What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 247 added, 266 removed, 692 unchanged (43% of the section changed)

3 unchanged sentences

(Thousands of dollars)

September 30,

2021 December 31,

44 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Thousands of dollars, except per share amounts)

2 unchanged sentences

Revenue from sales to customers $ 687,549 425,324 $ 2,038,905 1,311,627

(Loss) gain on crude contracts ( 226,245 ) ( 75,880 ) ( 440,630 ) 324,792

(Loss) gain on derivative instruments ( 59,164 ) ( 5,290 ) ( 499,794 ) 319,502

Gain on sale of assets and other income 2,315 1,831 21,217 6,006

10 unchanged sentences

Impairment of assets — 219,138 171,296 1,206,284

Other expense (benefit) 70,328 22,007 91,407 ( 23,181 )

Other (benefit) expense ( 32,791 ) 20,224 58,616 ( 2,957 )

Total costs and expenses 407,329 699,920 1,588,923 2,843,844

4 unchanged sentences

Total other loss ( 48,518 ) ( 50,359 ) ( 189,858 ) ( 134,984 )

Loss from continuing operations before income taxes ( 38,115 ) ( 417,906 ) ( 393,306 ) ( 1,013,279 )

Income tax benefit ( 11,177 ) ( 94,773 ) ( 99,336 ) ( 186,306 )

Loss from continuing operations ( 26,938 ) ( 323,133 ) ( 293,970 ) ( 826,973 )

(Loss) income from discontinued operations, net of income taxes ( 102 ) ( 1,267 ) 106 ( 6,129 )

Net loss including noncontrolling interest ( 27,040 ) ( 324,400 ) ( 293,864 ) ( 833,102 )

Income (loss) from continuing operations before income taxes 174,853 ( 328,414 ) ( 218,453 ) ( 1,341,693 )

Income tax expense (benefit) 36,838 ( 62,584 ) ( 62,498 ) ( 248,890 )

Income (loss) from continuing operations 138,015 ( 265,830 ) ( 155,955 ) ( 1,092,803 )

(Loss) from discontinued operations, net of income taxes ( 706 ) ( 778 ) ( 600 ) ( 6,907 )

Net income (loss) including noncontrolling interest 137,309 ( 266,608 ) ( 156,555 ) ( 1,099,710 )

Net income (loss) attributable to noncontrolling interest 28,853 ( 23,055 ) 85,509 ( 122,869 )

NET LOSS ATTRIBUTABLE TO MURPHY $ ( 63,082 ) ( 317,184 ) $ ( 350,520 ) ( 733,288 )

LOSS PER COMMON SHARE – BASIC

NET INCOME (LOSS) ATTRIBUTABLE TO MURPHY $ 108,456 ( 243,553 ) $ ( 242,064 ) ( 976,841 )

INCOME (LOSS) PER COMMON SHARE – BASIC

Continuing operations $ 0.70 ( 1.58 ) $ ( 1.57 ) ( 6.31 )

Discontinued operations — ( 0.01 ) — ( 0.05 )

Net loss $ ( 0.41 ) ( 2.06 ) $ ( 2.27 ) ( 4.78 )

LOSS PER COMMON SHARE – DILUTED

Net income (loss) $ 0.70 ( 1.59 ) $ ( 1.57 ) ( 6.36 )

INCOME (LOSS) PER COMMON SHARE – DILUTED

Continuing operations $ 0.70 ( 1.58 ) $ ( 1.57 ) ( 6.31 )

Discontinued operations — ( 0.01 ) — ( 0.05 )

Net loss $ ( 0.41 ) ( 2.06 ) $ ( 2.27 ) ( 4.78 )

Net income (loss) $ 0.70 ( 1.59 ) $ ( 1.57 ) ( 6.36 )

Cash dividends per Common share $ 0.125 0.125 0.375 0.500

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020 2021 2020

Net (loss) including noncontrolling interest $ ( 27,040 ) ( 324,400 ) $ ( 293,864 ) ( 833,102 )

Net income (loss) including noncontrolling interest $ 137,309 ( 266,608 ) $ ( 156,555 ) ( 1,099,710 )

Other comprehensive (loss) income, net of tax

3 unchanged sentences

Other comprehensive (loss) income ( 26,655 ) 32,346 21,159 ( 83,834 )

COMPREHENSIVE (LOSS) $ ( 4,949 ) ( 312,757 ) $ ( 246,050 ) ( 949,282 )

COMPREHENSIVE INCOME (LOSS) $ 110,654 ( 234,262 ) $ ( 135,396 ) ( 1,183,544 )

See Notes to Consolidated Financial Statements, page 7.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six Months Ended

Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020

Operating Activities

Net (loss) including noncontrolling interest $ ( 293,864 ) ( 833,102 )

Adjustments to reconcile net loss to net cash provided (required) by continuing operations activities

Loss (income) from discontinued operations ( 106 ) 6,129

Net income (loss) including noncontrolling interest $ ( 156,555 ) ( 1,099,710 )

Adjustments to reconcile net income (loss) to net cash provided by continuing operations activities

Loss from discontinued operations 600 6,907

Depreciation, depletion and amortization 615,372 769,151

Previously suspended exploration costs 633 7,677

Dry hole and previously suspended exploration costs 17,899 8,255

Amortization of undeveloped leases 13,872 21,951

2 unchanged sentences

Noncash restructuring expense — 17,565

Deferred income tax benefit ( 101,195 ) ( 167,902 )

Deferred income tax (benefit) expense ( 65,149 ) ( 231,748 )

Mark to market loss (gain) on contingent consideration 105,111 ( 29,476 )

Mark to market loss (gain) on crude contracts 284,360 ( 173,848 )

Mark to market loss (gain) on derivative instruments 228,497 ( 104,463 )

Long-term non-cash compensation 42,080 35,200

Net (increase) decrease in noncash working capital 26,565 1,335

Net decrease (increase) in noncash working capital 117,330 ( 26,261 )

Other operating activities, net ( 33,924 ) ( 26,837 )

14 unchanged sentences

Withholding tax on stock-based incentive awards ( 4,973 ) ( 7,094 )

Proceeds from term loan and other loans — 371

Capital lease obligation payments ( 643 ) ( 514 )

14 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Thousands of dollars)

1 unchanged sentence

Cumulative Preferred Stock – par $ 100 , authorized 400,000 shares, none issued

Common Stock – par $ 1.00 , authorized 450,000,000 shares, issued 195,100,628 shares at June 30, 2021 and 195,100,628 shares at June 30, 2020

Common Stock – par $ 1.00 , authorized 450,000,000 shares, issued 195,100,628 shares at September 30, 2021 and 195,100,628 shares at September 30, 2020

Balance at beginning of period 195,101 195,101 195,101 195,089

33 unchanged sentences

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.

These notes are an integral part of the financial statements of Murphy Oil Corporation and Consolidated Subsidiaries (Murphy/ Company) on pages 2 through 6 of this Form 10-Q report.

Note A – Nature of Business and Interim Financial Statements

5 unchanged sentences

These non-consolidated VIEs are not material to our financial position or results of operations.

As of June 30, 2021, our maximum exposure to loss was $ 3.4 million (excluding operational impacts), which represents our net investment in Delta House.

As of September 30, 2021, our maximum exposure to loss was $ 3.4 million (excluding operational impacts), 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 June 30, 2021 and December 31, 2020, and the results of operations, cash flows and changes in stockholders’ equity for the interim periods ended June 30, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America (U.S.).

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, 2021 and December 31, 2020, and the results of operations, cash flows and changes in stockholders’ equity for the interim periods ended September 30, 2021 and 2020, 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.

1 unchanged sentence

Consolidated financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Company’s 2020 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 six-month periods ended June 30, 2021 are not necessarily indicative of future results.

Financial results for the three-month and nine-month periods ended September 30, 2021 are not necessarily indicative of future results.

Note B – New Accounting Principles and Recent Accounting Pronouncements

25 unchanged sentences

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 six-month periods ended June 30, 2021, the Company recognized $ 758.8 million and $ 1,351.4 million, respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas.

For the three-month and six-month periods ended June 30, 2020, the Company recognized $ 285.7 million and $ 886.3 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, 2021, the Company recognized $ 687.5 million and $ 2,038.9 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, 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.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020 2021 2020

5 unchanged sentences

Offshore 20,499 19,173 70,333 54,864

— ( 58 ) — 1,806

Total crude oil and condensate revenue

15 unchanged sentences

Total revenue from contracts with customers 687,549 425,324 2,038,905 1,311,627

(Loss) gain on crude contracts ( 226,245 ) ( 75,880 ) ( 440,630 ) 324,792

(Loss) gain on derivative instruments ( 59,164 ) ( 5,290 ) ( 499,794 ) 319,502

Gain on sale of assets and other income 2,315 1,831 21,217 6,006

1 unchanged sentence

Contract Balances and Asset Recognition

As of June 30, 2021, and December 31, 2020, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet from continuing operations, were $ 206.6 million and $ 135.2 million, respectively.

As of September 30, 2021, and December 31, 2020, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet from continuing operations, were $ 144.0 million and $ 135.2 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, 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 contracts that have financing components as at June 30, 2021.

The Company has not entered into any revenue contracts that have financing components as at September 30, 2021.

The Company does not employ sales incentive strategies such as commissions or bonuses for obtaining sales contracts.

10 unchanged sentences

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 June 30, 2021, 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:

Current Long-Term Contracts Outstanding at June 30, 2021

As of September 30, 2021, 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:

Current Long-Term Contracts Outstanding at September 30, 2021

Location Commodity End Date Description Approximate Volumes

7 unchanged sentences

Contracts to sell natural gas at USD index pricing 25 MMCFD

Canada Natural Gas Q4 2023 1

Contracts to sell natural gas at CAD fixed prices 38 MMCFD

Canada Natural Gas Q4 2023 Contracts to sell natural gas at CAD fixed prices 38 MMCFD

Canada Natural Gas Q4 2024 Contracts to sell natural gas at USD index pricing 31 MMCFD

5 unchanged sentences

Contracts to sell natural gas at USD index pricing 49 MMCFD

Canada NGL Q3 2023 Contracts to sell natural gas liquids at various CAD pricing 952 BOED

1 These contracts are scheduled to commence after the balance sheet date, at various dates between Q4 2021 and Q1 2022.

3 unchanged sentences

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.

As of June 30, 2021, the Company had total capitalized exploratory well costs for continuing operations pending the determination of proved reserves of $ 197.5 million.

The following table reflects the net changes in capitalized exploratory well costs during the six-month periods ended June 30, 2021 and 2020.

As of September 30, 2021, the Company had total capitalized exploratory well costs for continuing operations pending the determination of proved reserves of $ 186.6 million.

The following table reflects the net changes in capitalized exploratory well costs during the nine-month periods ended September 30, 2021 and 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

4 unchanged sentences

Capitalized exploratory well costs charged to expense — ( 39,408 )

Balance at June 30 $ 197,537 180,135

Balance at September 30 $ 186,623 187,859

The capitalized well costs charged to expense during 2020 represent a charge for asset impairments (see below).

1 unchanged sentence

The projects are aged based on the last well drilled in the project.

September 30,

(Thousands of dollars) Amount No.

6 unchanged sentences

$ 186,623 13 7 187,859 12 5

Of the $ 183.6 million of exploratory well costs capitalized more than one year at June 30, 2021, $ 91.5 million is in Vietnam, $ 46.2 million is in the U.S., $ 25.7 million is in Brunei, $ 15.4 million is in Mexico, and $ 4.8 million is in Canada.

Of the $ 183.3 million of exploratory well costs capitalized more than one year at September 30, 2021, $ 92.3 million is in Vietnam, $ 45.0 million is in the U.S., $ 25.9 million is in Brunei, $ 15.3 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.

4 unchanged sentences

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 six months ended June 30, 2021 and 2020.

Six Months Ended

The following table reflects the recognized impairments for the nine months ended September 30, 2021 and 2020.

Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020

$ — 1,152,515

Canada 171,296 —

Other Foreign — 39,709

Corporate — 14,060

$ 171,296 1,206,284

3 unchanged sentences

The Company has accounted for its former U.K.

refining and marketing operations as discontinued operations for all periods presented.

The results of operations associated with discontinued operations for the three-month and six-month periods ended June 30, 2021 and 2020 were as follows:

refining and marketing and Malaysian exploration and production 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, 2021 and 2020 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020 2021 2020

5 unchanged sentences

(Loss) income from discontinued operations $ ( 706 ) ( 778 ) $ ( 600 ) ( 6,907 )

As of June 30, 2021, assets held for sale on the Consolidated Balance Sheet include the carrying value of the net property, plant equipment of CA-2 project in Brunei and the Company’s office building in El Dorado, Arkansas.

As of September 30, 2021, assets held for sale on the Consolidated Balance Sheet include the carrying value of the net property, plant equipment of CA-2 project in Brunei and the Company’s office building in El Dorado, Arkansas.

As of June 30, 2021, the CA-1 asset in Brunei is no longer being marketed for sale.

As of December 31, 2020, assets held for sale included the King’s Quay Floating Production System (FPS) of $ 250.1 million (sold in March 2021), the Brunei exploration and production properties, and the Company’s office building in El Dorado, Arkansas.

(Thousands of dollars) June 30,

(Thousands of dollars) September 30,

2021 December 31,

14 unchanged sentences

Note F – Financing Arrangements and Debt

As of June 30, 2021, the Company had a $ 1.6 billion revolving credit facility (RCF).

As of September 30, 2021, 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 June 30, 2021, the Company had no outstanding borrowings under the RCF and $ 31.0 million of outstanding letters of credit, which reduce the borrowing capacity of the RCF.

At June 30, 2021, the interest rate in effect on borrowings under the facility was 1.78 %.

At June 30, 2021, the Company was in compliance with all covenants related to the RCF.

At September 30, 2021, the Company had no outstanding borrowings under the RCF and $ 31.4 million of outstanding letters of credit, which reduce the borrowing capacity of the RCF.

At September 30, 2021, the interest rate in effect on borrowings under the facility was 1.78 %.

At September 30, 2021, the Company was in compliance with all covenants related to the RCF.

In March 2021, the Company issued $ 550.0 million of new notes that bear interest at a rate of 6.375 % and mature on July 15, 2028.

3 unchanged sentences

Note F – Financing Arrangements and Debt (Contd.)

(collectively the 2022 Notes).

The cost of the debt extinguishment of $ 36.9 million is included in Interest expense, net on the Consolidated Statement of Operations for the six months ended June 30, 2021.

The cash costs of $ 34.2 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the six months ended June 30, 2021.

the 2022 Notes).

The cost of the debt extinguishment of $ 36.9 million is included in Interest expense, net on the Consolidated Statement of Operations for the nine months ended September 30, 2021.

The cash costs of $ 34.2 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2021.

In August 2021, the Company redeemed $ 150.0 million aggregate principal amount of its 6.875 % senior notes due 2024 (2024 Notes).

The cost of the debt extinguishment of $ 3.5 million is included in Interest expense, net on the Consolidated Statement of Operations for the nine months ended September 30, 2021.

The cash costs of $ 2.6 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2021.

The Company also has a shelf registration statement on file with the U.S.

1 unchanged sentence

Subsequent to quarter end, the Company issued a notice of partial redemption with respect to $ 150.0 million aggregate principal amount of its 6.875 % senior notes due 2024 (2024 Notes).

The Company will redeem the 2024 Notes at the applicable redemption price set forth in the indenture governing the 2024 Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The redemption date of the 2024 Notes will be August 16, 2021.

The Company will redeem the 2024 Notes at the applicable redemption price set forth in the indenture governing the 2024 Notes, plus accrued and unpaid interest, if any, to the date of redemption.

The redemption date of the 2024 Notes will be December 2, 2021.

Note G – Other Financial Information

Additional disclosures regarding cash flow activities are provided below.

Six Months Ended

Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020

Net (increase) decrease in operating working capital, excluding cash and cash equivalents:

(Increase) decrease in accounts receivable ¹ $ ( 104,775 ) 227,710

Decrease in accounts receivable ¹ $ 75,100 251,706

Decrease in inventories 9,718 4,747

2 unchanged sentences

(Decrease) in income taxes payable ( 1,493 ) ( 1,236 )

Net decrease in noncash operating working capital $ 26,565 1,335

Net (increase) decrease in noncash operating working capital $ 117,330 ( 26,261 )

Supplementary disclosures:

5 unchanged sentences

Decrease in capital expenditure accrual 31,301 74,742

1 Excludes receivable/payable balances relating to mark-to-market of crude contracts and contingent consideration relating to acquisitions.

2 Excludes non-cash capitalized cost offset by impairment of $ 74.4 million related to Terra Nova in 2021.

1 Excludes receivable/payable balances relating to mark-to-market of derivative instruments and contingent consideration relating to acquisitions.

2 Excludes non-cash capitalized cost offset by impairment of $ 74.4 million in the first quarter of 2021 and a gain in other operating income of $ 71.8 million following a commercial agreement to sanction an asset life extension project at Terra Nova in the third quarter of 2021, which extended the life of Terra Nova by approximately 10 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

9 unchanged sentences

the life insurance benefits are noncontributory.

The table that follows provides the components of net periodic benefit expense for the three-month and six-month periods ended June 30, 2021 and 2020.

Three Months Ended June 30,

The table that follows provides the components of net periodic benefit expense for the three-month and nine-month periods ended September 30, 2021 and 2020.

Three Months Ended September 30,

Pension Benefits Other Postretirement Benefits

6 unchanged sentences

Net periodic benefit expense $ 5,414 6,557 841 930

Other - curtailment — 586 — ( 1,825 )

Other - special termination benefits — 8,435 — —

Total net periodic benefit expense $ 5,350 15,100 840 ( 585 )

Six Months Ended June 30,

Nine Months Ended September 30,

Pension Benefits Other Postretirement Benefits

10 unchanged sentences

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.

During the six-month period ended June 30, 2021, the Company made contributions of $ 19.5 million to its defined benefit pension and postretirement benefit plans.

During the nine-month period ended September 30, 2021, the Company made contributions of $ 31.0 million to its defined benefit pension and postretirement benefit plans.

Remaining funding in 2021 for the Company’s defined benefit pension and postretirement plans is anticipated to be $ 10.9 million.

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

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 Incentive Plan (2020 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

other stock-based incentives.

The 2020 Long-Term Plan expires in 2030.

A total of 5 million shares are issuable during the life of the 2020 Long-Term Plan.

A total of five million 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.

During the first six months of 2021, the Committee granted the following awards from the 2020 Long-Term Plan:

During the first nine months of 2021, the Committee granted the following awards from the 2020 Long-Term Plan:

2020 Long-Term Incentive Plan

14 unchanged sentences

All awards on or after May 12, 2021, will be made under the 2021 NED Plan.

During the first six months of 2021, the Committee granted the following awards to Non-Employee Directors:

During the first nine months of 2021, the Committee granted the following awards to Non-Employee Directors:

2018 Stock Plan for Non-Employee Directors

10 unchanged sentences

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 six-month period ended June 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

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, 2021.

Amounts recognized in the financial statements with respect to share-based plans are shown in the following table:

Six Months Ended

Nine Months Ended

September 30,

(Thousands of dollars) 2021 2020

Compensation charged against income before tax benefit $ 29,145 17,542

Related income tax (expense) benefit recognized in income 2,478 769

Related income tax benefit recognized in income 4,120 2,278

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 six-month periods ended June 30, 2021 and 2020.

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, 2021 and 2020.

The following table reports the weighted-average shares outstanding used for these computations.

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

(Weighted-average shares) 2021 2020 2021 2020

2 unchanged sentences

Diluted method 155,932,262 153,596,109 154,239,440 153,479,654

1 Due to a net loss recognized by the Company for the three-month and six-month periods ended June 30, 2021, no unvested stock awards were included in the computation of diluted earnings per share because the effect would have been antidilutive.

1 Due to a net loss recognized by the Company for the nine-month period ended September 30, 2021 and 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 June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

The Company’s effective income tax rate is calculated as the amount of income tax expense (benefit) divided by income (loss) from continuing operations before income taxes.

For the three-month and six-month periods ended June 30, 2021 and 2020, the Company’s effective income tax rates were as follows:

Three months ended June 30, 29.3 % 22.7 %

Six months ended June 30, 25.3 % 18.4 %

The effective tax rate for the three-month period ended June 30, 2021 was above the U.S.

For the three-month and nine-month periods ended September 30, 2021 and 2020, the Company’s effective income tax rates were as follows:

Three months ended September 30, 21.1 % 19.1 %

Nine months ended September 30, 28.6 % 18.6 %

The effective tax rate for the three-month period ended September 30, 2021 was above the U.S.

statutory tax rate of 21% primarily due to income generated in Canada, which has a higher tax rate, offset by no tax applied to the pre-tax income of the noncontrolling interest in MP GOM, which has the impact of decreasing the effective tax rate on income.

The effective tax rate for the three-month period ended September 30, 2020 was below the 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 nine-month period ended September 30, 2021 was above the U.S.

statutory tax rate of 21% primarily due to no tax applied to the pre-tax income of the noncontrolling interest in MP GOM, which has the impact of increasing the effective tax rate on an overall loss.

The effective tax rate for the three-month period ended June 30, 2020 was higher than the statutory tax rate of 21% principally due to a research and development tax credit in Canada, which has the impact of increasing the effective tax rate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note K– Income Taxes (Contd.)

The effective tax rate for the six-month period ended June 30, 2021 was above the U.S.

statutory tax rate of 21% primarily due to loss generated in Canada, which has a higher tax rate, as well as no tax applied to the pre-tax income of the noncontrolling interest in MP GOM.

The effective tax rate for the six-month period ended June 30, 2020 was below the 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 nine-month period ended September 30, 2020 was below the 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 Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities.

The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities, and currently the Company is under audit in several of these jurisdictions.

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 June 30, 2021, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows:

As of September 30, 2021, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows:

United States – 2016;

1 unchanged sentence

Malaysia – 2014;

and United Kingdom – 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note K– Income Taxes (Contd.)

United Kingdom – 2018.

Following the divestment of Malaysia in the third quarter of 2019, the Company has retained certain possible liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019.

1 unchanged sentence

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.

Murphy uses derivative instruments, such as swaps and zero-cost commodity price collar contracts, 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.

4 unchanged sentences

Certain interest rate derivative contracts were previously 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 and amortized to the income statement over time.

During the six-month period ended June 30, 2021, the Company redeemed all of the remaining notes due 2022 and expensed the remainder of the previously deferred loss on the interest rate swap of $ 2.1 million to Interest expense in the Consolidated Statement of Operations.

During the nine-month period ended September 30, 2021, the Company redeemed all of the remaining notes due 2022 and expensed the remainder of the previously deferred loss on the interest rate swap of $ 2.1 million to Interest expense in the Consolidated Statement of Operations.

Commodity Price Risks

At June 30, 2021, the Company had 45,000 barrels per day in WTI crude oil swap financial contracts maturing through December 2021 at an average price of $ 42.77 , and 20,000 barrels per day in WTI crude oil swap financial contracts maturing from January to December of 2022 at an average price of $ 44.88 .

Under these contracts, which mature monthly, the Company pays the average monthly price in effect and receives the fixed contract price.

At June 30, 2020, the Company had 45,000 barrels per day in WTI crude oil swap financial contracts maturing through the end of December 2020 at an average price of $ 56.42 , and 2,000 barrels per day in WTI crude oil swap contracts maturing from January through December 2021 at an average price of $ 41.54 .

The Company has entered into crude oil swaps and collar contracts.

Under the swaps contracts, which mature monthly, the Company pays the average monthly price in effect and receives the fixed contract price on a notional amount of sales volume, thereby fixing the price for the commodity sold.

Under the collar contracts, which also mature monthly, the Company purchased a put option and sold a call option with no net premiums paid to or received from counterparties.

Upon maturity, collar contracts require payments by the Company if the NYMEX average closing price is above the ceiling price or payments to the Company if the NYMEX average closing price is below the floor price.

At September 30, 2021, volumes per day associated with outstanding crude oil derivative contracts and the weighted average prices for these contracts are as follows:

September 30, 2021

NYMEX WTI swap contracts:

Volume per day (Bbl):

45,000 20,000

Price per Bbl:

$ 42.77 $ 44.88

NYMEX WTI collar contracts:

Volume per day (Bbl):

Price per Bbl:

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 June 30, 2021 and 2020.

At June 30, 2021 and December 31, 2020, the fair value of derivative instruments not designated as hedging instruments are presented in the following table.

June 30, 2021 December 31, 2020

The Company had no foreign currency exchange derivatives outstanding at September 30, 2021 and 2020.

At September 30, 2021 and December 31, 2020, the fair value of derivative instruments not designated as hedging instruments are presented in the following table.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note L – Financial Instruments and Risk Management (Contd.)

September 30, 2021 December 31, 2020

(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 $ — Accounts receivable $ 13,050

Commodity swaps Accounts receivable $ — Accounts receivable 13,050

Accounts payable ( 312,448 ) Accounts payable ( 89,842 )

Deferred credits and other liabilities ( 41,645 ) Deferred credits and other liabilities ( 12,833 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note L – Financial Instruments and Risk Management (Contd.)

For the three-month and six-month periods ended June 30, 2021 and 2020, 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.

Commodity collars Accounts receivable — Accounts receivable —

Accounts payable ( 15,929 ) Accounts payable —

For the three-month and nine-month periods ended September 30, 2021 and 2020, 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 June 30, Six months ended June 30,

(Thousands of dollars) Statement of Operations Location Three Months Ended September 30, Nine months ended September 30,

Type of Derivative Contract 2021 2020 2021 2020

Commodity (Loss) gain on crude contracts $ ( 226,245 ) ( 75,880 ) $ ( 440,630 ) 324,792

Commodity swaps (Loss) gain on derivative instruments $ ( 43,235 ) ( 5,290 ) ( 483,865 ) 319,502

Commodity collars (Loss) gain on derivative instruments ( 15,929 ) — ( 15,929 ) —

Fair Values – Recurring

4 unchanged sentences

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 June 30, 2021 and December 31, 2020, are presented in the following table.

June 30, 2021 December 31, 2020

The carrying value of assets and liabilities recorded at fair value on a recurring basis at September 30, 2021 and December 31, 2020, are presented in the following table.

September 30, 2021 December 31, 2020

(Thousands of dollars) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Commodity derivative contracts $ — — — — — 13,050 — 13,050

Commodity swaps $ — — — — — 13,050 — 13,050

$ — — — — — 13,050 — 13,050

Commodity collars $ — 15,929 — 15,929 — — — —

Nonqualified employee savings plan 17,180 — — 17,180 14,988 — — 14,988

Commodity derivative contracts — 425,625 — 425,625 — 102,675 — 102,675

Commodity swaps — 354,093 — 354,093 — 102,675 — 102,675

Contingent consideration — — 238,115 238,115 — — 133,004 133,004

1 unchanged sentence

The fair value of commodity (WTI crude oil) derivative contracts in 2021 and 2020 were based on active market quotes for WTI crude oil.

The before tax 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 before tax income effect of changes in the fair value of crude oil derivative contracts is recorded in Gain (loss) on derivative instruments 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.

1 unchanged sentence

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note L – Financial Instruments and Risk Management (Contd.)

The contingent consideration, related to two acquisitions in 2019 and 2018, is valued using a Monte Carlo simulation model.

2 unchanged sentences

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 June 30, 2021 and December 31, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

There were no offsetting positions recorded at September 30, 2021 and December 31, 2020.

Note M – Accumulated Other Comprehensive Loss

The components of Accumulated other comprehensive loss on the Consolidated Balance Sheets at December 31, 2020 and June 30, 2021 and the changes during the six-month period ended June 30, 2021, are presented net of taxes in the following table.

The components of Accumulated other comprehensive loss on the Consolidated Balance Sheets at December 31, 2020 and September 30, 2021 and the changes during the nine-month period ended September 30, 2021, are presented net of taxes in the following table.

(Thousands of dollars) Foreign

8 unchanged sentences

Net other comprehensive income (loss) 6,534 12,935 1,690 21,159

Balance at June 30, 2021 $ ( 286,169 ) ( 267,350 ) — ( 553,519 )

1 Reclassifications before taxes of $ 10,513 are included in the computation of net periodic benefit expense for the six-month period ended June 30, 2021.

Balance at September 30, 2021 $ ( 317,477 ) ( 262,697 ) — ( 580,174 )

1 Reclassifications before taxes of $ 16,282 are included in the computation of net periodic benefit expense for the nine-month period ended September 30, 2021.

See Note H for additional information.

Related income taxes of $ 2,231 are included in Income tax expense (benefit) for the six-month period ended June 30, 2021.

2 Reclassifications before taxes of $ 2,140 are included in Interest expense, net, for the six-month period ended June 30, 2021.

Related income taxes of $ 450 are included in Income tax expense (benefit) for the six-month period ended June 30, 2021.

Related income taxes of $ 3,347 are included in Income tax expense (benefit) for the nine-month period ended September 30, 2021.

2 Reclassifications before taxes of $ 2,140 are included in Interest expense, net, for the nine-month period ended September 30, 2021.

Related income taxes of $ 450 are included in Income tax expense (benefit) for the nine-month period ended September 30, 2021.

See Note L for additional information.

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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.

ENVIRONMENTAL MATTERS – Murphy and other companies in the oil and natural 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.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS – Murphy and other companies in the oil and natural gas industry are subject to numerous federal, state, local and foreign laws and regulations dealing with the environment and protection of health and safety.

The principal environmental, health and safety laws and regulations to which Murphy is subject address such matters as the generation, storage, handling, use, disposal and remediation of petroleum products, wastewater and hazardous materials;

the emission and discharge of such materials to the environment, including greenhouse gas emissions;

wildlife, habitat and water protection;

the placement, operation and decommissioning of production equipment;

and the health and

safety of our employees, contractors and communities where our operations are located.

These laws and regulations also generally require permits for existing operations, as well as the construction or development of new operations and the decommissioning facilities once production has ceased.

Violation of environmental, health and safety 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note N– Environmental and Other Contingencies (Contd.)

could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable laws and regulations and claims by neighboring landowners and other third parties for any personal injury and property damage that might result.

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold.

Pursuant to recent SEC amendments to this item, the Company will be using a threshold of $ 1.0 million for such proceedings.

The Biden administration has indicated that it intends to increase regulatory oversight of the oil and gas industry, with a focus on climate change and greenhouse gas emissions (including methane emissions).

The Biden administration has issued a number of executive orders that address climate change, including creation of climate-related task forces, directives to federal agencies to procure carbon-free electricity, and a goal of a carbon pollution-free power sector by 2035 and a net-zero emissions U.S.

economy by 2050.

The Biden administration has also issued orders related to oil and gas activities on federal lands, infrastructure and environmental justice.

In addition, an international climate agreement (the Paris Agreement) was agreed to at the 2015 United Nations Framework Convention on Climate Change in Paris, France.

The Paris Agreement entered into force in November 2016.

Although the U.S.

officially withdrew from the Paris Agreement on November 4, 2020, on January 20, 2021, President Biden began the 30-day process of rejoining the Paris Agreement, which became effective for the U.S.

on February 19, 2021.

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.

5 unchanged sentences

refineries that were sold in 2011.

The Company also

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note N– Environmental and Other Contingencies (Contd.)

obtained insurance covering certain levels of environmental exposures related to past operations of these refineries.

The Company also obtained insurance covering certain levels of environmental exposures related to past operations of these refineries.

Murphy USA Inc.

10 unchanged sentences

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 June 30, 2021 Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Total Assets at September 30, 2021 Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(Millions of dollars) External

11 unchanged sentences

Total $ 10,330.9 630.7 137.3 421.9 ( 266.6 )

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

(Millions of dollars) External

12 unchanged sentences

1 Additional details about results of oil and natural gas operations are presented in the table on pages 25 and 26.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note P – Leases

Nature of Leases

The Company has entered into various operating leases such as a gas processing plant, floating production storage and off-take vessels, buildings, marine vessels, vehicles, drilling rigs, pipelines and other oil and gas field equipment.

Remaining lease terms range from 1 year to 19 years, some of which may include options to extend leases for multi-year periods and others which include options to terminate the leases within 1 month.

Options to extend lease terms are at the Company’s discretion.

Early lease terminations are a combination of both at Company discretion and mutual agreement between the Company and lessor.

Purchase options also exist for certain leases.

Related Expenses

Expenses related to finance and operating leases included in the Consolidated Financial Statements are as follows:

Three Months Ended June 30, Six Months Ended June 30,

(Thousands of dollars) Financial Statement Category 2021 2020 2021 2020

Operating lease 1,2

Lease operating expenses $ 48,049 $ 53,588 $ 94,133 125,189

Operating lease 2

Transportation, gathering and processing 9,982 9,137 19,758 19,063

Operating lease 2

Selling and general expense 2,453 3,281 5,273 6,750

Operating lease 2

Other operating expense 2,427 4,201 4,842 4,615

Operating lease 2

Property, plant and equipment 26,738 13,104 31,634 37,660

Operating lease Impairment of assets — 6,555 — 6,555

Finance lease

Interest on lease liabilities Interest expense, net 86 92 172 188

Sublease income Other income ( 662 ) ( 336 ) ( 958 ) ( 642 )

Net lease expense $ 89,073 $ 89,636 $ 154,854 199,392

1 Variable lease expenses.

The three and six months ended June 30, 2021 included variable lease expenses of $ 8.2 million and $ 13.5 million;

and for the three and six months ended June 30, 2020 included variable lease expenses of $ 6.0 million and $ 12.3 million, respectively, primarily related to additional volumes processed at a gas processing plant.

2 Short-term leases due within 12 months.

The three and six months ended June 30, 2021 included $ 11.1 million and $ 23.5 million for Lease operating expense, $ 7.6 million and $ 14.9 million for Transportation, gathering and processing, $ 0.5 million and $ 1.3 million for Selling and general expense and $ 10.0 million and $ 14.9 million for Property, plant and equipment, net relating to short term leases due within 12 months.

The three and six months ended June 30, 2020 included $ 21.4 million and $ 54.3 million for Lease operating expense, $ 6.6 million and $ 8.0 million for Transportation, gathering and processing, $ 1.0 million and $ 2.2 million for Selling and general expense, $ 7.5 million and $ 22.9 million for Property, plant and equipment, net, and $ 2.4 million for other operating expense relating to short-term leases due within 12 months.

Expenses primarily relate to drilling rigs and other oil and gas field equipment.

Maturity of Lease Liabilities

(Thousands of dollars) Operating Leases Finance Leases Total

2021 $ 109,284 534 109,818

2022 185,790 1,068 186,858

2023 138,692 1,069 139,761

2024 133,502 1,069 134,571

2025 83,210 1,069 84,279

Remaining 726,103 3,472 729,575

Total future minimum lease payments 1,376,581 8,281 1,384,862

Less imputed interest ( 382,394 ) ( 1,403 ) ( 383,797 )

Present value of lease liabilities 1

$ 994,187 6,878 1,001,065

1 Includes both the current and long-term portion of the lease liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note P – Leases (Contd.)

Lease Term and Discount Rate

June 30, 2021

Weighted average remaining lease term:

Operating leases 11 years

Finance leases 8 years

Weighted average discount rate:

Operating leases 5.4 %

Finance leases 4.7 %

Other Information

Six Months Ended June 30,

(Thousands of dollars) 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 87,768 $ 90,831

Operating cash flows from finance leases 172 188

Financing cash flows from finance leases 371 336

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases ¹ $ 94,788 277,662

1 The six months ended June 30, 2021 includes $ 90.3 million related to an offshore drilling rig with a lease term of 16 months.

The six months ended June 30, 2020 includes $ 268.8 million related to a 5 -year lease for the Cascade/Chinook FPSO in the U.S.

Gulf of Mexico.

MANAGEMENT’S DISCUSSION AND ANALYSIS

In 2021, the global dissemination of several vaccinations in response to the ongoing coronavirus disease 2019 (COVID-19) pandemic has led to increased economic activity and subsequently increased demand for oil and gas.

However emerging COVID-19 variants, such as the Delta variant, continue to create uncertainty in the outlook for future demand for oil and gas, and hence volatility in current and future prices for Murphy’s product.

In the current quarter and first half of 2021, overall energy demand has recovered significantly compared to 2020.

The OPEC+ group of oil producing countries (OPEC+) continues to constrain supply, however these are being gradually scaled back as 2021 progresses.

OPEC+ last year cut production by 10 million barrels per day (bpd) following the COVID-19 demand reduction.

It has gradually reinstated supply so that the curtailments are approximately 5.8 million bpd at the end of June 2021.

From July to December 2021 OPEC+ has reported it will increase supply by a 0.4 million bpd a month, with aims to fully phase out cuts by September 2022.

Overall the combination of OPEC+ supply constraints and the increase in demand driven by the global COVID-19 vaccine roll out has provided upwards pressure to the oil price which directly impacts the Company’s product revenue from sales compared to one year ago.

For the three months ended June 30, 2021, West Texas Intermediate (WTI) crude oil prices averaged approximately $66 per barrel (compared to $58 in the first quarter of 2021 and $28 in the second quarter of 2020).

The closing price for WTI at the end of the second quarter of 2021 was approximately $71 per barrel, reflecting a 52% increase from the price at the end of 2020 and a 14% increase from the first quarter 2021 closing price.

The average price in July 2021 was $72.43 per barrel.

As of close on August 3, 2021, the NYMEX WTI forward curve price for the remainder of 2021 and 2022 were $69.71 and $65.34 per barrel, respectively.

For the three months ended June 30, 2021, the Company produced 182 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $207.1 million in capital expenditures (on a value of work done basis) in the three months ended June 30, 2021.

The Company reported net loss from continuing operations of $26.9 million for the three months ended June 30, 2021.

This amount includes income attributable to noncontrolling interest of $36.0 million and after-tax losses on unrealized mark to market revaluations on commodity price hedge positions and contingent consideration of $103.3 million and $48.8 million, respectively.

For the six months ended June 30, 2021, the Company produced 174 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $458.2 million in capital expenditures (on a value of work done basis) in the six months ended June 30, 2021, which included $17.3 million to fund the development of the King’s Quay Floating Production System (FPS).

In 2021, the global distribution and administration of vaccinations in response to the ongoing coronavirus disease 2019 (COVID-19) pandemic has led to an improving global economic outlook and subsequently increased demand for oil and gas.

Emerging COVID-19 variants, such as the Delta variant, continue to create uncertainty in the outlook, however in 2021 demand for oil and gas has remained resilient.

The demand resilience has revealed an oil supply shortage, and hence is applying upward pressure to current and future oil and gas prices.

The OPEC+ group of oil producing countries (OPEC+) continues to target increasing supply by 0.4 million bpd a month, with aims to fully phase out prior cuts by September 2022, at the current rate of OPEC+ supply increases.

In 2020 OPEC+ cut production by 10 million barrels per day (bpd) following the COVID-19 demand reduction.

It has gradually reinstated supply so that the curtailments are approximately 5.8 million bpd at the end of September 2021.

However, some members of the OPEC+ are falling short on supply increases.

Overall, the combination of OPEC+ supply constraints and the increase in demand driven by the global COVID-19 vaccine roll out has provided upward pressure to the oil price which directly impacts the Company’s product revenue from sales compared to one year ago.

For the three months ended September 30, 2021, West Texas Intermediate (WTI) crude oil prices averaged approximately $70.56 per barrel (compared to $66.07 in the second quarter of 2021 and $40.93 in the third quarter of 2020).

The closing price for WTI at the end of the third quarter of 2021 was approximately $71.54 per barrel, reflecting a modest increase from the second quarter 2021 closing price and an 81% increase from the third quarter 2020 closing price.

The average price in October 2021 was $81.22 per barrel.

As of close on November 2, 2021, the NYMEX WTI forward curve price for the remainder of 2021 and 2022 were $83.91 and $76.27 per barrel, respectively.

In the third quarter of 2021, the Company continued to delever by redeeming $150.0 million aggregate principal amount of its 6.875% senior notes due 2024 for the principal amount plus cash costs of $2.6 million.

Earlier in 2021, the Company executed a series of financial transactions which redeemed the remaining notes due 2022 and issued new 7 year senior unsecured notes maturing in July 2028.

The 2022 notes were redeemed for total use of funds of $619.5 million, which included redemption at par of $576.4 million, early retirement premium (make whole payment) of $34.2 million, and $8.9 million of accrued interest.

The 2028 notes were issued for total proceeds of $550.0 million and closing costs of $8.1 million.

The proceeds from issue are reported net of costs to issue on the Consolidated Balance Sheets.

In the third quarter of 2021, the Company acquired an additional 7.525% working interest at Terra Nova in Canada following a commercial agreement to sanction an asset life extension project.

This transaction deferred an asset obligation at Terra Nova by approximately 10 years and decreased the obligation associated with the abandonment liability of the working interest before the acquisition by approximately $72 million.

For the three months ended September 30, 2021, the Company produced 163 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations;

this includes the impact of Hurricane Ida on U.S.

Gulf of Mexico production of 14.5 thousand barrels of oil equivalent per day (including NCI).

The Company invested $110.5 million in capital expenditures (on a value of work done basis) in the three months ended September 30, 2021.

The Company reported net income from continuing operations of $138.0 million for the three months ended September 30, 2021.

This amount includes income attributable to noncontrolling interest of $28.9 million, after-tax gains on unrealized mark to market revaluations on commodity price swap and collar positions of $44.1 million, an after-tax non-cash credit of $53.6 million related to the deferral of asset retirement obligations and after-tax losses on contingent consideration of $22.4 million.

For the nine months ended September 30, 2021, the Company produced 170 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations;

this includes the impact of Hurricane Ida on U.S.

Gulf of Mexico production of 4.9 thousand barrels of oil equivalent per day (including NCI).

The Company invested $568.7 million in capital expenditures (on a value of work done basis) in the nine months ended September 30, 2021, which included $18.0 million to fund the development of the King’s Quay Floating Production System (FPS).

The FPS capital expenditures were reimbursed by Arclight in the first quarter of 2021 (see below).

The Company reported net loss from continuing operations of $294.0 million for the six months ended June 30, 2021.

This amount includes income attributable to noncontrolling interest of $56.7 million, after-tax impairment charges of $128.0 million, and after-tax losses on unrealized mark to market revaluations on commodity price hedge positions and contingent consideration of $224.6 million and $60.6 million, respectively.

For the three months ended June 30, 2020, the Company produced 180 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $179.6 million in capital expenditures (on a value of work done basis), in the second quarter of 2020, which included $32.7 million to fund the development of the King’s Quay FPS.

The Company reported net loss from continuing operations of $323.1 million for the second quarter of 2020.

This amount included loss attributable to noncontrolling interest of $7.2 million and after-tax losses on unrealized mark to market revaluations on commodity price hedge positions of $145.8 million.

For the six months ended June 30, 2020, the Company produced 189 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $557.6 million in capital expenditures (on a value of work done basis) for the six months ended June 30, 2020, which included $61.4 million to fund the development of the King’s Quay FPS.

The Company reported net loss from continuing operations of $827.0 million for the six months ended June 30, 2020.

This amount included loss attributable to noncontrolling interest of $99.8 million, after-tax impairment charges of $708.3 million and after-tax gains on unrealized mark to market revaluations on commodity price hedge positions of $137.3 million.

During the six months ended June 30, 2021, crude oil and condensate volumes from continuing operations were lower than the prior year period.

The decrease in production volumes is due to reduced capital expenditures throughout 2020 and the first

The Company reported net loss from continuing operations of $156.0 million for the nine months ended September 30, 2021.

This amount includes income attributable to noncontrolling interest of $85.5 million, after-tax impairment charges of $128.0 million, an after-tax non-cash credit of $53.6 million related to the deferral of asset retirement obligations and after-tax losses on unrealized mark to market revaluations on commodity price swap and collar positions and contingent consideration of $180.5 million and $83.0 million, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS (Contd.)

Summary (contd.)

quarter of 2021 to support generating positive free cash flow.

Revenue from sales to customers was 52% higher during the first half of 2021 compared to the first half of 2020, primarily driven by the change in price.

In the first half of 2021, the Company’s subsidiary "Murphy Exploration & Production Company USA" closed a transaction with ArcLight Capital Partners, LLC (ArcLight) for the sale of Murphy’s entire 50% interest in the King’s Quay FPS and associated export lateral pipelines.

For the three months ended September 30, 2020, the Company produced 163 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $122.7 million in capital expenditures (on a value of work done basis), in the third quarter of 2020, which included $19.3 million to fund the development of the King’s Quay FPS.

The Company reported net loss from continuing operations of $265.8 million for the third quarter of 2020.

This amount included loss attributable to noncontrolling interest of $23.1 million, after-tax impairment charges of $145.9 million and after-tax losses on unrealized mark to market revaluations on commodity price hedge positions and contingent consideration of $54.8 million and $11.1 million, respectively.

For the nine months ended September 30, 2020, the Company produced 180 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $680.3 million in capital expenditures (on a value of work done basis) for the nine months ended September 30, 2020, which included $80.7 million to fund the development of the King’s Quay FPS.

The Company reported net loss from continuing operations of $1,092.8 million for the nine months ended September 30, 2020.

This amount included loss attributable to noncontrolling interest of $122.9 million, after-tax impairment charges of $854.2 million and after-tax gains on unrealized mark to market revaluations on commodity price hedge positions and contingent consideration of $82.5 million and $23.3 million, respectively.

In the first quarter, the Company’s subsidiary "Murphy Exploration & Production Company USA" closed a transaction with ArcLight Capital Partners, LLC (ArcLight) for the sale of Murphy’s entire 50% interest in the King’s Quay FPS and associated export lateral pipelines.

The transaction reimbursed Murphy for its share of project costs from inception to closing with proceeds of $267.7 million.

Also, in the first half of 2021, the Company executed a series of financial transactions which redeemed the remaining notes due 2022 and issued new 7 year senior unsecured notes maturing in July 2028.

The 2022 notes were redeemed for total use of funds of $619.5 million, which includes redemption at par of $576.4 million, early retirement premium (make whole payment) of $34.2 million, and $8.9 million of accrued interest.

The 2028 notes were issued for total proceeds of $550.0 million and incurred closing costs of $8.0 million.

The proceeds from issue are reported net of costs to issue on the balance sheet.

Results of Operations

1 unchanged sentence

Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Millions of dollars) 2021 2020 2021 2020

1 unchanged sentence

Corporate and other (98.8) (72.9) (577.6) 26.9

(Loss) income from continuing operations (26.9) (323.2) (294.0) (827.0)

Income (loss) from continuing operations 138.0 (265.8) (156.0) (1,092.8)

Discontinued operations ¹ (0.7) (0.8) (0.6) (6.9)

Net (loss) income including noncontrolling interest $ (27.0) (324.4) (293.9) (833.1)

Net income (loss) including noncontrolling interest $ 137.3 (266.6) (156.6) (1,099.7)

1 The Company has presented its former U.K.

refining and marketing operations as discontinued operations in its consolidated financial statements.

refining and marketing and Malaysian exploration and production operations as discontinued operations in its consolidated financial statements.

Exploration and Production

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

(Millions of dollars) 2021 2020 2021 2020

10 unchanged sentences

Management uses EBITDA and adjusted EBITDA internally to evaluate the Company’s operational performance and trends between periods and relative to its industry competitors.

EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for Net (loss) income or Cash provided by operating activities as determined in accordance with accounting principles generally accepted in the United States of America.

EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for Net income (loss) or Cash provided by operating activities as determined in accordance with accounting principles generally accepted in the United States of America.

Also presented below is adjusted EBITDA per barrel of oil equivalent sold, a non-GAAP financial metric.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars, except per barrel of oil equivalents sold)

2021 2020 2021 2020

Net loss attributable to Murphy (GAAP) $ (63.1) (317.1) (350.5) (733.2)

Income tax benefit (11.2) (94.8) (99.3) (186.3)

Net income (loss) attributable to Murphy (GAAP) $ 108.5 (243.6) (242.1) (976.8)

Income tax expense (benefit) 36.8 (62.6) (62.5) (248.9)

Interest expense, net 46.9 45.2 178.4 124.9

1 unchanged sentence

EBITDA attributable to Murphy (Non-GAAP) 375.0 (41.3) 462.2 (375.7)

Mark-to-market loss (gain) on crude oil derivative contracts 130.9 184.5 284.4 (173.8)

Mark-to-market (gain) loss on derivative instruments (55.9) 69.3 228.5 (104.5)

Impairment of assets ¹ — 186.5 171.3 1,072.5

Mark-to-market loss (gain) on contingent consideration 28.4 14.0 105.1 (29.5)

Asset retirement obligation (gains) losses (71.8) — (71.8) —

Accretion of asset retirement obligations ¹ 10.8 10.8 30.8 31.2

Unutilized rig charges 3.2 5.2 8.5 13.2

Foreign exchange losses (gains) — 1.4 1.3 (3.3)

Discontinued operations (income) loss 0.1 1.2 (0.1) 6.1

Foreign exchange (gains) losses (2.8) 0.8 (1.5) (2.5)

Discontinued operations loss 0.7 0.8 0.6 6.9

Restructuring expenses — 5.0 — 46.4

Inventory loss — — — 4.8

Seal insurance proceeds — (1.7) — (1.7)

Adjusted EBITDA attributable to Murphy (Non-GAAP) $ 287.6 249.4 933.7 661.1

4 unchanged sentences

Results of Operations (contd.)

OIL AND GAS OPERATING RESULTS – THREE MONTHS ENDED JUNE 30, 2021 AND 2020

OIL AND GAS OPERATING RESULTS – THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Millions of dollars) United

Canada Other Total

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Oil and gas sales and other operating revenues $ 565.2 124.6 — 689.8

16 unchanged sentences

Results of operations (excluding Corporate segment) $ 168.1 73.9 (5.2) 236.8

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Oil and gas sales and other operating revenues $ 330.8 96.3 — 427.1

15 unchanged sentences

Results of operations before taxes (211.1) (11.7) (10.8) (233.6)

Income tax provisions (benefits) (42.6) (14.1) (0.3) (57.0)

Income tax (benefits) provisions (38.5) (3.1) 0.9 (40.7)

Results of operations (excluding Corporate segment) $ (172.6) (8.6) (11.7) (192.9)

1 Includes results attributable to a noncontrolling interest in MP GOM.

2 For the three months ended September 30, 2021, Canada includes $71.8 million of income related to the deferral of an asset retirement obligation at Terra Nova.

MANAGEMENT’S DISCUSSION AND ANALYSIS (Contd.)

Results of Operations (contd.)

OIL AND GAS OPERATING RESULTS – SIX MONTHS ENDED JUNE 30, 2021 AND 2020

OIL AND GAS OPERATING RESULTS – NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Millions of dollars) United

Canada Other Total

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Oil and gas sales and other operating revenues $ 1,704.4 349.2 — 2,053.6

17 unchanged sentences

Results of operations (excluding Corporate segment) $ 481.8 (37.7) (22.5) 421.6

Six months ended June 30, 2020

Nine months ended September 30, 2020

Oil and gas sales and other operating revenues $ 1,070.6 245.2 1.8 1,317.6

18 unchanged sentences

1 Includes results attributable to a noncontrolling interest in MP GOM.

2 For the nine months ended September 30, 2021, Canada includes $71.8 million of income related to the deferral of an asset retirement obligation at Terra Nova.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements