NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These notes are an integral part of the financial statements of Murphy Oil Corporation and Consolidated Subsidiaries (Murphy/the Company) on pages 2 through 6 of this Form 10-Q report.
Note A – Nature of Business and Interim Financial Statements
NATURE OF BUSINESS – Murphy Oil Corporation is an international oil and gas company that conducts its business through various operating subsidiaries. The Company primarily produces oil and natural gas in the United States and Canada and conducts oil and natural gas exploration activities worldwide.
In connection with the LLOG acquisition, further discussed in Note P – Acquisitions, we hold a 0.5% interest in two variable interest entities (VIEs), Delta House Oil and Gas Lateral LLC and Delta House Floating Production System (FPS) LLC (collectively Delta House). These VIEs have not been consolidated because we are not considered the primary beneficiary. These non-consolidated VIEs are not material to our financial position or results of operations. As of September 30, 2020, our maximum exposure to loss was $3.5 million, which represents our net investment in Delta House. We have not provided any financial support to Delta House other than amounts previously required by our membership interest.
INTERIM FINANCIAL STATEMENTS – In the opinion of Murphy’s management, the unaudited financial statements presented herein include all accruals necessary to present fairly the Company’s financial position at September 30, 2020 and December 31, 2019, and the results of operations, cash flows and changes in stockholders’ equity for the interim periods ended September 30, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America (U.S.). In preparing the financial statements of the Company in conformity with accounting principles generally accepted in the U.S., management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from the estimates.
Financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Company’s 2019 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report. Financial results for the three-month and nine-month periods ended September 30, 2020 are not necessarily indicative of future results.
Note B – New Accounting Principles and Recent Accounting Pronouncements
Accounting Principles Adopted
Financial Instruments – Credit Losses. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13 which replaces the impairment model for most financial assets, including trade receivables, from the incurred loss methodology to a forward-looking expected loss model that will result in earlier recognition of credit losses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and is to be applied on a modified retrospective basis. The Company adopted this accounting standard in the first quarter of 2020 and it did not have a material impact on its consolidated financial statements.
Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13 which modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company adopted this accounting standard in the first quarter of 2020 and it did not have a material impact on its consolidated financial statements.
Recent Accounting Pronouncements
Income Taxes. In December 2019, the FASB issued ASU 2019-12, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Implementation on a prospective or retrospective basis varies by specific topics within the ASU. Early adoption is permitted. The Company is currently assessing the potential impact of this ASU to its consolidated financial statements.
Compensation-Retirement Benefits-Defined Benefit Plans-General. In August 2018, the FASB issued ASU 2018-14 which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, the amendments in this ASU are effective for fiscal years ending after December 15, 2020, with early adoption permitted, and is to be applied on a retrospective basis to all periods presented. The Company is currently assessing the potential impact of this ASU to its consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note C – Revenue from Contracts with Customers
Nature of Goods and Services
The Company explores for and produces crude oil, natural gas and natural gas liquids (collectively oil and gas) in select basins around the globe. The Company’s revenue from sales of oil and gas production activities are primarily subdivided into two key geographic segments: the U.S. and Canada. Additionally, revenue from sales to customers is generated from three primary revenue streams: crude oil and condensate, natural gas liquids, and natural gas.
For operated oil and gas production where the non-operated working interest owner does not take-in-kind its proportionate interest in the produced commodity, the Company acts as an agent for the working interest owner and recognizes revenue only for its own share of the commingled production. The exception to this is the reporting of the noncontrolling interest in MP GOM as prescribed by ASC 810-10-45.
U.S. - In the United States, the Company primarily produces oil and gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico. Revenue is generally recognized when oil and gas are transferred to the customer at the delivery point. Revenue recognized is largely index based with price adjustments for floating market differentials.
Canada - In Canada, contracts are primarily long-term floating commodity index priced, except for certain natural gas physical forward sales fixed-price contracts. For the Offshore business in Canada, contracts are based on index prices and revenue is recognized at the time of vessel load based on the volumes on the bill of lading and point of custody transfer.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note C – Revenue from Contracts with Customers (Contd.)
Disaggregation of Revenue
The Company reviews performance based on two key geographical segments and between onshore and offshore sources of revenue within these geographies.
For the three-month and nine-month periods ended September 30, 2020, the Company recognized $425.3 million and $1,311.6 million, respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas. For the three-month and nine-month periods ended September 30, 2019, the Company recognized $750.3 million and $2,060.1 million respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas.
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|
|
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|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Thousands of dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net crude oil and condensate revenue
|
|
|
|
|
|
|
|
United States
|
Onshore
|
$
|
86,498
|
|
|
219,515
|
|
|
272,284
|
|
|
547,756
|
|
|
Offshore
|
216,918
|
|
|
398,518
|
|
|
714,143
|
|
|
1,090,462
|
|
Canada
|
Onshore
|
32,358
|
|
|
31,758
|
|
|
67,268
|
|
|
88,730
|
|
|
Offshore
|
19,173
|
|
|
28,407
|
|
|
54,864
|
|
|
115,686
|
|
Other
|
|
—
|
|
|
1,933
|
|
|
1,806
|
|
|
7,908
|
|
Total crude oil and condensate revenue
|
354,947
|
|
|
680,131
|
|
|
1,110,365
|
|
|
1,850,542
|
|
|
|
|
|
|
|
|
|
|
Net natural gas liquids revenue
|
|
|
|
|
|
|
|
United States
|
Onshore
|
6,766
|
|
|
5,557
|
|
|
16,145
|
|
|
22,497
|
|
|
Offshore
|
4,765
|
|
|
8,414
|
|
|
13,255
|
|
|
18,184
|
|
Canada
|
Onshore
|
2,780
|
|
|
2,751
|
|
|
6,090
|
|
|
8,987
|
|
Total natural gas liquids revenue
|
14,311
|
|
|
16,722
|
|
|
35,490
|
|
|
49,668
|
|
|
|
|
|
|
|
|
|
|
Net natural gas revenue
|
|
|
|
|
|
|
|
United States
|
Onshore
|
4,529
|
|
|
5,848
|
|
|
14,177
|
|
|
20,762
|
|
|
Offshore
|
9,827
|
|
|
15,879
|
|
|
35,487
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|
|
29,575
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|
Canada
|
Onshore
|
41,710
|
|
|
31,757
|
|
|
116,108
|
|
|
109,580
|
|
Total natural gas revenue
|
56,066
|
|
|
53,484
|
|
|
165,772
|
|
|
159,917
|
|
Total revenue from contracts with customers
|
425,324
|
|
|
750,337
|
|
|
1,311,627
|
|
|
2,060,127
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on crude contracts
|
(5,290)
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|
|
63,247
|
|
|
319,502
|
|
|
121,163
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|
Gain on sale of assets and other income
|
1,831
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|
|
3,493
|
|
|
6,006
|
|
|
10,283
|
|
Total revenue and other income
|
$
|
421,865
|
|
|
817,077
|
|
|
1,637,135
|
|
|
2,191,573
|
|
Contract Balances and Asset Recognition
As of September 30, 2020, and December 31, 2019, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet from continuing operations, were $70.8 million and $186.8 million, respectively. Payment terms for the Company’s sales vary across contracts and geographical regions, with the majority of the cash receipts required within 30 days of billing. Based on a forward-looking expected loss model in accordance with ASU 2016-13 (see Note B), the Company did not recognize any impairment losses on receivables or contract assets arising from customer contracts during the reporting periods.
The Company has not entered into any upstream oil and gas sale contracts that have financing components as of September 30, 2020.
The Company does not employ sales incentive strategies such as commissions or bonuses for obtaining sales contracts. For the periods presented, the Company did not identify any assets to be recognized associated with the costs to obtain a contract with a customer.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note C – Revenue from Contracts with Customers (Contd.)
Performance Obligations
The Company recognizes oil and gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer. Judgment is required to determine whether some customers simultaneously receive and consume the benefit of commodities. As a result of this assessment for the Company, each unit of measure of the specified commodity is considered to represent a distinct performance obligation that is satisfied at a point in time upon the transfer of control of the commodity.
For contracts with market or index-based pricing, which represent the majority of sales contracts, the Company has elected the allocation exception and allocates the variable consideration to each single performance obligation in the contract. As a result, there is no price allocation to unsatisfied remaining performance obligations for delivery of commodity product in subsequent periods.
The Company has entered into several long-term, fixed-price contracts in Canada. The underlying reason for entering a fixed price contract is generally unrelated to anticipated future prices or other observable data and serves a particular purpose in the Company’s long-term strategy.
As of September 30, 2020, the Company had the following sales contracts in place which are expected to generate revenue from sales to customers for a period of more than 12 months starting at the inception of the contract:
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Current Long-Term Contracts Outstanding at September 30, 2020
|
|
|
|
|
|
|
|
|
Approximate Volumes
|
Location
|
|
Commodity
|
|
End Date
|
|
Description
|
|
U.S.
|
|
Oil
|
|
Q4 2021
|
|
Fixed quantity delivery in Eagle Ford
|
|
17,000 BOED
|
U.S.
|
|
Natural Gas and NGL
|
|
Q1 2023
|
|
Deliveries from dedicated acreage in Eagle Ford
|
|
As produced
|
Canada
|
|
Natural Gas
|
|
Q4 2020
|
|
Contracts to sell natural gas at Alberta AECO fixed prices
|
|
59 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2020
|
|
Contracts to sell natural gas at USD Index pricing
|
|
60 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2021
|
|
Contracts to sell natural gas at USD Index pricing
|
|
10 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2022
|
|
Contracts to sell natural gas at Malin USD fixed prices
|
|
20 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2022
|
|
Contracts to sell natural gas at USD Index pricing
|
|
35 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2024
|
|
Contracts to sell natural gas at USD Index pricing
|
|
30 MMCFD
|
Canada
|
|
Natural Gas
|
|
Q4 2026
|
|
Contracts to sell natural gas at USD Index pricing
|
|
49 MMCFD
|
Fixed price contracts are accounted for as normal sales and purchases for accounting purposes.
Note D – Property, Plant, and Equipment
Exploratory Wells
Under FASB guidance exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project.
At September 30, 2020, the Company had total capitalized exploratory well costs for continuing operations pending the determination of proved reserves of $187.9 million. The following table reflects the net changes in capitalized exploratory well costs during the nine-month periods ended September 30, 2020 and 2019.
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|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
2020
|
|
2019
|
Beginning balance at January 1
|
$
|
217,326
|
|
|
207,855
|
|
Additions pending the determination of proved reserves
|
9,941
|
|
|
86,025
|
|
|
|
|
|
Capitalized exploratory well costs charged to expense
|
(39,408)
|
|
|
(13,145)
|
|
Balance at September 30
|
$
|
187,859
|
|
|
280,735
|
|
The capitalized well costs charged to expense during 2020 represent a charge for asset impairments (see below). The capitalized well costs charged to expense during 2019 included the CM-1X and the CT-1X wells in Vietnam Block 11-2/11. The wells were originally drilled in 2017.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note D – Property, Plant and Equipment (Contd.)
The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs have been capitalized. The projects are aged based on the last well drilled in the project.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
Amount
|
|
No. of Wells
|
|
No. of Projects
|
|
Amount
|
|
No. of Wells
|
|
No. of Projects
|
Aging of capitalized well costs:
|
|
|
|
|
|
|
|
|
|
|
|
Zero to one year
|
$
|
8,000
|
|
|
1
|
|
|
—
|
|
|
64,711
|
|
|
5
|
|
|
5
|
|
One to two years
|
54,334
|
|
|
5
|
|
|
5
|
|
|
63,615
|
|
|
1
|
|
|
1
|
|
Two to three years
|
—
|
|
|
—
|
|
|
—
|
|
|
27,500
|
|
|
1
|
|
|
—
|
|
Three years or more
|
125,525
|
|
|
6
|
|
|
—
|
|
|
124,909
|
|
|
5
|
|
|
—
|
|
|
$
|
187,859
|
|
|
12
|
|
|
5
|
|
|
280,735
|
|
|
12
|
|
|
6
|
|
Of the $179.9 million of exploratory well costs capitalized more than one year at September 30, 2020, $88.2 million is in Vietnam, $46.0 million is in the U.S., $25.3 million is in Brunei, $15.6 million is in Mexico, and $4.8 million is in Canada. In all geographical areas, either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion.
Impairments
In 2020, declines in future oil and natural gas prices (principally driven by reduced demand in response to the COVID-19 pandemic and increased supply in the first quarter of 2020 from foreign oil producers and - see Risk Factors on page 38) led to impairments in certain of the Company’s U.S. Offshore and Other Foreign properties. The Company recorded pretax noncash impairment charges of $1,206.3 million to reduce the carrying values to their estimated fair values at select properties.
The fair values were determined by internal discounted cash flow models using estimates of future production, prices, costs and discount rates believed to be consistent with those used by principal market participants in the applicable region.
The following table reflects the recognized impairments for the nine months ended September 30, 2020.
|
|
|
|
|
|
|
Nine Months Ended
|
(Thousands of dollars)
|
September 30, 2020
|
U.S.
|
$
|
1,152,515
|
|
|
|
Other Foreign
|
39,709
|
|
Corporate
|
14,060
|
|
|
$
|
1,206,284
|
|
Divestments
In July 2019, the Company completed a divestiture of its two subsidiaries conducting Malaysian operations, Murphy Sabah Oil Co., Ltd. and Murphy Sarawak Oil Co., Ltd., in a transaction with PTT Exploration and Production Public Company Limited (PTTEP) which was effective January 1, 2019. Total cash consideration received upon closing was $2.0 billion. A gain on sale of $960.0 million was recorded as part of discontinued operations on the Consolidated Statement of Operations during 2019. The Company does not anticipate tax liabilities related to the sales proceeds. Murphy was entitled to receive a $100.0 million bonus payment contingent upon certain future exploratory drilling results prior to October 2020, however the results were not achieved by PTTEP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note E – Discontinued Operations and Assets Held for Sale
The Company has accounted for its former Malaysian exploration and production operations and its former U.K., U.S. refining and marketing operations as discontinued operations for all periods presented. The results of operations associated with discontinued operations for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Thousands of dollars)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
$
|
—
|
|
|
972,737
|
|
|
4,074
|
|
|
1,328,110
|
|
Costs and expenses
|
|
|
|
|
|
|
|
Lease operating expenses
|
—
|
|
|
6,262
|
|
|
—
|
|
|
127,138
|
|
Depreciation, depletion and amortization
|
—
|
|
|
(1)
|
|
|
—
|
|
|
33,697
|
|
Other costs and expenses
|
778
|
|
|
11,079
|
|
|
10,981
|
|
|
81,560
|
|
(Loss) income before taxes
|
(778)
|
|
|
955,397
|
|
|
(6,907)
|
|
|
1,085,715
|
|
Income tax expense
|
—
|
|
|
2,029
|
|
|
—
|
|
|
58,083
|
|
(Loss) income from discontinued operations
|
$
|
(778)
|
|
|
953,368
|
|
|
(6,907)
|
|
|
1,027,632
|
|
The following table presents the carrying value of the major categories of assets and liabilities of the Brunei exploration and production operations, the U.K. refining and marketing operations and the Company’s office building in El Dorado, Arkansas and two airplanes that are reflected as held for sale on the Company’s Consolidated Balance Sheets. Subsequent to period end, one of the planes has been sold.
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
September 30,
2020
|
|
December 31,
2019
|
Current assets
|
|
|
|
Cash
|
$
|
29,420
|
|
|
25,185
|
|
Accounts receivable
|
425
|
|
|
4,834
|
|
Inventories
|
406
|
|
|
406
|
|
Prepaid expenses and other
|
831
|
|
|
1,882
|
|
Property, plant, and equipment, net
|
68,393
|
|
|
82,116
|
|
Deferred income taxes and other assets
|
9,441
|
|
|
9,441
|
|
|
|
|
|
Total current assets associated with assets held for sale
|
$
|
108,916
|
|
|
123,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
$
|
5,481
|
|
|
3,702
|
|
|
|
|
|
Current maturities of long-term debt (finance lease)
|
728
|
|
|
705
|
|
Taxes payable
|
1,510
|
|
|
1,411
|
|
|
|
|
|
Long-term debt (finance lease)
|
6,702
|
|
|
7,240
|
|
Asset retirement obligation
|
256
|
|
|
240
|
|
Total current liabilities associated with assets held for sale
|
$
|
14,677
|
|
|
13,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note F – Financing Arrangements and Debt
As of September 30, 2020, the Company had a $1.6 billion revolving credit facility (RCF). The RCF is a senior unsecured guaranteed facility which expires in November 2023. At September 30, 2020, the Company had $200.0 million outstanding borrowings under the RCF and $3.7 million of outstanding letters of credit, which reduce the borrowing capacity of the RCF. At September 30, 2020, the interest rate in effect on borrowings under the facility was 1.84%. At September 30, 2020, the Company was in compliance with all covenants related to the RCF.
The Company also has a shelf registration statement on file with the U.S. Securities and Exchange Commission that permits the offer and sale of debt and/or equity securities through October 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note G – Other Financial Information
Additional disclosures regarding cash flow activities are provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
(Thousands of dollars)
|
2020
|
|
2019
|
Net (increase) decrease in operating working capital, excluding cash and cash equivalents:
|
|
|
|
(Increase) decrease in accounts receivable ¹
|
$
|
251,706
|
|
|
(128,698)
|
|
Decrease in inventories
|
4,747
|
|
|
4,398
|
|
(Increase) in prepaid expenses
|
(17,400)
|
|
|
(3,745)
|
|
Increase (decrease) in accounts payable and accrued liabilities ¹
|
(264,078)
|
|
|
165,224
|
|
Increase (decrease) in income taxes payable
|
(1,236)
|
|
|
3,078
|
|
Net (increase) decrease in noncash operating working capital
|
$
|
(26,261)
|
|
|
40,257
|
|
Supplementary disclosures:
|
|
|
|
Cash income taxes paid, net of refunds
|
$
|
(12,559)
|
|
|
(4,563)
|
|
Interest paid, net of amounts capitalized of $5.9 million in 2020 and $0.2 million in 2019
|
139,651
|
|
|
137,116
|
|
|
|
|
|
Non-cash investing activities:
|
|
|
|
Asset retirement costs capitalized ²
|
$
|
6,342
|
|
|
48,203
|
|
(Increase) decrease in capital expenditure accrual
|
74,742
|
|
|
(52,659)
|
|
1 Excludes receivable/payable balances relating to mark-to-market of crude contracts and contingent consideration relating to acquisitions.
2 2019 includes asset retirement obligations assumed as part of the LLOG acquisition of $37.3 million. See Note P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note H – Employee and Retiree Benefit Plans
The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees. All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plan and the U.S. director’s plan. All U.S. tax qualified plans meet the funding requirements of federal laws and regulations. Contributions to foreign plans are based on local laws and tax regulations. The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees. The health care benefits are contributory; the life insurance benefits are noncontributory.
On May 6, 2020, the Company announced that it was closing its headquarter office in El Dorado, Arkansas, its office in Calgary, Alberta, and consolidating all worldwide staff activities to its existing office location in Houston, Texas. As a result of this decision and the subsequent restructuring activities, a pension remeasurement was triggered and the Company incurred pension curtailment and special termination benefit charges as a result of the associated reduction of force. The Company elected the use of a practical expedient to perform the pension remeasurement as of May 31, 2020, which resulted in an increase in our pension and other postretirement benefit liabilities of $63.0 million due to a lower discount rate and lower plan assets compared to December 31, 2019.
The table that follows provides the components of net periodic benefit expense for the three-month and nine-month periods ended September 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
(Thousands of dollars)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Service cost
|
$
|
1,664
|
|
|
2,064
|
|
|
342
|
|
|
421
|
|
Interest cost
|
4,827
|
|
|
7,151
|
|
|
612
|
|
|
945
|
|
Expected return on plan assets
|
(5,773)
|
|
|
(6,455)
|
|
|
—
|
|
|
—
|
|
Amortization of prior service cost (credit)
|
149
|
|
|
248
|
|
|
—
|
|
|
(98)
|
|
Recognized actuarial loss
|
5,690
|
|
|
3,516
|
|
|
(24)
|
|
|
—
|
|
Net periodic benefit expense
|
$
|
6,557
|
|
|
6,524
|
|
|
930
|
|
|
1,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
(Thousands of dollars)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Service cost
|
$
|
5,996
|
|
|
6,188
|
|
|
1,235
|
|
|
1,261
|
|
Interest cost
|
16,381
|
|
|
21,402
|
|
|
2,200
|
|
|
2,833
|
|
Expected return on plan assets
|
(18,414)
|
|
|
(19,285)
|
|
|
—
|
|
|
—
|
|
Amortization of prior service cost (credit)
|
515
|
|
|
741
|
|
|
—
|
|
|
(293)
|
|
Recognized actuarial loss
|
14,223
|
|
|
10,538
|
|
|
(24)
|
|
|
—
|
|
Net periodic benefit expense
|
18,701
|
|
|
19,584
|
|
|
3,411
|
|
|
3,801
|
|
Other - curtailment
|
586
|
|
|
—
|
|
|
(1,825)
|
|
|
—
|
|
Other - special termination benefits
|
8,435
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total net periodic benefit expense
|
$
|
27,722
|
|
|
19,584
|
|
|
1,586
|
|
|
3,801
|
|
The components of net periodic benefit expense, other than the service cost, curtailment and special termination benefits components, are included in the line item “Interest and other income (loss)” in Consolidated Statements of Operations. The curtailment and special termination benefits components are included in the line item “Restructuring expenses” in Consolidated Statement of Operations.
During the nine-month period ended September 30, 2020, the Company made contributions of $27.4 million to its defined benefit pension and postretirement benefit plans. Remaining funding in 2020 for the Company’s defined benefit pension and postretirement plans is anticipated to be $10.3 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note I – Incentive Plans
The costs resulting from all share-based and cash-based incentive plans are recognized as an expense in the Consolidated Statements of Operations using a fair value-based measurement method over the periods that the awards vest.
The 2017 Annual Incentive Plan (2017 Annual Plan) authorizes the Executive Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and certain other employees. Cash awards under the 2017 Annual Plan are determined based on the Company’s actual financial and operating results as measured against the performance goals established by the Committee.
In May 2020, the Company’s shareholders approved replacement of the 2018 Long-Term Incentive Plan (2018 Long-Term Plan) with the 2020 Long-Term Incentive Plan (2020 Long-Term Plan). All awards on or after May 13, 2020, will be made under the 2020 Long-Term Plan.
The 2020 Long-Term Plan and the 2018 Long-Term Plan authorizes the Committee to make grants of the Company’s Common Stock to employees. These grants may be in the form of stock options (nonqualified or incentive), stock appreciation rights (SAR), restricted stock, restricted stock units (RSU), performance units, performance shares, dividend equivalents and other stock-based incentives. The 2020 Long-Term Plan expires in 2030. A total of 5,000,000 shares are issuable during the life of the 2020 Long-Term Plan. Shares issued pursuant to awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market. Share awards that have been canceled, expired, forfeited or otherwise not issued under an award shall not count as shares issued under this Plan.
The Stock Plan for Non-Employee Directors (2018 NED Plan) permits the issuance of restricted stock, restricted stock units and stock options or a combination thereof to the Company’s Non-Employee Directors.
During the first nine months of 2020, the Committee granted 999,700 performance-based RSUs and 340,600 time-based RSUs to certain employees under the 2018 Long-Term Plan. The fair value of the performance-based RSUs, using a Monte Carlo valuation model, was $21.51 per unit. The fair value of the time-based RSUs was estimated based on the fair market value of the Company’s stock on the date of grant of $21.68 per unit. Additionally, in February 2020, the Committee granted 1,152,500 cash-settled RSUs (CRSU) to certain employees. The CRSUs are to be settled in cash, net of applicable income taxes, and are accounted for as liability-type awards. The initial fair value of the CRSUs granted in February 2020 was $21.68. Also, in February, the Committee granted 106,248 shares of time-based RSUs to the Company’s non-employee Directors under the 2018 NED Plan. These units are scheduled to vest on the third anniversary of the date of grant. The estimated fair value of these awards was $22.59 per unit on date of grant.
All stock option exercises are non-cash transactions for the Company. The employee receives net shares, after applicable withholding obligations, upon each stock option exercise. The actual income tax benefit realized from the tax deductions related to stock option exercises of the share-based payment arrangements were immaterial for the nine-month period ended September 30, 2020.
Amounts recognized in the financial statements with respect to share-based plans are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
(Thousands of dollars)
|
2020
|
|
2019
|
Compensation charged against income before tax benefit
|
$
|
17,542
|
|
|
39,884
|
|
Related income tax benefit recognized in income
|
2,278
|
|
|
6,204
|
|
Certain incentive compensation granted to the Company’s named executive officers, to the extent their total compensation exceeds $1.0 million per executive per year, is not eligible for a U.S. income tax deduction under the Tax Cuts and Jobs Act (2017 Tax Act).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note J – Earnings per Share
Net (loss) income attributable to Murphy was used as the numerator in computing both basic and diluted income per Common share for the three-month and nine-month periods ended September 30, 2020 and 2019. The following table reports the weighted-average shares outstanding used for these computations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
(Weighted-average shares)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Basic method
|
153,596,109
|
|
|
160,365,705
|
|
|
153,479,654
|
|
|
167,310,202
|
|
Dilutive stock options and restricted stock units ¹
|
—
|
|
|
614,333
|
|
|
—
|
|
|
795,025
|
|
Diluted method
|
153,596,109
|
|
|
160,980,038
|
|
|
153,479,654
|
|
|
168,105,227
|
|
1 Due to a net loss recognized by the Company for the three-month and nine-month periods ended September 30, 2020, no unvested stock awards were included in the computation of diluted earnings per share because the effect would have been antidilutive.
The following table reflects certain options to purchase shares of common stock that were outstanding during the periods presented but were not included in the computation of diluted shares above because the incremental shares from the assumed conversion were antidilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Antidilutive stock options excluded from diluted shares
|
2,111,068
|
|
|
2,903,768
|
|
|
2,305,973
|
|
|
3,016,361
|
|
Weighted average price of these options
|
$
|
38.54
|
|
|
$
|
44.65
|
|
|
$
|
40.15
|
|
|
$
|
45.38
|
|
Note K – Income Taxes
The Company’s effective income tax rate is calculated as the amount of income tax expense (benefit) divided by income from continuing operations before income taxes. For the three-month and nine-month periods ended September 30, 2020 and 2019, the Company’s effective income tax rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Three months ended September 30,
|
19.1%
|
|
10.6%
|
Nine months ended September 30,
|
18.6%
|
|
12.1%
|
The effective tax rate for the three-month period ended September 30, 2020 was below the U.S. statutory tax rate of 21% due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is available, as well as no tax benefit available from the pre-tax loss of the noncontrolling interest in MP GOM.
The effective tax rate for the three-month period ended September 30, 2019 was below the U.S. statutory tax rate of 21% due to an income tax deduction for prior years Vietnam exploration spend which resulted in an income tax benefit of $15 million.
The effective tax rate for the nine-month period ended September 30, 2020 was below the U.S. statutory tax rate of 21% due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is available, as well as no tax benefit available from the pre-tax loss of the noncontrolling interest in MP GOM. These items reduced the tax credit on a reported pre-tax net loss.
The effective tax rate for the nine-month period ended September 30, 2019 was below the statutory tax rate of 21% due to an income tax deduction for prior years Vietnam exploration spend which resulted in an income tax benefit of $15 million, a reduction of the Alberta provincial corporate income tax rate that reduced the future deferred tax liability by $13 million, and no tax applied to the pre-tax income of the noncontrolling interest in MP GOM.
The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities. These audits often take multiple years to complete and settle. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future years from resolution of outstanding unsettled matters. As of September 30, 2020, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows: United States – 2016; Canada – 2016; Malaysia – 2013; and United Kingdom – 2018. Following the divestment of Malaysia in the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note K– Income Taxes (Contd.)
third quarter of 2019, the Company has retained certain possible tax and other liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019. The Company believes current recorded liabilities are adequate.
Note L – Financial Instruments and Risk Management
Murphy uses derivative instruments to manage certain risks related to commodity prices, foreign currency exchange rates and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes and it does not use derivatives with leveraged or complex features. Derivative instruments are traded with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (NYMEX). The Company has a risk management control system to monitor commodity price risks and any derivatives obtained to manage a portion of such risks. For accounting purposes, the Company has not designated commodity and foreign currency derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Operations. Certain interest rate derivative contracts were accounted for as hedges and the gain or loss associated with recording the fair value of these contracts was deferred in Accumulated other comprehensive loss until the anticipated transactions occur.
Commodity Price Risks
At September 30, 2020, the Company had 45,000 barrels per day in WTI crude oil swap financial contracts maturing through December 2020 at an average price of $56.42, and 18,000 barrels per day in WTI crude oil swap financial contracts maturing from January to December of 2021 at an average price of $43.31. Under these contracts, which mature monthly, the Company pays the average monthly price in effect and receives the fixed contract price.
At September 30, 2019, the Company had 35,000 barrels per day in WTI crude oil swap financial contracts maturing through December 2019 at an average price of $60.51 and 35,000 barrels per day in WTI crude oil swap financial contracts maturing through December 2020 at an average price of $57.59.
Foreign Currency Exchange Risks
The Company is subject to foreign currency exchange risk associated with operations in countries outside the U.S. The Company had no foreign currency exchange short-term derivatives outstanding at September 30, 2020 and 2019.
At September 30, 2020 and December 31, 2019, the fair value of derivative instruments not designated as hedging instruments are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
(Thousands of dollars)
|
|
Asset (Liability) Derivatives
|
|
Asset (Liability) Derivatives
|
Type of Derivative Contract
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
Commodity
|
|
Accounts receivable
|
|
$
|
93,774
|
|
|
Accounts payable
|
|
$
|
(33,364)
|
|
For the three-month and nine-month periods ended September 30, 2020 and 2019, the gains and losses recognized in the Consolidated Statements of Operations for derivative instruments not designated as hedging instruments are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss)
|
|
Gain (Loss)
|
(Thousands of dollars)
|
|
Statement of Operations Location
|
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
Type of Derivative Contract
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Commodity
|
|
(Loss) gain on crude contracts
|
|
$
|
(5,290)
|
|
|
63,247
|
|
|
$
|
319,502
|
|
|
121,163
|
|
Interest Rate Risks
Under hedge accounting rules, the Company deferred the net cost associated with derivative contracts purchased to manage interest rate risk associated with 10-year notes sold in May 2012 to match the payment of interest on these notes through 2022. During the nine-month periods ended September 30, 2020 and 2019, $1.1 million and $2.2 million, respectively, of the deferred loss on the interest rate swaps was charged to Interest expense in the Consolidated Statement of Operations. The remaining loss (net of tax) deferred on these matured contracts at September 30, 2020 was $2.0 million and is recorded, net of income taxes of $0.5 million, in Accumulated other comprehensive loss in the Consolidated Balance Sheet. The Company expects to charge approximately $0.4 million of this deferred loss to Interest expense, net in the Consolidated Statement of Operations during the remainder of 2020.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note L – Financial Instruments and Risk Management (Contd.)
Fair Values – Recurring
The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants.
The carrying value of assets and liabilities recorded at fair value on a recurring basis at September 30, 2020 and December 31, 2019, are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
(Thousands of dollars)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
$
|
—
|
|
|
93,774
|
|
|
—
|
|
|
93,774
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$
|
—
|
|
|
93,774
|
|
|
—
|
|
|
93,774
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,364
|
|
|
—
|
|
|
33,364
|
|
Nonqualified employee savings plans
|
|
16,169
|
|
|
—
|
|
|
—
|
|
|
16,169
|
|
|
17,035
|
|
|
—
|
|
|
—
|
|
|
17,035
|
|
Contingent consideration
|
|
—
|
|
|
—
|
|
|
117,311
|
|
|
117,311
|
|
|
—
|
|
|
—
|
|
|
146,787
|
|
|
146,787
|
|
|
|
$
|
16,169
|
|
|
—
|
|
|
117,311
|
|
|
133,480
|
|
|
17,035
|
|
|
33,364
|
|
|
146,787
|
|
|
197,186
|
|
The fair value of WTI crude oil derivative contracts in 2020 and 2019 were based on active market quotes for WTI crude oil. The income effect of changes in the fair value of crude oil derivative contracts is recorded in Gain (loss) on crude contracts in the Consolidated Statements of Operations.
The nonqualified employee savings plan is an unfunded savings plan through which participants seek a return via phantom investments in equity securities and/or mutual funds. The fair value of this liability was based on quoted prices for these equity securities and mutual funds. The income effect of changes in the fair value of the nonqualified employee savings plan is recorded in Selling and general expenses in the Consolidated Statements of Operations.
The contingent consideration, related to two acquisitions in 2019 and 2018, is valued using a Monte Carlo simulation model. The income effect of changes in the fair value of the contingent consideration is recorded in Other (benefit) expense in the Consolidated Statements of Operations. Any remaining contingent consideration payable will be due annually in years 2021 to 2026.
The Company offsets certain assets and liabilities related to derivative contracts when the legal right of offset exists. There were no offsetting positions recorded at September 30, 2020 and December 31, 2019.
Note M – Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss on the Consolidated Balance Sheets at December 31, 2019 and September 30, 2020 and the changes during the nine-month period ended September 30, 2020, are presented net of taxes in the following table.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note M – Accumulated Other Comprehensive Loss (Contd.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
Foreign
Currency
Translation
Gains (Losses)
|
|
Retirement
and
Postretirement
Benefit Plan
Adjustments
|
|
Deferred
Loss on
Interest Rate
Derivative
Hedges
|
|
Total
|
Balance at December 31, 2019
|
$
|
(353,252)
|
|
|
(218,015)
|
|
|
(2,894)
|
|
|
(574,161)
|
|
Components of other comprehensive income (loss):
|
|
|
|
|
|
|
|
Before reclassifications to income and retained earnings
|
(39,520)
|
|
|
(55,707)
|
|
|
—
|
|
|
(95,227)
|
|
Reclassifications to income
|
—
|
|
|
10,488
|
|
¹
|
905
|
|
²
|
11,393
|
|
Net other comprehensive income (loss)
|
(39,520)
|
|
|
(45,219)
|
|
|
905
|
|
|
(83,834)
|
|
Balance at September 30, 2020
|
$
|
(392,772)
|
|
|
(263,234)
|
|
|
(1,989)
|
|
|
(657,995)
|
|
1 Reclassifications before taxes of $13,720 are included in the computation of net periodic benefit expense for the nine-month period ended September 30, 2020. See Note H for additional information. Related income taxes of $3,232 are included in Income tax expense (benefit) for the nine-month period ended September 30, 2020.
2 Reclassifications before taxes of $1,147 are included in Interest expense, net, for the nine-month period ended September 30, 2020. Related income taxes of $242 are included in Income tax expense (benefit) for the nine-month period ended September 30, 2020. See Note L for additional information.
Note N – Environmental and Other Contingencies
The Company’s operations and earnings have been, and may be, affected by various forms of governmental action both in the United States and throughout the world. Examples of such governmental action include, but are by no means limited to: tax legislation changes, including tax rate changes and retroactive tax claims; royalty and revenue sharing changes; price controls; currency controls; allocation of supplies of crude oil and petroleum products and other goods; expropriation of property; restrictions and preferences affecting the issuance of oil and gas or mineral leases; restrictions on drilling and/or production; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Governmental actions are often motivated by political considerations and may be taken without full consideration of their consequences or may be taken in response to actions of other governments. It is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company.
Murphy and other companies in the oil and gas industry are subject to numerous federal, state, local and foreign laws and regulations dealing with the environment. Violation of federal or state environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and construction bans or delays. A discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury and property damage that might result.
The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. Although the Company has used operating and disposal practices that were standard in the industry at the time, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company, or on or under other locations where these wastes have been taken for disposal. In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes were not under Murphy’s control. Under existing laws, the Company could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial plugging operations to prevent future contamination. Certain of these historical properties are in various stages of negotiation, investigation, and/or cleanup and the Company is investigating the extent of any such liability and the availability of applicable defenses.
The Company has retained certain liabilities related to environmental and operational matters at formerly owned U.S. refineries that were sold in 2011. The Company obtained insurance covering certain levels of environmental exposures related to past operations of these refineries. The Company has not retained any environmental exposure associated with Murphy’s former U.S. marketing operations. The Company believes costs related to these sites will not have a material adverse effect on Murphy’s net income/(loss), financial condition or liquidity in a future period.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note N– Environmental and Other Contingencies (Contd.)
There is the possibility that environmental expenditures could be required at currently unidentified sites, and new or revised regulations could require additional expenditures at known sites. However, based on information currently available to the Company, the amount of future remediation costs incurred, at known or currently unidentified sites, is not expected to have a material adverse effect on the Company’s future net income/(loss), cash flows or liquidity.
Murphy and its subsidiaries are engaged in a number of other legal proceedings, all of which Murphy considers routine and incidental to its business. Based on information currently available to the Company, the ultimate resolution of environmental and legal matters referred to in this note is not expected to have a material adverse effect on the Company’s net income/ (loss), financial condition or liquidity in a future period.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note O – Business Segments
Information about business segments and geographic operations is reported in the following table. For geographic purposes, revenues are attributed to the country in which the sale occurs. Corporate, including interest income, other gains and losses (including foreign exchange gains/losses and realized and unrealized gains/losses on crude oil contracts), interest expense and unallocated overhead, is shown in the tables to reconcile the business segments to consolidated totals.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2020
|
|
Three Months Ended September 30, 2020
|
|
Three Months Ended September 30, 2019
|
(Millions of dollars)
|
|
External
Revenues
|
|
Income
(Loss)
|
|
External
Revenues
|
|
Income
(Loss)
|
Exploration and production ¹
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
7,028.0
|
|
|
330.8
|
|
|
(172.6)
|
|
|
656.8
|
|
|
170.8
|
|
Canada
|
|
2,155.5
|
|
|
96.3
|
|
|
(8.6)
|
|
|
95.0
|
|
|
(9.1)
|
|
Other
|
|
264.1
|
|
|
—
|
|
|
(11.7)
|
|
|
1.9
|
|
|
(3.7)
|
|
Total exploration and production
|
|
9,447.6
|
|
|
427.1
|
|
|
(192.9)
|
|
|
753.7
|
|
|
158.0
|
|
Corporate
|
|
1,002.1
|
|
|
(5.2)
|
|
|
(72.9)
|
|
|
63.4
|
|
|
0.3
|
|
Assets/revenue/income (loss) from continuing operations
|
|
10,449.7
|
|
|
421.9
|
|
|
(265.8)
|
|
|
817.1
|
|
|
158.3
|
|
Discontinued operations, net of tax
|
|
19.7
|
|
|
—
|
|
|
(0.8)
|
|
|
—
|
|
|
953.4
|
|
Total
|
|
$
|
10,469.4
|
|
|
421.9
|
|
|
(266.6)
|
|
|
817.1
|
|
|
1,111.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
External
Revenues
|
|
Income
(Loss)
|
|
External
Revenues
|
|
Income
(Loss)
|
Exploration and production ¹
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
$
|
1,070.6
|
|
|
(1,011.7)
|
|
|
1,734.3
|
|
|
420.0
|
|
Canada
|
|
|
|
245.2
|
|
|
(35.0)
|
|
|
323.8
|
|
|
(7.5)
|
|
Other
|
|
|
|
1.8
|
|
|
(73.0)
|
|
|
7.9
|
|
|
(35.4)
|
|
Total exploration and production
|
|
|
|
1,317.6
|
|
|
(1,119.7)
|
|
|
2,066.0
|
|
|
377.1
|
|
Corporate
|
|
|
|
319.5
|
|
|
26.9
|
|
|
125.6
|
|
|
(97.0)
|
|
Assets/revenue/income (loss) from continuing operations
|
|
|
|
1,637.1
|
|
|
(1,092.8)
|
|
|
2,191.6
|
|
|
280.1
|
|
Discontinued operations, net of tax
|
|
|
|
—
|
|
|
(6.9)
|
|
|
—
|
|
|
1,027.6
|
|
Total
|
|
|
|
$
|
1,637.1
|
|
|
(1,099.7)
|
|
|
2,191.6
|
|
|
1,307.7
|
|
1 Additional details about results of oil and gas operations are presented in the table on pages 26 and 27.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Note P – Acquisitions
LLOG Acquisition:
In June 2019, the Company announced the completion of a transaction with LLOG Exploration Offshore L.L.C. and LLOG Bluewater Holdings, L.L.C., (LLOG) which was effective January 1, 2019. Through this transaction, Murphy acquired strategic deepwater Gulf of Mexico assets which added approximately 67 MMBOE of proven reserves at May 31, 2019.
Under the terms of the transaction, Murphy paid cash consideration of $1,236.2 million and has an obligation to pay additional contingent consideration of up to $200 million in the event that certain revenue thresholds are exceeded between 2019 and 2022; and $50 million following first oil from certain development projects. The revenue threshold was not exceeded for the 2019 period.
Note Q – Restructuring Charges
On May 6, 2020, the Company announced that it was closing its headquarter office in El Dorado, Arkansas, its office in Calgary, Alberta, and consolidating all worldwide staff activities to its existing office location in Houston, Texas. As a result of this decision, certain directly attributable costs and charges have been recognized and reported as Restructuring charges as part of net income during the three and nine months ended September 30, 2020. These costs include severance, relocation, IT costs, pension curtailment charges and a write-off of the right of use asset lease associated with the Canada office. Further, the office building in El Dorado and two airplanes are classified as held for sale as of September 30, 2020. Subsequent to period end, one of the planes has been sold. All Restructuring charges have been recorded in the Corporate segment.
The following table presents a summary of the restructuring charges included in Operating (loss) income from continuing operations for the three and nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
Three Months Ended
September 30, 2020
|
Nine Months Ended
September 30, 2020
|
Severance
|
$
|
2,635
|
|
22,502
|
|
Pension and termination benefit charges
|
—
|
|
10,913
|
|
Contract exit costs and other
|
2,347
|
|
12,964
|
|
Restructuring charges
|
$
|
4,982
|
|
46,379
|
|
The following table represents a reconciliation of the liability associated with the Company’s restructuring activities at September 30, 2020, which is reflected in Other accrued liabilities on the Consolidated Balance Sheet:
|
|
|
|
|
|
(Thousands of dollars)
|
|
Restructuring accruals
|
$
|
28,814
|
|
Utilizations
|
(19,635)
|
|
Liability at September 30, 2020
|
$
|
9,179
|
|