Murphy Oil Corporation Annual Report 2020 Form 10-K (NYSE:MUR) Published: February 27th, 2020 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8590 MURPHY OIL CORPORATION (Exact name of registrant as specified in its charter) Delaware 71-0361522 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 300 Peach Street, P.O. Box 7000, 71731-7000 El Dorado, Arkansas (Zip Code) (Address of principal executive offices) (870) 862-6411 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $1.00 Par Value MUR New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (as of June 30, 2019) – $2,748,431,387. Number of shares of Common Stock, $1.00 Par Value, outstanding at January 31, 2020 was 153,169,317. Documents incorporated by reference: Portions of the Registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders onM ay 13, 2020 have been incorporated by reference in Part III herein. MURPHY OIL CORPORATION 2019 FORM 10-K TABLE OF CONTENTS Page Number PART I Item 1. Business 1 Item 1A. Risk Factors 11 Item 1B. Unresolved Staff Comments 18 Item 2. Properties 18 Item 3. Legal Proceedings 18 Item 4. Mine Safety Disclosures 18 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. Selected Financial Data 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42 Item 8. Financial Statements and Supplementary Data 42 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 42 Item 9A. Controls and Procedures 42 Item 9B. Other Information 42 PART III Item 10. Directors, Executive Officers and Corporate Governance 43 Item 11. Executive Compensation 43 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 43 Item 13. Certain Relationships and Related Transactions, and Director Independence 43 Item 14. Principal Accounting Fees and Services 43 PART IV Item 15. Exhibits, Financial Statement Schedules 44 Signatures 47 PART I Item 1. BUSINESS Summary Murphy Oil Corporation is a global oil and natural gas exploration and production company. As used in this report, the terms Murphy, Murphy Oil, we, our, its and Company may refer to Murphy Oil Corporation or any one or more of its consolidated subsidiaries. The Company was originally incorporated in Louisiana in 1950 as Murphy Corporation. It was reincorporated in Delaware in 1964, at which time it adopted the name Murphy Oil Corporation, and was reorganized in 1983 to operate primarily as a holding company of its various businesses. In 2013, the U.S. downstream business was separated from Murphy Oil Corporation’s oil and natural gas exploration and production business. For reporting purposes, Murphy’s exploration and production activities are subdivided into three geographic segments, including the United States, Canada, and all other countries. Additionally, Corporate activities include interest income, interest expense, foreign exchange effects, corporate risk management activities and administrative costs not allocated to the segments. The Company’s corporate headquarters are located in El Dorado, Arkansas. At December 31, 2019, Murphy had 822 employees (2018: 1,108). In addition to the following information about each business activity, data about Murphy’s operations, properties and business segments, including revenues by class of products and financial information by geographic area, are provided on pages 22 through 36, 68 through 70, 94 through 108 and 111 of this Form 10-K report. Interested parties may obtain the Company’s public disclosures filed with the Securities and Exchange Commission (SEC), including Form 10-K, Form 10-Q, Form 8-K and other documents, by accessing the Investor Relations section of Murphy Oil Corporation’s Website at www.murphyoilcorp.com. Exploration and Production The Company explores for and produces crude oil, natural gas and natural gas liquids worldwide. The Company’s management team directs the Company’s worldwide exploration and production activities. The business maintains upstream operating offices, with the most significant of these including Houston, Texas and Calgary, Alberta. In July 2019, the Company closed 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). Total cash consideration received upon closing was $2.0 billion. Effective January 1, 2019, Malaysia operations were reported as discontinued operations, and a gain on sale of $985.4 million was recorded as part of discontinued operations on the Consolidated Statement of Operations. Murphy is entitled to receive a $100.0 million bonus payment contingent upon certain future exploratory drilling results prior to October 2020. During 2019, Murphy’s principal continuing exploration and production activities were conducted in the United States by wholly-owned Murphy Exploration & Production Company – USA (Murphy Expro USA) and its subsidiaries, in Canada by wholly-owned Murphy Oil Company Ltd. (MOCL) and its subsidiaries, and in Australia, Brazil, Brunei, Mexico and Vietnam by wholly-owned Murphy Exploration & Production Company – International (Murphy Expro International) and its subsidiaries. Murphy’s continuing operations hydrocarbon production in 2019 was in the United States, Canada and Brunei (held for sale). Unless otherwise indicated, all references to the Company’s offshore U.S. and total oil, natural gas liquids and natural gas production and sales volumes, and proved reserves include a noncontrolling interest in MP Gulf of Mexico, LLC (MP GOM; see further details below). Murphy’s worldwide 2019 production (excluding Malaysia) on a barrel of oil equivalent basis (six thousand cubic feet of natural gas equals one barrel of oil) was 185,649 barrels of oil equivalent per day, an increase of 49.3% compared to 2018. See Management’s Discussion and Analysis section for further details on 2019 production and sales volume. United States In the United States, Murphy has production of crude oil, natural gas liquids and natural gas primarily from fields in the Gulf of Mexico and in the Eagle Ford Shale area of South Texas. The Company produced approximately 112,000 barrels of crude oil and natural gas liquids per day and approximately 83 MMCF of natural gas per day in the U.S. in 2019. These amounts represented 78.9% of the Company’s total worldwide oil and natural gas liquids and 23.4% of worldwide natural gas production volumes. Offshore On May 31, 2019, the Company completed 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 67.4 MMBOE of proven reserves at May 31, 2019. Under the terms of the transaction, Murphy paid cash consideration of $1,238.4 million. Murphy has a future obligation to pay $50 million following first oil from certain development projects, as well as, additional contingent consideration of up to $200 million in the event that certain revenue thresholds are exceeded between 2019 and 2022.