fees consisted of services for income tax consultation and tax compliance services.
|
Based on these reviews and
discussions, the Audit Committee recommended to the Board that the Companys audited consolidated financial statements be included in its Annual Report on Form
10-K
for the year ended December 31,
2016.
AUDIT COMMITTEE
R. Madison Murphy
(Chairman)
Lawrence R. Dickerson
Neal E. Schmale
Laura A. Sugg
|
|
|
|
|
|
|
Murphy Oil Corporation
|
|
|
43
|
|