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Item 5. Market for Registrant’s Common Equity

2022-02-25 compared with 2021-02-26 · 150 added, 40 removed, 42 unchanged (82% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Common Stock is traded on the New York Stock Exchange using “MUR” as the trading symbol.

There were 2,379 stockholders of record as of December 31, 2020.

Information on dividends per share by quarter for 2020 and 2019 are reported on page 118 of this Form 10-K report.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Continued

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

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The companies in the peer group included:

Apache Corporation Devon Energy Corporation Range Resources Corporation

Cabot Oil & Gas Corporation Ovintiv Inc.

SM Energy Company

Chesapeake Energy Corporation Hess Corporation Southwestern Energy Company

Cimarex Energy Co.

Marathon Oil Corporation Whiting Petroleum Corporation

CNX Resources Corporation Matador Resources Company

APA Corporation Hess Corporation PDC Energy, Inc.

Coterra Energy Inc.

Kosmos Energy Ltd.

Range Resources Corporation

CNX Resources Corporation Marathon Oil Corporation Southwestern Energy Company

Devon Energy Corporation Ovintiv Inc.

Talos Energy Inc.

2016 2017 2018 2019 2020 2021

Murphy Oil Corporation 100 103 81 96 45 101

100 146 151 118 140 66

100 148 125 82 83 59

Peer Group 100 90 65 71 55 99

S&P 500 Index 100 122 116 153 181 233

100 112 136 130 171 203

XOP Index 100 91 65 59 38 63

In 2021, the Company elected to include the S&P Oil and Gas Exploration and Production Index (XOP) in its shareholder return performance presentation as XOP reports a comprehensive view of the oil and gas exploration and production segment of the S&P Total Market Index which is more comparable for the Company than the S&P 500 Index.

SELECTED FINANCIAL DATA

The following table contains selected financial data which highlight certain trends in Murphy’s financial condition and results of operations for the last five years.

The following table contains select financial data which highlight certain trends in Murphy’s results of operations and financial condition for the last five years.

The income statement data for the last three years excludes Malaysia as the Malaysia operations were classified as discontinued operations effective January 1, 2019.

See Note E – Assets Held for Sale and Discontinued Operations and Note G – Property, Plant, and Equipment for more information regarding the results of operations and the sale of Malaysia.

See Note E – Assets Held for Sale and Discontinued Operations and Note D – Property, Plant and Equipment for more information regarding the sale of Malaysia.

( Thousands of dollars except per share data )

Results of Operations for the Year 2021 2020 2019 2018 2017

2020 2019 2018 2017 2016

Revenue from sales to customers $ 2,801,215 1,751,709 2,817,111 1,806,473 1,300,464

$ 1,751,709 2,817,111 1,806,473 1,300,464 1,862,891

Net cash provided by continuing operations 1,422,163 802,708 1,489,105 749,395 613,351

802,708 1,489,105 749,395 613,351 600,795

Income (loss) from continuing operations 48,753 (1,255,294) 188,815 169,138 (553,015)

(1,255,294) 188,815 169,138 (553,015) (273,943)

Net income (loss) attributable to Murphy (73,664) (1,148,777) 1,149,732 411,094 (311,789)

(1,148,777) 1,149,732 411,094 (311,789) (275,970)

Cash dividends – diluted 77,204 95,989 163,669 173,044 172,565

95,989 163,669 173,044 172,565 206,635

Per Common share – diluted

Income (loss) from continuing operations (0.47) (7.43) 0.52 0.92 (3.21)

(7.43) 0.52 0.92 (3.21) (1.59)

Net income (loss) attributable to Murphy (0.48) (7.48) 6.98 2.36 (1.81)

(7.48) 6.98 2.36 (1.81) (1.60)

Average common shares outstanding (thousands) – diluted 154,291 153,507 164,812 174,209 172,524

153,507 164,812 174,209 172,524 172,173

Cash dividends per Common share $ 0.50 0.625 1.00 1.00 1.00

$ 0.625 1.00 1.00 1.00 1.20

Capital Expenditures for the Year 1

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Exploration and production $ 690,100 $ 813,300 2,683,200 1,818,800 942,500

$ 813,300 $ 2,683,200 1,818,800 942,500 789,721

Corporate and other 21,100 13,300 15,000 22,700 10,300

13,300 15,000 22,700 10,300 21,740

826,600 2,698,200 1,841,500 952,800 811,461

Total capital expenditures - continuing operations 711,200 826,600 2,698,200 1,841,500 952,800

Discontinued operations — — 64,400 145,800 22,891

— 64,400 145,800 22,891 —

$ 826,600 2,762,600 1,987,300 975,691 811,461

Total capital expenditures 711,200 826,600 2,762,600 1,987,300 975,691

Financial Condition at December 31

Current ratio 0.76 1.40 1.03 1.04 1.64

1.40 1.03 1.04 1.64 1.04

Working capital (deficit) (283,416) 283,971 31,538 33,756 537,396

$ 283,971 31,538 33,756 537,396 56,751

Net property, plant and equipment 8,127,852 8,269,038 9,969,743 8,432,133 8,220,031

8,269,038 9,969,743 8,432,133 8,220,031 8,316,188

10,620,852 11,718,504 11,052,587 9,860,942 10,295,860

Total assets 10,304,940 10,620,852 11,718,504 11,052,587 9,860,942

Long-term debt 2

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Murphy shareholders’ equity 4,157,311 4,214,337 5,467,460 4,829,299 4,620,191

4,214,337 5,467,460 4,829,299 4,620,191 4,916,679

27.44 35.75 27.91 26.77 28.55

Per share 26.91 27.44 35.75 27.91 26.77

Long-term debt – percent of capital employed 3

2 unchanged sentences

Common shares outstanding (thousands) 154,463 153,599 152,935 173,059 172,573

153,599 152,935 173,059 172,573 172,202

Number of stockholders of record 2,237 2,379 2,265 2,324 2,506

2,379 2,265 2,324 2,506 2,588

1 Capital expenditures include accruals for incurred but unpaid capital activities, while property additions and dry holes in the Statements of Cash Flows are cash-based capital expenditures and do not include capital accruals and geological, geophysical and certain other exploration expenses that are not eligible for capitalization under oil and natural gas accounting rules.

2021 Corporate and other Capital Expenditures includes capitalized interest costs of $16.1 million.

2019 includes $1,261.1 million for proved property acquisitions, primarily related to the LLOG transaction.

2018 includes $794.6 million capital expenditures in relation to the MP GOM transaction.

2 Long-term debt includes non-current capital lease obligations.

2 Long-term debt includes non-current finance lease obligations (see Note G – Financing Arrangements and Debt ).

3 Long-term debt – percent of capital employed is calculated as total long-term debt at the balance sheet date divided by the sum of total long-term debt plus total Murphy shareholders’ equity at that date.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Murphy Oil Corporation is a worldwide oil and natural gas exploration and production company.

A more detailed description of the Company’s significant assets can be found in Item 1 of this Form 10-K report.

In 2021, a combination of the global availability of vaccines and a relaxation of certain government-imposed lockdowns in response to the ongoing COVID-19 pandemic has led to an improving global economic outlook and subsequently increased demand for oil and gas.

Several COVID-19 variants, such as Delta and Omicron, temporarily created uncertainty in the outlook;

however, vaccines remained effective and therefore demand for oil and gas has remained resilient in the second half of 2021 and early 2022.

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 continues to target increasing supply by 0.4 million barrels per day (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 bpd following the COVID-19 demand reduction.

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

However, some members of the OPEC+ are not meeting their commitments to reinstate supply.

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

Significant Company operating and financial highlights during and at the end of 2021 were as follows:

• Produced 167 thousand barrels of oil equivalent (BOE) per day (158 thousand excluding noncontrolling interest, NCI)

• Maintained capital discipline with full year accrued capital expenditures of $711.2 million, including noncontrolling interest ($23.0 million) and King’s Quay Floating Production System (FPS) of $17.3 million (which was sold in the first quarter of 2021)

• Generated $1,422.2 million of net cash provided by operating activities and $734.0 million of adjusted cash flow 1 , which includes a working capital inflow of $118.5 million

• Reduced Lease operating expense per barrel of oil equivalent by 5% year-over-year

• Preserved liquidity of $2.1 billion, including $521.2 million of cash as of December 31, 2021 and $1.6 billion available on an unsecured revolving credit facility

• Decreased full year Selling, general and administrative costs by 13% from 2020

• Repaid approximately $530 million of total debt, a 17% debt reduction in the year

• Achieved 103% total proved reserve replacement with year-end proved reserves of 716.9 million barrels of oil equivalent

Throughout this section, the term, ‘excluding noncontrolling interest’ or ‘excluding NCI’ refers to amounts attributable to Murphy.

Unless noted, amounts include noncontrolling interest.

Murphy’s continuing operations generate revenue by producing crude oil, natural gas liquids (NGL) and natural gas in the United States, Gulf of Mexico and Canada and then selling these products to customers.

The Company’s revenue is affected by the prices of crude oil, natural gas and NGL.

In order to make a profit and generate cash in its exploration and production business, revenue generated from the sales of oil and natural gas produced must exceed the combined costs of producing these products and expenses related to exploration, administration, and for capital borrowed from lending institutions and note holders.

1 Adjusted cash flow is calculated as cash flow from operations less capital expenditures ( $688.2 million).

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Changes in the price of crude oil and natural gas have a significant impact on the profitability of the Company.

In 2021, liquids from continuing operations represented 62% of total hydrocarbons produced on an energy equivalent basis.

In 2022, the Company’s ratio of hydrocarbon production represented by liquids is expected to be 59%.

If the prices for crude oil and natural gas are lower in 2022 or beyond, this will have an unfavorable impact on the Company’s operating profits;

likewise, if prices are higher, this will have a favorable impact.

The Company, from time to time, may choose to use a variety of commodity hedge instruments to reduce commodity price risk, including forward sale fixed financial swaps and long-term fixed-price physical commodity sales.

Oil prices recovered in 2021 compared to the 2020 period and were higher compared to 2019.

The sales price of a barrel of West Texas Intermediate (WTI) crude oil averaged $67.91 in 2021, $39.40 in 2020, and $57.03 in 2019.

In 2022, the WTI price has thus far been above those in the comparable period in 2021.

The WTI index increased 72% over the prior year principally as a result of OPEC+ supply constraints and the increase in demand driven by the global COVID-19 vaccine roll out as discussed above.

The most common crude oil indices used to price the Company’s crude include WTI Houston (MEH), Heavy Louisiana Sweet (HLS), Mars and Brent.

The NYMEX natural gas price per million British Thermal Units (MMBTU) averaged $3.84 in 2021, $1.99 in 2020 and $2.52 in 2019.

The 2021 NYMEX natural gas price was higher compared to the 2020 price and natural gas prices in North America in 2022 have thus far been above those in the comparable period in 2021.

Results of Operations

Murphy Oil’s results of operations, with associated diluted earnings per share (EPS), for the last three years are presented in the following table.

Years Ended December 31,

(Millions of dollars, except EPS )

2021 2020 2019

Income (loss) from continuing operations before income taxes $ 42.9 (1,549.0) 203.5

Net (loss) income attributable to Murphy (73.7) (1,148.8) 1,149.7

Diluted EPS (0.48) (7.48) 6.98

(Loss) income from continuing operations attributable to Murphy (72.4) (1,141.6) 85.2

Diluted EPS (0.47) (7.43) 0.52

(Loss) income from discontinued operations (1.2) (7.2) 1,064.5

Diluted EPS (0.01) (0.05) 6.46

For the year ended December 31, 2021, the Company produced 167 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $711.2 million in capital expenditures (on a value of work done basis) for the year ended December 31, 2021, which included $23.0 million attributable to noncontrolling interest and $17.3 million to fund the development of the King’s Quay FPS (which was subsequently sold).

The Company reported net income from continuing operations of $48.8 million (which included post tax impairment charges of $151.5 million and income attributable to noncontrolling interest of $121.2 million) for the year ended December 31, 2021.

For the year ended December 31, 2020, the Company produced 175 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations.

The Company invested $826.6 million in capital expenditures (on a value of work done basis) for the year ended December 31, 2020, which included $21.7 million attributable to noncontrolling interest and $92.8 million to fund the development of the King’s Quay FPS.

The Company reported net loss from continuing operations of $1,255.3 million (which included post tax impairment charges of $854.2 million and loss attributable to noncontrolling interest of $113.7 million) for the year ended December 31, 2020.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Other Key Performance Metrics

The Company uses other operational performance and income metrics to review operational performance.

The table below presents Earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA.

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 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.

Management uses Adjusted EBITDA per barrel of oil equivalent sold to evaluate the Company’s profitability of one barrel of oil equivalent sold in the period.

Adjusted EBITDA per barrel of oil equivalent sold is a non-GAAP financial metric.

Year Ended December 31,

(Millions of dollars, except per barrel of oil equivalents sold) 2021 2020 2019

Net (loss) income attributable to Murphy (GAAP) $ (73.7) (1,148.8) 1,149.7

Income tax expense (benefit) (5.9) (293.7) 14.7

Interest expense, net 221.8 169.4 219.3

Depreciation, depletion and amortization expense ¹ 760.6 932.6 1,076.5

EBITDA attributable to Murphy (Non-GAAP) 902.8 (340.5) 2,460.2

Impairment of assets ¹ 196.3 1,072.5 —

Mark-to-market loss (gain) on crude oil derivative contracts 112.1 69.3 33.4

Asset retirement obligation (gains) losses (71.8) (2.8) —

Mark-to-market loss (gain) on contingent consideration 63.2 (13.8) 8.7

Accretion of asset retirement obligations ¹ 41.1 42.1 40.5

Unutilized rig charges 8.7 16.0 —

Discontinued operations loss (income) 1.2 7.2 (1,064.5)

Foreign exchange losses (gains) (1.0) 0.7 6.4

Restructuring expenses — 50.0 —

Inventory loss — 8.3 —

Seal insurance proceeds — (1.7) (8.0)

Business development transaction costs — — 24.4

Write-off of previously suspended exploration wells — — 13.2

Adjusted EBITDA attributable to Murphy (Non-GAAP) $ 1,252.6 907.3 1,514.3

Total barrels of oil equivalents sold from continuing operations attributable to Murphy (thousands of barrels) 57,476 60,189 63,128

Adjusted EBITDA per barrel of oil equivalents sold $ 21.79 15.07 23.99

1 Depreciation, depletion, and amortization expense, impairment of assets and accretion of asset retirement obligations used in the computation of adjusted EBITDA exclude the portion attributable to the non-controlling interest.

Segment Results – In the following table, the Company’s results of operations for the three years ended December 31, 2021, are presented by segment.

More detailed reviews of operating results for the Company’s exploration and production and other activities follow the table.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

A summary of Net (loss) income is presented in the following table.

( Millions of dollars )

2021 2020 2019

Exploration and production – continuing operations

United States $ 766.3 (1,014.3) 518.4

Canada (16.1) (35.0) (4.3)

Other International (33.5) (85.6) (53.5)

Total exploration and production – continuing operations 716.7 (1,134.9) 460.6

Corporate and other (668.0) (120.3) (271.8)

Income (loss) from continuing operations 48.7 (1,255.2) 188.8

(Loss) income from discontinued operations (1.2) (7.2) 1,064.5

Net income (loss) including noncontrolling interest 47.5 (1,262.4) 1,253.3

Net income (loss) attributable to noncontrolling interest 121.2 (113.7) 103.6

Net (loss) income attributable to Murphy $ (73.7) (1,148.7) 1,149.7

A summary of oil and natural gas revenues is presented in the following table.

( Millions of dollars )

2021 2020 2019

United States Oil and natural gas liquids $ 2,199.7 1,335.8 2,285.8

Natural gas 121.7 69.4 73.9

Canada Oil and natural gas liquids 228.9 174.0 287.4

Natural gas 245.9 170.6 158.4

Other Oil 4.9 1.8 11.6

Total oil and natural gas revenues $ 2,801.1 1,751.6 2,817.1

Exploration and Production

Please refer to Schedule 6 – Results of Operations for Oil and Natural Gas Producing Activities in the Supplemental Oil and Natural Gas Information section for supporting tables.

All amounts include amounts attributable to a noncontrolling interest in MP GOM (a subsidiary of Murphy Expro USA, operating and developing properties in the Gulf of Mexico) and exclude discontinued operations, unless otherwise noted.

Exploration and production (E&P) from continuing operations recorded earnings of $716.7 million in 2021 compared to a loss of $1,134.9 million in 2020.

Results were favorable $1,851.6 million in 2021 compared to 2020 primarily due to higher oil, natural gas liquid and natural gas prices, lower impairment charges, lower depreciation, depletion and amortization (DD&A), lower lease operating expenses (LOE), lower exploration expenses and lower general and administrative (G&A) expenses, partially offset by higher transportation, gathering and processing and income tax charges.

See below for further details.

Crude oil price realizations averaged $66.80 per barrel in the current year compared to $38.02 per barrel in 2020, a price increase of 76% year over year.

natural gas realized price per thousand cubic feet (MCF) averaged $3.71 in the current year compared to $2.02 per MCF in 2020, a price increase of 84% year over year.

Canada natural gas realized price per MCF averaged U.S.

$2.43 in the current year compared to U.S.

$1.79 per MCF in 2020, a price increase of 36% year over year.

Oil and natural gas production costs, including associated production taxes, on a per-unit basis, were $9.53 in 2021 excluding transportation, gathering and processing (TGP) (2020:

The favorable decrease in per-unit production costs in 2021 was primarily attributable to reduced costs associated with well workovers and concerted efficiency efforts.

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-K

Item 5. Market for Registrant’s Common Equity