What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-25 compared with 2021-02-26 · 571 added, 651 removed, 1955 unchanged (38% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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PRINCIPAL ACCOUNTING FEES AND SERVICES

Our independent registered public accounting firm is KPMG LLP, Houston, TX, Auditor Firm ID:

Information required by this item is incorporated by reference to Murphy’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 11, 2022 under the caption “Audit Committee Report.”

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Report of Management – Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

(KPMG LLP , Houston, TX, Auditor Firm ID:

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting (KPMG LLP, Houston, TX, Auditor Firm ID:

Consolidated Balance Sheets

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Note C – Revenue from Contracts with Customers

Note D – Acquisition

Note E – Assets Held for Sa le and Discontinued Operations

Note D – Property, Plant and Equipment

Note E – Assets Held for Sale and Discontinued Operations

Note F – Inventories

Note G – Property, Plant, and Equipment

Note H – Financing Arrangements and Debt

Note I – Asset Retirement Obligations

Note J – Income Taxes

Note K – Incentive Plans

Note L – Employee and Retiree Benefit Plans

Note M – Financial Instruments and Risk Management

Note N – Earnings per Share

Note O – Other Financial Information

Note P – Accumulated Other Comprehensive Loss

Note Q – Assets and Liabilities Measured at Fair Value

Note R – Commitments

Note S – Environmental and Other Contingencies

Note T – Common Stock Issued and Outstanding

Note U – Business Segments

Note V – Leases

Note W – Restructuring Charges

Note G – Financing Arrangements and Debt

Note H – Asset Retirement Obligations

Note I – Income Taxes

Note J – Incentive Plans

Note K – Employee and Retiree Benefit Plans

Note L – Financial Instruments and Risk Management

Note M – Earnings per Share

Note N – Other Financial Information

Note O – Accumulated Other Comprehensive Loss

Note P – Assets and Liabilities Measured at Fair Value

Note Q – Commitments

Note R – Environmental and Other Contingencies

Note S – Common Stock Issued and Outstanding

Note T – Business Segments

Note U – Leases

Note V – Restructuring Charges

Supplemental Oil and Natural Gas Information (unaudited)

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Exhibit 4.9 to Form 10-K filed on February 27, 2020

10.1 Credit Agreement dated as of August 10, 2016 among Murphy Oil Corporation, Murphy Exploration & Production Company – International, and Murphy Oil Company Ltd., as borrowers, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto

Exhibit 10.1 to Form 8-K filed August 12, 2016

10.2 Third Amendment dated as of November 17, 2017 to Credit Agreement dated as of August 10, 2016 among Murphy Oil Corporation, Murphy Exploration & Production Company – International and Murphy Oil Company Ltd., as borrowers, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto

Exhibit 10.1 to Form 8-K filed November 20, 2017

10.3 Fourth Amendment dated as of October 10, 2018 to Credit Agreement dated as of August 10, 2016 among Murphy Oil Corporation, Murphy Exploration & Production Company – International and Murphy Oil Company Ltd., as borrowers, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto

Exhibit 10.1 to Form 8-K filed October 11, 2018

10.1 Credit Agreement dated as of November 28, 2018 among Murphy Oil Corporation, Murphy Exploration & Production Company – International, and Murphy Oil Company Ltd., as borrowers, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto

Exhibit 10.4 to Form 10-K for the year ended December 31, 2018

10.2 Murphy Oil Corporation 2017 Annual Incentive Plan

Exhibit A to definitive proxy statement filed March 28, 2016

*10.3 Murphy Oil Corporation Annual Incentive Plan

10.4 Murphy Oil Corporation 2012 Long-Term Incentive Plan

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10.18 Form of employee performance-based restricted stock unit – stock settled grant agreement (2020 LTI Plan)

Exhibit 10.21 to Form 10-K filed on February 26, 2021

10.19 Form of employee time-based restricted stock unit – stock settled 3-year grant agreement (2020 LTI Plan)

Exhibit 10.22 to Form 10-K filed on February 26, 2021

10.20 Form of employee time-based restricted stock unit – stock settled 5-year grant agreement (2020 LTI Plan)

Exhibit 10.23 to Form 10-K filed on February 26, 2021

10.21 Form of employee time-based restricted stock unit – cash settled 3-year grant agreement (2020 LTI Plan)

Exhibit 10.24 to Form 10-K filed on February 26, 2021

10.22 Form of employee time-based restricted stock unit – cash settled 5-year grant agreement (2020 LTI Plan)

Exhibit 10.25 to Form 10-K filed on February 26, 2021

10.23 Murphy Oil Corporation 2013 Stock Plan for Non-Employee Directors

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/s/ CLAIBORNE P.

DEMING /s/ R.

DEMING /s/ JAMES V.

Deming, Chairman and Director James V.

Kelley, Director

JENKINS /s/ R.

MADISON MURPHY

Deming, Chairman and Director R.

Madison Murphy, Director

JENKINS /s/ WALENTIN MIROSH

Jenkins, President and

Chief Executive Officer and Director

(Principal Executive Officer) Walentin Mirosh, Director

(Principal Executive Officer) R.

Madison Murphy, Director

JAY COLLINS /s/ JEFFREY W.

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Schmale, Director

/s/ ELISABETH W.

KELLER /s/ LAURA A.

Keller, Director Laura A.

/s/ MICHELLE A.

EARLEY /s/ LAURA A.

Earley, Director Laura A.

Sugg, Director

KELLEY /s/ DAVID R.

Kelley, Director David R.

/s/ ELISABETH W.

KELLER /s/ DAVID R.

Keller, Director David R.

Looney, Executive Vice President

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(Principal Accounting Officer)

Table of Conten ts

REPORT OF MANAGEMENT – CONSOLIDATED FINANCIAL STATEMENTS

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generally accepted accounting principles (GAAP) appropriate in the circumstances and include some amounts based on informed estimates and judgments, with consideration given to materiality.

An independent registered public accounting firm, KPMG LLP, has audited the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and provides an objective, independent opinion about the Company’s consolidated financial statements.

An independent registered public accounting firm, KPMG LLP, has audited the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and provides an objective, independent opinion about the Company’s consolidated financial statements.

The Audit Committee of the Board of Directors appoints the independent registered public accounting firm;

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KPMG LLP has performed an audit of the Company’s internal control over financial reporting, and their opinion thereon can be found on page 67.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note B to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No.

2016-02, Leases.

Basis for Opinion

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The Company’s internal petroleum reserve engineers estimate proved oil and gas reserves and the Company engages third-party petroleum reserve specialists to perform an independent assessment.

For the year ended December 31, 2020, the Company recorded depreciation, depletion, and amortization expense of $987.2 million.

For the year ended

Table of Conten ts

December 31, 2021, the Company recorded depreciation, depletion, and amortization expense of $795.1 million.

We identified the assessment of the estimated oil and gas reserves used in the depletion of producing oil and gas properties as a critical audit matter.

Complex auditor judgment was required in evaluating the Company’s estimate of

total proved oil and gas reserves, which is an input to the depletion expense calculation.

Complex auditor judgment was required in evaluating the Company’s estimate of total proved oil and gas reserves, which is an input to the depletion expense calculation.

Estimating proved oil and gas reserves requires the expertise of professional petroleum reserve engineers based on their estimates of forecasted production, forecasted operating costs, future development costs, and oil and gas prices.

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Evaluation of the realizability of deferred tax assets

As discussed in Note J to the consolidated financial statements, the Company had gross deferred tax assets of $1,018.9 million, which includes U.S.

As discussed in Note I to the consolidated financial statements, the Company had gross deferred tax assets of $1,147.1 million, which includes a deferred tax asset for U.S.

net operating losses of $577.5 million, as of December 31, 2021.

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We identified the evaluation of the realizability of deferred tax assets as a critical audit matter.

The evaluation of the realizability of deferred tax assets, specifically those related to U.S.

The evaluation of the realizability of deferred tax assets, especially those related to U.S.

net operating loss carryforwards, required subjective auditor judgment to assess the application of tax laws and the projections of future taxable income over the periods in which those temporary differences become deductible.

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We involved income tax professionals with specialized skills and knowledge who assisted in assessing the Company’s application of tax laws.

Impairment assessment of property, plant, and equipment related to oil and gas properties

As discussed in Note A to the consolidated financial statements, the Company reviews their oil and gas properties for triggering events that would indicate potential impairment.

The Company analyzes indicators for possible triggers of impairment such as a significant reduction in sales prices for oil or natural gas, unfavorable revisions of oil or natural gas reserves, changes to contracts, environmental regulations, tax law or other regulatory changes.

Assessment of recoverability of property, plant, and equipment related to oil and gas properties

As described in Note A to the consolidated financial statements, the Company reviews their oil and gas properties for triggering events that would indicate potential impairment.

The Company analyzes

Table of Conten ts

indicators for possible triggers of impairment such as a significant reduction in sales prices for oil or natural gas, unfavorable revisions of oil or natural gas reserves, changes to contracts, environmental regulations, tax law or other regulatory changes.

If a triggering event is identified in relation to one or more properties, an undiscounted cash flow analysis is required to quantitatively evaluate recoverability.

When the carrying amount of an oil and gas property exceeds its estimated undiscounted future net cash flows, the carrying amount is reduced to estimated fair value.

Estimated future net cash flows used to estimate fair value are based on forecasted production of oil and gas reserves, commodity prices based on published forward price curves or contract prices as of the date of the estimate, operating and development costs, and a discount rate.

The Company recorded impairment expense of $1,206.3 million related to property, plant, and equipment for the year ended December 31, 2020.

We identified the evaluation of the impairment assessment of property, plant, and equipment related to oil and gas properties as a critical audit matter.

There is a high degree of subjectivity in the evaluation of the estimate of oil and gas reserves used to determine future cash flows in such assessment due to (1) the uncertainty associated with future commodity prices and estimated future production, (2) risk adjustment factors associated with reserve volumes, and (3)

the judgment inherent in forecasting capital and operating costs and selecting a discount rate to apply in the Company’s assessment.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s property, plant, and equipment process for oil and gas properties, including controls over the Company’s impairment assessment process and oil and gas reserve estimation process.

We evaluated (1) the professional qualifications of the Company’s internal petroleum reserve engineers, third-party petroleum reserve specialists, and external engineering firm, (2) the knowledge, skills, and ability of the Company’s internal petroleum reserve engineers and third-party petroleum reserve specialists, and (3) the relationship of the third-party petroleum reserve specialists and external engineering firm to the Company.

We evaluated the Company’s cash flow analysis related to forecasted production, capital, and operating costs by comparing to historical results and future development plans.

The Company compares estimated future net cash flows expected in connection with the property to the carrying amount of the property to determine if the carrying amount is recoverable or if further quantitative analysis is required.

We identified the assessment of recoverability of property, plant, and equipment related to oil and gas properties as a critical audit matter.

There is a high degree of subjectivity in performing procedures due to the uncertainty associated with future commodity prices and estimated oil and gas reserves used in the Company’s assessment.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s property, plant, and equipment process for oil and gas properties including controls over the Company’s triggering event assessment process and oil and gas reserve estimation process.

We compared future commodity price assumptions to publicly available market information.

We evaluated risk adjustment factors associated with reserve volumes by comparing to guideline ranges by reserve class in published industry surveys.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate used in the valuation by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

We assessed the competence, capabilities, and objectivity of the Company’s internal petroleum reserve engineers, who estimated the oil and gas reserves, and the third-party reserve specialists engaged by the Company to evaluate the estimated proved oil and gas reserves.

We have served as the Company’s auditor since 1952.

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February 25, 2022

Table of Conten ts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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February 25, 2022

Table of Conten ts

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

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Cash and cash equivalents $ 521,184 310,606

Accounts receivable, less allowance for doubtful accounts of $ 1,605 in 2020 and 2019

Accounts receivable, net

258,150 262,014

Inventories Note F

54,198 66,076

Prepaid expenses 31,925 33,860

Assets held for sale Note E

15,453 327,736

Total current assets 880,910 1,000,292

Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $ 12,457,851 in 2021 and $ 11,455,305 in 2020

Note G 8,269,038 9,969,743

Operating lease assets Note V 927,658 598,293

Deferred income taxes Note J 395,253 129,287

8,127,852 8,269,038

Operating lease assets Note U

881,389 927,658

Deferred income taxes Note I

385,516 395,253

Deferred charges and other assets 29,273 28,611

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Current liabilities

Current maturities of long-term debt, finance lease $ 654 —

Accounts payable 623,129 407,097

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Total current liabilities 1,164,326 716,321

Long-term debt, including capital lease obligation Note H 2,988,067 2,803,381

Asset retirement obligations Note I

Long-term debt, including finance lease obligation Note G

2,465,414 2,988,067

Asset retirement obligations Note H

839,776 816,308

Deferred credits and other liabilities 570,574 680,580

Non-current operating lease liabilities Note V 845,088 521,324

Deferred income taxes Note J 180,341 207,198

Non-current operating lease liabilities Note U

761,162 845,088

Deferred income taxes Note I

182,892 180,341

Total liabilities 5,984,144 6,226,705

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Retained earnings 5,218,670 5,369,538

Accumulated other comprehensive loss Note P ( 601,333 ) ( 574,161 )

Accumulated other comprehensive loss Note O

( 527,711 ) ( 601,333 )

Treasury stock ( 1,655,447 ) ( 1,690,661 )

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See Notes to Consolidated Financial Statements, page 73.

Table of Conten ts

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

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Revenue from sales to customers $ 2,801,215 1,751,709 2,817,111

(Loss) gain on crude contracts 202,661 ( 856 ) ( 41,975 )

(Loss) gain on derivative instruments ( 525,850 ) 202,661 ( 856 )

Gain on sale of assets and other income 23,916 12,971 12,798

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Total costs and expenses 2,017,846 3,329,650 2,383,760

Operating (loss) income from continuing operations ( 1,362,309 ) 445,293 215,587

Operating income (loss) from continuing operations 281,435 ( 1,362,309 ) 445,293

Other income (loss)

Interest and other income (loss) ( 17,303 ) ( 22,520 ) 7,774

Interest income and other (loss) ( 16,771 ) ( 17,303 ) ( 22,520 )

Interest expense, net ( 221,773 ) ( 169,423 ) ( 219,275 )

Total other loss ( 238,544 ) ( 186,726 ) ( 241,795 )

(Loss) income from continuing operations before income taxes ( 1,549,035 ) 203,498 43,002

Income tax (benefit) expense ( 293,741 ) 14,683 ( 126,136 )

(Loss) income from continuing operations ( 1,255,294 ) 188,815 169,138

(Loss) income from discontinued operations, net of income taxes ( 7,151 ) 1,064,487 250,348

Income (loss) from continuing operations before income taxes 42,891 ( 1,549,035 ) 203,498

Income tax expense (benefit) ( 5,862 ) ( 293,741 ) 14,683

Income (loss) from continuing operations 48,753 ( 1,255,294 ) 188,815

Income (loss) from discontinued operations, net of income taxes ( 1,225 ) ( 7,151 ) 1,064,487

Net income (loss) including noncontrolling interest 47,528 ( 1,262,445 ) 1,253,302

Net (loss) income attributable to noncontrolling interest ( 113,668 ) 103,570 8,392

Net income (loss) attributable to noncontrolling interest 121,192 ( 113,668 ) 103,570

NET INCOME (LOSS) ATTRIBUTABLE TO MURPHY $ ( 73,664 ) ( 1,148,777 ) 1,149,732

(LOSS) INCOME PER COMMON SHARE – BASIC

INCOME (LOSS) PER COMMON SHARE – BASIC

Continuing operations $ ( 0.47 ) ( 7.43 ) 0.52

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Net income (loss) $ ( 0.48 ) ( 7.48 ) 7.01

(LOSS) INCOME PER COMMON SHARE – DILUTED

INCOME (LOSS) PER COMMON SHARE – DILUTED

Continuing operations $ ( 0.47 ) ( 7.43 ) 0.52

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See Notes to Consolidated Financial Statements, page 73.

Table of Conten ts

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

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Net income (loss) including noncontrolling interest $ 47,528 ( 1,262,445 ) 1,253,302

$ ( 1,262,445 ) 1,253,302 419,486

Other comprehensive income (loss), net of tax

Net gain (loss) from foreign currency translation 12,116 29,241 66,600

29,241 66,600 ( 145,022 )

Retirement and postretirement benefit plans 59,816 ( 57,617 ) ( 35,979 )

( 57,617 ) ( 35,979 ) 29,110

Deferred loss on interest rate hedges reclassified to interest expense 1,690 1,204 5,005

1,204 5,005 2,342

Reclassification of certain tax effects to retained earnings

— — ( 30,237 )

— — ( 3,737 )

Other comprehensive income (loss) 73,622 ( 27,172 ) 35,626

( 27,172 ) 35,626 ( 147,544 )

Comprehensive income (loss) 121,150 ( 1,289,617 ) 1,288,928

$ ( 1,289,617 ) 1,288,928 271,942

Comprehensive income (loss) attributable to noncontrolling interest ( 121,192 ) 113,668 ( 103,570 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO MURPHY $ ( 42 ) ( 1,175,949 ) 1,185,358

See Notes to Consolidated Financial Statements, page 73.

Table of Conten ts

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

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

(Income) loss from discontinued operations 7,151 ( 1,064,487 ) ( 250,348 )

Depreciation, depletion and amortization 795,105 987,239 1,147,842

Previously suspended exploration costs 21,099 12,840 20,508

Amortization of undeveloped leases 26,743 27,973 40,177

Accretion of asset retirement obligations 42,136 40,506 27,119

Impairment of assets 196,296 1,206,284 —

Noncash restructuring expense 17,565 — —

Deferred income tax charge (benefit) ( 278,042 ) 28,530 ( 177,627 )

Mark to market loss on derivative instruments 112,113 69,310 33,364

Mark to market loss (gain) on contingent consideration 63,147 ( 13,783 ) 8,672

Mark to market loss (gain) on crude contracts 69,310 33,364 ( 33,954 )

Long-term non-cash compensation 63,382 46,558 76,958

Net (increase) decrease in noncash operating working capital ( 32,027 ) ( 16,887 ) ( 16,103 )

Accretion of asset retirement obligations 46,613 42,136 40,506

Amortization of undeveloped leases 18,925 26,743 27,973

Previously suspended exploration costs 17,339 21,099 12,840

Deferred income tax (benefit) expense ( 4,146 ) ( 278,042 ) 28,530

Loss (income) from discontinued operations 1,225 7,151 ( 1,064,487 )

Net decrease (increase) in noncash working capital 118,457 ( 32,027 ) ( 16,887 )

Other operating activities, net ( 53,821 ) ( 35,080 ) ( 59,508 )

Noncash restructuring expense — 17,565 —

Net cash provided by continuing operations activities 1,422,163 802,708 1,489,105

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Property additions and dry hole costs ( 670,479 ) ( 759,809 ) ( 1,244,069 )

Property additions for King's Quay FPS ( 112,961 ) ( 100,202 ) —

Proceeds from sales of property, plant and equipment 270,503 13,750 20,382

Property additions for King's Quay FPS ( 17,734 ) ( 112,961 ) ( 100,202 )

Acquisition of oil and natural gas properties — — ( 1,212,315 )

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Financing Activities

Borrowings on revolving credit facility and term loan 450,000 1,725,000 325,000

Repayment of revolving credit facility and term loan ( 250,000 ) ( 2,050,000 ) —

Cash dividends paid ( 95,989 ) ( 163,669 ) ( 173,044 )

Retirement of debt ( 876,358 ) ( 12,225 ) ( 521,332 )

Debt issuance, net of cost 541,913 ( 613 ) 542,394

Repayment of revolving credit facility ( 365,000 ) ( 250,000 ) ( 2,050,000 )

Borrowings on revolving credit facility 165,000 450,000 1,725,000

Distributions to noncontrolling interest ( 137,517 ) ( 43,673 ) ( 128,158 )

Early retirement of debt ( 12,225 ) ( 521,332 ) —

Cash dividends paid ( 77,204 ) ( 95,989 ) ( 163,669 )

Early redemption of debt cost ( 39,335 ) — ( 26,626 )

Withholding tax on stock-based incentive awards ( 5,209 ) ( 7,094 ) ( 6,991 )

Debt issuance, net of cost ( 613 ) 542,394 —

Capital lease obligation payments ( 803 ) ( 695 ) ( 688 )

Loss on early extinguishment of debt — ( 26,626 ) —

Repurchase of common stock — — ( 499,924 )

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Effect of exchange rate changes on cash and cash equivalents 638 2,009 3,533

Net increase (decrease) in cash and cash equivalents 3,846 ( 53,163 ) ( 270,510 )

Net increase in cash and cash equivalents 210,578 3,846 ( 53,163 )

Cash and cash equivalents at beginning of period 310,606 306,760 359,923

Cash and cash equivalents at end of period $ 521,184 310,606 306,760

1 Reclassified to conform with current presentation (see Note E ).

1 Net cash provided by discontinued operations are not part of the cash flow reconciliation.

See Notes to Consolidated Financial Statements, page 73.

Table of Conten ts

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31 (Thousands of dollars except share amounts) 2020 2019 2018

Years Ended December 31 (Thousands of dollars except number of shares) 2021 2020 2019

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

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Balance at beginning of year 941,692 949,445 979,642

Exercise of stock options, including income tax benefits ( 156 ) ( 182 ) ( 362 )

Restricted stock transactions and other ( 33,649 ) ( 38,731 ) ( 33,920 )

Stock-based compensation 25,429 26,052 33,235

Restricted stock transactions and other ( 38,749 ) ( 33,649 ) ( 38,731 )

Exercise of stock options, including income tax benefits ( 1,674 ) ( 156 ) ( 182 )

Fair value increase in common controlled assets — — ( 24,519 )

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Net income (loss) for the year attributable to Murphy ( 73,664 ) ( 1,148,777 ) 1,149,732

Reclassification of certain tax effects from accumulated other comprehensive loss — — 30,237

Sale and leaseback gain recognized upon adoption of ASC 842, net of tax impact — 114,712 —

Cash dividends ( 77,204 ) ( 95,989 ) ( 163,669 )

Sale and leaseback gain recognized upon adoption of ASC 842, net of tax impact — — 114,712

Balance at end of year 5,218,670 5,369,538 6,614,304

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net of income taxes 1,690 1,204 5,005

Reclassification of certain tax effects to retained earnings — — ( 30,237 )

Other — — ( 3,737 )

Balance at end of year ( 527,711 ) ( 601,333 ) ( 574,161 )

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Balance at beginning of year ( 1,690,661 ) ( 1,717,217 ) ( 1,249,162 )

Purchase of treasury shares — ( 499,924 ) —

Awarded restricted stock, net of forfeitures 33,888 26,556 31,869

Exercise of stock options 1,326 — —

Purchase of treasury shares — — ( 499,924 )

Balance at end of year – 40,637,578 of Common Stock in 2021, 41,502,003 shares of Common Stock in 2020, and 42,153,908 shares of Common Stock in 2019

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Balance at beginning of year 179,810 337,151 368,343

Acquisition — — 359,951

Acquisition closing adjustments — ( 6,604 ) —

Net (loss) income attributable to noncontrolling interest ( 113,668 ) 103,570 8,392

Net income (loss) attributable to noncontrolling interest 121,192 ( 113,668 ) 103,570

Distributions to noncontrolling interest owners ( 137,517 ) ( 43,673 ) ( 128,158 )

Acquisition closing adjustments — — ( 6,604 )

Balance at end of year 163,485 179,810 337,151

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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 60-64 of the Form 10-K report.

These notes are an integral part of the consolidated financial statements of Murphy Oil Corporation and Consolidated Subsidiaries (Murphy/the Company) on pages 68-72 of the Form 10-K report.

Note A – Significant Accounting Polices

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The Company sold its Malaysian assets in 2019, and they are reported as discontinued operations.

In connection with the LLOG Exploration Offshore L.L.C.

and LLOG Bluewater Holdings, L.L.C., (LLOG) acquisition, we hold a 0.5 % interest in two variable interest entities (VIEs), Delta House Oil and Gas Lateral LLC and Delta House Floating Production System (FPS) LLC (collectively Delta House).

These VIEs have not been consolidated because we are not considered the primary beneficiary.

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

As of December 31, 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.

PRINCIPLES OF CONSOLIDATION – The consolidated financial statements include the accounts of Murphy Oil Corporation and all majority-owned subsidiaries.

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Other investments are generally carried at cost.

All significant intercompany accounts and transactions have been eliminated.

Intercompany accounts and transactions are eliminated.

REVENUE RECOGNITION – Revenues from sales of crude oil, natural gas liquids and natural gas are recorded when deliveries have occurred and legal ownership of the commodity transfers to the customer;

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The fair value of investment securities is determined by available market prices.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

ACCOUNTS RECEIVABLE – At December 31, 2021 and 2020, the Company’s accounts receivable primarily consisted of amounts owed to the Company by customers for sales of crude oil and natural gas and operating costs related to joint venture partners working interest share.

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Costs of undeveloped leases associated with unproved properties are expensed over the life of the leases.

Exploratory well costs are capitalized pending determination about whether proved

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

reserves have been found.

Exploratory well costs are capitalized pending determination about whether proved reserves have been found.

In certain cases, a determination of whether a drilled exploratory well has found proved reserves cannot be made immediately.

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If an impairment occurs, the carrying value of the impaired asset is reduced to fair value.

In 2020, declines in future oil and natural gas prices (principally driven by reduced commodity demand in response to the COVID-19 pandemic and increased supply in the first quarter of 2020 from foreign oil producers) led to impairments in certain of the Company’s U.S.

Offshore and Other Foreign properties and assets.

In 2020, the Company recognized pretax noncash impairment charges of $ 1,206.3 million to reduce the carrying values at select properties.

There were no impairments in 2019.

As a result of management’s assessments during 2018, the Company recognized a pretax, noncash impairment charge of $ 20.0 million at select Midland properties.

See also Note G for further discussion of impairment charges.

In 2021 and 2020, the Company recognized pretax noncash impairment charges of $ 196.3 million and $ 1,206.3 million, respectively, to reduce the carrying values at select properties.

In 2021, the Company recorded an impairment charge of $ 171.3 million for Terra Nova due to the status, including agreements with the partners, of operating and production plans and $ 25.0 million for assets reported as Assets held for sale in the Consolidated Balance Sheets.

See also Note D for further discussion of impairment charges.

The Company records a liability for asset retirement obligations (ARO) equal to the fair value of the estimated cost to retire an asset.

6 unchanged sentences

Any difference between costs incurred upon settlement of an asset retirement obligation and the recorded liability is recognized as a gain or loss in the Company’s earnings.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

Depreciation and depletion of producing oil and natural gas properties are recorded based on units of production.

7 unchanged sentences

Operating leases are presented on the Consolidated Balance Sheet as Operating lease assets with the corresponding lease liabilities presented in Operating lease liabilities and Non-current operating lease liabilities.

Finance lease assets (related to Brunei) are presented on the Consolidated Balance Sheet within Assets held for sale with the corresponding liabilities presented in Current maturities of long-term debt and Long-term debt.

Finance lease assets (related to Brunei) are presented on the Consolidated Balance Sheet within Property, plant and equipment with the corresponding liabilities presented in Current maturities of long-term debt and Long-term debt.

Generally, lease liabilities are recognized at commencement and based on the present value of the future minimum lease payments to be made over the lease term.

1 unchanged sentence

Where implicit lease rates are not determinable, the minimum lease payments are discounted using the Company’s collateralized incremental borrowing rates.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

Operating leases are expensed according to their nature and recognized in Lease operating expenses, Selling and general expenses or capitalized in the Consolidated Financial Statements.

10 unchanged sentences

A deferred tax asset valuation allowance is recorded when evidence indicates that it is more likely than not that all or a portion of these deferred tax assets will not be realized in a future period.

On December 22, 2017 the Tax Cuts and Jobs Act (2017 Tax Act) was enacted which triggered the transitional tax on a deemed repatriation of all past foreign earnings (see Note J) and a provision for this impact has been recorded.

Deferred tax liabilities are recorded for relevant withholding taxes when undistributed earnings of foreign subsidiaries are not considered indefinitely invested.

Under present law, the Company would incur a 5 % withholding tax on any earnings repatriated from Canada to the U.S.

The accounting rules for income tax uncertainties permit recognition of income tax benefits only when they are more likely than not to be realized.

5 unchanged sentences

dollars are included in Accumulated Other Comprehensive Loss in Consolidated Statements of Stockholders’ Equity.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – The fair value of a derivative instrument is recognized as an asset or liability in the Company’s Consolidated Balance Sheets.

7 unchanged sentences

If a derivative instrument no longer qualifies as a cash flow hedge and the underlying forecasted transaction is no longer probable of occurring, hedge accounting is discontinued, and the gain or loss recorded in Accumulated other comprehensive loss is recognized immediately in earnings.

All commodity price derivatives for the periods provided are not designated as cash flow or fair value hedges and therefore changes in fair value are recognized in earnings.

FAIR VALUE MEASUREMENTS– The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets.

5 unchanged sentences

Equity-Settled Awards – The fair value of awarded stock options, restricted stock units and other stock-based compensation that are settled with Company shares is determined based on a combination of management assumptions and the market value of the Company’s common stock.

The Company uses the Black-Scholes option pricing model for computing the fair value of equity-

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

settled stock options.

The Company uses a Monte Carlo valuation model to determine the fair value of performance-based restricted stock units that are equity settled and expense is recognized over the three -year vesting period.

The fair value of time-lapse restricted stock units is determined based on the price of Company stock on the date of grant and expense is recognized over the vesting period.

The Company uses the Black-Scholes option pricing model for computing the fair value of equity-settled stock options.

The primary assumptions made by management include the expected life of the stock option award and the expected volatility of Murphy’s common stock price.

1 unchanged sentence

Stock option expense is recognized on a straight-line basis over the respective vesting period of two or three years .

The fair value of time-lapse restricted stock units is determined based on the price of Company stock on the date of grant and expense is recognized over the vesting period.

The Company estimates the number of stock options and performance-based restricted stock units that will not vest and adjusts its compensation expense accordingly.

3 unchanged sentences

When SAR are exercised and when CRSU and phantom units settle, the Company adjusts previously recorded expense to the final amounts paid out in cash for these awards.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note A – Significant Accounting Policies (Contd.)

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS – The Company recognizes the funded status (the difference between the fair value of plan assets and the projected benefit obligation) of its defined benefit and other postretirement benefit plans in the Consolidated Balance Sheets.

13 unchanged sentences

The Company adopted the standard in the fourth quarter of 2020, and it did not have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-7 requiring that the service cost component of pension and postretirement benefit costs be presented in the same line item as other current employee compensation costs and other components of those benefit costs be presented separately from the service cost component outside a subtotal of income from operations, if presented.

The update also requires that only the service cost component of pension and postretirement benefit cost is eligible for capitalization.

The update is effective for annual and interim periods beginning after December 15, 2017.

The Company elected to apply the practical expedient, which allows us to reclassify amounts disclosed previously in the retirement benefits note as the basis for applying retrospective presentation for comparative periods.

The Company adopted the standard in the first quarter of 2018 and it did not have a material impact on its consolidated financial statements.

Financial Instruments – Credit Losses.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13 which replaces the impairment model for most financial assets, including trade receivables, from the incurred loss methodology to a forward-looking expected loss model that will result in earlier recognition of credit losses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note B – New Accounting Principles and Recent Accounting Pronouncements (Contd.)

permitted, and is to be applied on a modified retrospective basis.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13 which replaces the impairment model for most financial assets, including trade receivables, from the incurred loss methodology to a forward-looking expected loss model that will result in earlier recognition of credit losses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and is to be applied on a modified retrospective basis.

The Company adopted this accounting standard in the first quarter of 2020, and it did not have a material impact on its consolidated financial statements.

6 unchanged sentences

The Company adopted this accounting standard in the first quarter of 2020, and it did not have a material impact on its consolidated financial statements.

In February 2016, the FASB issued an Accounting Standards Update (ASU) 2016-02 (Topic 842) to increase transparency and comparability among companies by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The main difference between previous Generally Accepted Accounting Principles (GAAP) and this ASU is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.

The company adopted the standard in the first quarter of 2019 utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019.

The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date.

The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of right-of-use assets.

The adoption of ASU 2016-02 resulted in the initial recognition of right-of-use assets of $ 618.1 million, current lease liabilities for operating leases of approximately $ 155.5 million, non-current lease liabilities of $ 468.4 million and a cumulative-effect adjustment to credit retained earnings of $ 114.7 million on its Consolidated Balance Sheets, with no material impact to its Consolidated Statements of Operations.

See Note V for further information regarding the impact of the adoption of ASU 2016-02 on the Company’s financial statements.

Compensation – Stock Compensation.

In June 2018, the FASB issued an ASU 2018-07 which supersedes existing guidance for equity-based payments to nonemployees and expands the scope of guidance for stock compensation to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees.

As a result, the same guidance that provides for employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements.

The Company adopted this guidance during the first quarter of 2019 and it did not have material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-9 which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the type of changes to the terms and conditions of share-based payment awards to which an entity would be required to apply modification accounting.

The update is effective for annual periods beginning after December 15, 2017 and interim periods within the annual period.

The Company adopted this accounting standard in the first quarter of 2018 and it did not have a material impact on its consolidated financial statements.

Statement of Operations – Reporting Comprehensive Income .

In February 2018, the FASB issued ASU 2018-2, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.

The Company elected to early adopt this accounting standard during the first quarter of 2018 and recorded discrete adjustments from accumulated other comprehensive income to retained earnings of $ 28.4 million related to retirement and postretirement obligations and $ 1.8 million related to the deferred loss on interest rate derivative hedges.

The adoption of this ASU will have no future impact.

Recent Accounting Pronouncements

Income Taxes .

3 unchanged sentences

The Company adopted this guidance in the first quarter of 2021, and it did not have a material impact on its consolidated financial statements.

Recent Accounting Pronouncements

None affecting the Company.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

7 unchanged sentences

For operated oil and gas production where the non-operated working interest owner does not take-in-kind its proportionate interest in the produced commodity, the Company acts as an agent for the working interest owner and recognizes revenue only for its own share of the commingled production.

The exception to this is the reporting of the noncontrolling interest in MP GOM as prescribed by ASC 810-10-45.

The exception to this is the reporting of the noncontrolling interest in MP GOM as prescribed by U.S.

- In the United States, the Company primarily produces oil and gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico.

1 unchanged sentence

Revenue recognized is largely index based with price adjustments for floating market differentials.

Canada - In Canada, contracts are primarily long-term floating commodity index priced, except for certain natural gas physical forward sales fixed-price contracts.

Canada - In Canada, contracts include long-term floating commodity index priced and natural gas physical forward sales fixed-price contracts.

For the Offshore business in Canada, contracts are based on index prices and revenue is recognized at the time of vessel load based on the volumes on the bill of lading and point of custody transfer.

In 2019, the Company made an immaterial reclassification to correct its financial statements to report transportation, gathering, and processing costs as a separate line item (previously reported net in revenue) in the Consolidated Statements of Operations and revised the 2018 period to reflect this presentation.

There was no resultant change in net income attributable to Murphy.

Disaggregation of Revenue

3 unchanged sentences

Note C – Revenue from Contracts with Customers (Contd.)

For the years ended December 31, 2020, 2019, and 2018 the Company recognized $ 1,751.7 million, $ 2,817.1 million and $ 1,806.5 million, respectively, from contracts with customers for the continuing operations sales of oil, natural gas liquids and natural gas.

For the years ended December 31, 2021, 2020, and 2019 the Company recognized $ 2,801.2 million, $ 1,751.7 million and $ 2,817.1 million, respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas.

Years Ended December 31,

23 unchanged sentences

Total revenue and other income $ 2,299,281 1,967,341 2,829,053

1 Includes revenue attributable to noncontrolling interest in MP GOM, effective November 30, 2018.

1 Includes revenue attributable to noncontrolling interest in MP GOM.

2 Gain on sale of Malaysia operations of $ 985.4 million in 2019 is reported in discontinued operations.

2 unchanged sentences

Payment terms for the Company’s sales vary across contracts and geographical regions, with the majority of the cash receipts required within 30 days of billing.

Based on a forward-looking expected loss model in accordance with ASU 2016-13 (see Note B), the Company did not recognize any impairment losses on receivables or contract assets arising from customer contracts during the reporting periods.

The Company has not entered into any upstream oil and natural gas sale contracts that have financing components as of December 31, 2020.

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 revenue contracts that have financing components as of December 31, 2021, 2020 or 2019.

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

For the periods presented, the Company did not identify any assets to be recognized associated with the costs to obtain a contract with a customer.

Performance Obligations

The Company recognizes oil and gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer.

Judgment is required to determine whether some customers simultaneously receive and consume the

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

1 unchanged sentence

Note C – Revenue from Contracts with Customers (Contd.)

benefit of commodities.

Performance Obligations

The Company recognizes oil and gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer.

Judgment is required to determine whether some customers simultaneously receive and consume the benefit of commodities.

As a result of this assessment for the Company, each unit of measure of the specified commodity is considered to represent a distinct performance obligation that is satisfied at a point in time upon the transfer of control of the commodity.

6 unchanged sentences

Location Commodity End Date Description Approximate Volumes

Oil Q4 2021 Fixed quantity delivery in Eagle Ford 17,000 BOED

Natural Gas and NGL Q1 2023 Deliveries from dedicated acreage in Eagle Ford As produced

Canada Natural Gas Q4 2022 Contracts to sell natural gas at USD index pricing 8 MMCFD

Canada Natural Gas Q4 2022 Contracts to sell natural gas at USD Index pricing 7 MMCFD

Canada Natural Gas Q4 2022 Contracts to sell natural gas at USD index fixed pricing 20 MMCFD

Canada Natural Gas Q4 2022 Contracts to sell natural gas at CAD fixed prices 5 MMCFD

Canada Natural Gas Q4 2022 Contracts to sell natural gas at USD fixed pricing 20 MMCFD

Canada Natural Gas Q4 2023 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 2024 Contracts to sell natural gas at USD index pricing 31 MMCFD

Canada Natural Gas Q4 2024 Contracts to sell natural gas at Alberta AECO fixed prices 115 MMCFD

Canada Natural Gas Q4 2024 Contracts to sell natural gas at USD index fixed pricing 15 MMCFD

Canada Natural Gas Q4 2024 Contracts to sell natural gas at CAD fixed prices 100 MMCFD

Canada Natural Gas Q4 2024 1

Contracts to sell natural gas at CAD fixed prices 34 MMCFD

Canada Natural Gas Q4 2024 Contracts to sell natural gas at USD fixed pricing 15 MMCFD

Canada Natural Gas Q4 2026 Contracts to sell natural gas at USD index pricing 49 MMCFD

Note D – Acquisitions

LLOG Transaction :

In June 2019, the Company announced the completion of a transaction with LLOG Exploration Offshore L.L.C.

and LLOG Bluewater Holdings, L.L.C., (LLOG) which was effective January 1, 2019.

Through this transaction, Murphy acquired strategic deepwater Gulf of Mexico assets which added approximately 67 MMBOE of proven reserves at May 31, 2019.

Under the terms of the transaction, Murphy paid cash consideration of $ 1,236.2 million and has an obligation to pay additional contingent consideration of up to $ 200.0 million in the event that certain revenue thresholds are exceeded between 2019 and 2022, and $ 50.0 million following first oil from certain development projects.

The revenue threshold was not exceeded for the 2020 period.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note D – Acquisition (Contd.)

(Thousands of dollars) LLOG

Cash consideration paid $ 1,236,165

Contingent consideration 89,444

Total purchase consideration 1,325,609

(Thousands of dollars)

Fair value of Property, plant and equipment 1,356,185

Other assets 6,697

Asset retirement obligations ( 37,273 )

Total net assets $ 1,325,609

Note E – Assets Held for Sale and Discontinued Operations

The following table presents the carrying value of the major categories of assets and liabilities that are reflected as held for sale on the Company’s Consolidated Balance Sheets at December 31, 2020.

These include the King’s Quay Floating Production System (FPS) of $ 250.1 million , the Brunei exploration and production properties, and the Company’s office building in El Dorado, Arkansas.

As of December 31, 2019 the balance represents assets and liabilities of the Brunei exploration and production properties and the U.K.

refining and marketing operations.

( Thousands of dollars )

Current assets

Cash $ 10,185 25,185

Accounts receivable — 4,834

Inventories 406 406

Prepaid expenses and other — 1,882

Property, plant, and equipment, net 307,704 82,116

Deferred income taxes and other assets 9,441 9,441

Total current assets associated with assets held for sale 327,736 123,864

Current liabilities

Accounts payable 5,306 3,702

Other accrued liabilities 45 —

Current maturities of long-term debt (finance lease) 737 705

Taxes payable 1,510 1,411

Asset retirement obligation 261 240

Long-term debt (finance lease) 6,513 7,240

Total current liabilities associated with assets held for sale 14,372 13,298

The Company has accounted for its former Malaysian exploration and production operations, along with its former U.K.

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

The results of operations associated with discontinued operations are presented in the following table.

( Thousands of dollars )

2020 2019 2018

$ 4,090 1,364,943 854,251

Costs and expenses

Lease operating expense

— 127,138 202,062

Depreciation, depletion and amortization — 33,697 196,287

Other costs and expenses (benefits) 11,241 81,538 70,088

Total income from discontinued operations before taxes ( 7,151 ) 1,122,570 385,814

Income tax expense — 58,083 135,466

Income from discontinued operations $ ( 7,151 ) 1,064,487 250,348

1 2019 includes a $ 985.4 million gain on sale of the Malaysia operations.

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

1 These contracts are scheduled to commence after the balance sheet date, during Q1 2022.

Fixed price contracts are accounted for as normal sales and purchases for accounting purposes.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note F – Inventories

Inventories consisted of the following at December 31, 2020 and 2019.

( Thousands of dollars )

Unsold crude oil $ 16,399 27,634

Materials and supplies 49,677 48,489

Inventories $ 66,076 76,123

Note G – Property, Plant, and Equipment

Note D – Property, Plant and Equipment

December 31, 2021 December 31, 2020

1 unchanged sentence

Exploration and production ¹ $ 20,440,568 8,098,396 2

19,583,682 8,232,191 2

Corporate and other 145,135 29,456 140,661 36,847

3 unchanged sentences

2 Includes $ 22,543 in 2021 and $ 22,940 in 2020 related to administrative assets and support equipment.

In July 2019, the Company completed a divestiture of its two subsidiaries conducting Malaysian operations, Murphy Sabah Oil Co., Ltd.

In March 2021, the King’s Quay FPS was sold to ArcLight Capital Partners, LLC (ArcLight) for proceeds of $ 267.7 million, which reimburses the Company for previously incurred capital expenditures.

In 2019, the Company completed a divestiture of its two subsidiaries conducting Malaysian operations, Murphy Sabah Oil Co., Ltd.

and Murphy Sarawak Oil Co., Ltd., in a transaction with PTT Exploration and Production Public Company Limited (PTTEP) which was effective January 1, 2019.

1 unchanged sentence

A gain on sale of $ 985.4 million was recorded as part of discontinued operations on the Consolidated Statement of Operations in 2019.

Murphy was entitled to receive a $ 100.0 million bonus payment contingent upon certain future exploratory drilling results prior to October 2020, however the results were not achieved.

In June 2019, the Company announced the completion of a transaction with LLOG Exploration Offshore L.L.C.

and LLOG Bluewater Holdings, L.L.C., (LLOG) which was effective January 1, 2019.

Through this transaction, Murphy acquired strategic deepwater Gulf of Mexico assets which added approximately 67 MMBOE of proven reserves at May 31, 2019.

Murphy was entitled to receive a $ 100.0 million bonus payment contingent upon certain future exploratory drilling results prior to October 2020;

however, the results were not achieved.

In 2019, the Company acquired strategic deepwater Gulf of Mexico assets from LLOG Exploration Offshore L.L.C.

and LLOG Bluewater Holdings, L.L.C., (LLOG).

Under the terms of the transaction, Murphy paid cash consideration of $ 1,236.2 million and has an obligation to pay additional contingent consideration of up to $ 200 million in the event that certain revenue thresholds are exceeded between 2019 and 2022;

1 unchanged sentence

The revenue threshold was not exceeded for 2019 or 2020;

In 2018, a wholly owned subsidiary, Murphy Exploration & Production Company - USA, entered into a definitive agreement with Petrobras America Inc.

however, the threshold was met in 2021.

In 2018, the Company, through a subsidiary, acquired all of the Gulf of Mexico producing assets from Petrobras America Inc.

(PAI), a subsidiary of Petrobras.

The transaction was comprised of all of the Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations.

Both companies contributed all their current producing Gulf of Mexico assets to MP Gulf of Mexico, LLC, a subsidiary of Murphy, which following closing of the transaction is owned 80 % by Murphy and 20 % by PAI.

The transaction excluded Murphy’s exploration blocks.

However, PAI’s blocks that hold deep exploration rights were part of the transaction.

Murphy paid net cash consideration of $ 780.7 million, after adjustments provided for in the sale and purchase agreement.

Additionally, PAI received a 20 % interest in MP GOM and will earn an additional contingent consideration of up to $ 150.0 million if certain price and production thresholds are exceeded beginning in 2019 through 2025.

Also, Murphy agreed to carry $ 50.0 million of PAI development costs in the St.

Under the terms of the transaction, Murphy paid cash consideration of $ 780.7 million and has an obligation to pay additional contingent consideration of up to $ 150.0 million if certain price and production thresholds are exceeded beginning in 2019 through 2025;

and $ 50.0 million carry for PAI development costs in the St.

Malo Field if certain enhanced oil recovery projects are undertaken.

As of December 31, 2020, Murphy had funded $ 29.7 million of the carried interest.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note G – Property, Plant and Equipment (Contd.)

In 2020, declines in future oil and natural gas prices (principally driven by reduced demand in response to the COVID-19 pandemic and increased supply in the first quarter of 2020 from foreign oil producers and - see Risk Factors) led to impairments in certain of the Company’s U.S.

The price and production thresholds were not exceeded for 2019 and 2020;

however, the thresholds were met in 2021.

As of December 31, 2021, Murphy had completely funded the carried interest.

During the first quarter of 2021, the Company recorded an impairment charge of $ 171.3 million for Terra Nova due to the status, including agreements with the partners, of operating and production plans.

Subsequently, the Company acquired an additional 7.525 % working interest at Terra Nova following a commercial agreement to sanction an asset life extension project.

In the fourth quarter of 2021, the Company recorded an impairment charge of $ 25.0 million for assets reported as Assets held for sale in the Consolidated Balance Sheet.

In 2020, declines in future oil and natural gas prices (principally driven by reduced demand in response to the COVID-19 pandemic and increased supply in the first quarter of 2020 from foreign oil producers) led to impairments in certain of the Company’s U.S.

Offshore and Other Foreign properties.

The Company recorded pretax noncash impairment charges of $ 1,206.3 million to reduce the carrying values of certain properties to their estimated fair values at the time of impairment.

During 2018, declines in future oil and natural gas prices led to impairments in certain of the Company’s producing properties.

During 2018, as a result declines in future oil and natural gas prices, the Company recorded pretax noncash impairment charges of $ 20.0 million to reduce the carrying values of certain Midland properties to their estimated fair values at the time of impairment.

The following table reflects the recognized impairments for the three years ended December 31, 2020.

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.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note D - Property, Plant and Equipment (Contd.)

The following table reflects the recognized before tax impairments for the three years ended December 31, 2021.

(Thousands of dollars) 2021 2020 2019

$ 1,152,515 — 20,000

Canada $ 171,296 — —

Other Foreign 18,000 39,709 —

1 unchanged sentence

— 1,152,515 —

$ 196,296 1,206,284 —

Exploratory Wells

7 unchanged sentences

Reclassifications to proved properties based on the determination of proved reserves — — ( 61,096 )

— ( 61,096 ) ( 2,214 )

Capitalized exploration well costs charged to expense ( 18,860 ) ( 39,709 ) ( 13,145 )

Ending balance at December 31 $ 179,481 181,616 217,326

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

The capitalized well costs charged to expense during 2021 and 2020 principally represent charges for asset impairments (see above).

The capitalized well costs charged to expense during 2019 included the CM-1X and the CT-1X wells in Vietnam Block 11-2/11.

The wells were originally drilled in 2017.

The capitalized well costs charged to expense during 2018 included the Julong East well in Block CA-1, offshore Brunei in which further development of the well has not been sanctioned by the operator and the contract term for development sanctions was reached.

This well was originally drilled in 2012.

The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs has been capitalized.

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

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note G – Property, Plant and Equipment (Contd.)

2021 2020 2019

10 unchanged sentences

In all geographical areas, either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion.

Note H – Financing Arrangements and Debt

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note E – Assets Held for Sale and Discontinued Operations

As of December 31, 2021, these include the net property, plant equipment of the CA-2 project in Brunei and the Company’s office building in El Dorado, Arkansas.

The Company’s CA-1 asset in Brunei is no longer being marketed for sale.

As of December 31, 2020, the balance also included $ 250.1 million for the King’s Quay Floating Production System (FPS), which was sold in March 2021 (see Note D ).

( Thousands of dollars )

Current assets

Cash $ — 10,185

Inventories — 406

Property, plant, and equipment, net 15,453 307,704

Deferred income taxes and other assets — 9,441

Total current assets associated with assets held for sale 15,453 327,736

Current liabilities

Accounts payable — 5,306

Other accrued liabilities — 45

Current maturities of long-term debt (finance lease) — 737

Taxes payable — 1,510

Asset retirement obligation — 261

Long-term debt (finance lease) — 6,513

Total current liabilities associated with assets held for sale $ — 14,372

The Company has accounted for its former Malaysian exploration and production operations and its former U.K.

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

The results of operations associated with discontinued operations are presented in the following table.

( Thousands of dollars )

2021 2020 2019

$ 795 4,090 1,364,943

Costs and expenses

Lease operating expense — — 127,138

Depreciation, depletion and amortization — — 33,697

Other costs and expenses (benefits) 2,020 11,241 81,538

Total income from discontinued operations before taxes ( 1,225 ) ( 7,151 ) 1,122,570

Income tax expense — — 58,083

Income from discontinued operations $ ( 1,225 ) ( 7,151 ) 1,064,487

1 2019 includes a $ 985.4 million gain on sale of the Malaysia operations.

Note F – Inventories

Inventories consisted of the following at December 31, 2021 and 2020:

( Thousands of dollars )

Unsold crude oil $ 15,497 16,399

Materials and supplies 38,701 49,677

Inventories $ 54,198 66,076

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note G – Financing Arrangements and Debt

As of December 31, 2021, the Company has a $ 1.6 billion revolving credit facility (RCF).

The RCF is a senior unsecured guaranteed facility which expires in November 2023.

At December 31, 2020, the Company had $ 200.0 million outstanding borrowings under the RCF and $ 3.8 million of outstanding letters of credit, which reduces the borrowing capacity of the RCF.

At December 31, 2021, the Company had no outstanding borrowings under the RCF and $ 31.4 million of outstanding letters of credit, which reduces the borrowing capacity of the RCF.

At December 31, 2021, the interest rate in effect on borrowings under the facility would have been 1.78 %.

At December 31, 2021, the Company was in compliance with all covenants related to the RCF.

In May 2019, the Company entered into a $ 500 million term loan credit facility (the New Term Credit Facility).

The New Term Credit Facility was a senior unsecured guaranteed facility with an original maturity date of December 2, 2019.

The covenants within the New Term Credit Facility were substantially consistent with those in the Company’s revolving credit facility (see RCF above), and borrowings under the New Term Credit Facility bore interest at comparable rates to those incurred under the 2018 facility.

In July 2019, the Company closed the previously announced Malaysia divestiture, repaid and terminated the New Term Credit Facility.

In November 2019, the Company sold $ 550 million of new notes that bear interest at a rate of 5.875 % and mature on December 1, 2027.

The Company incurred transaction costs of $ 7.4 million on the issuance of these new notes.

The Company will pay interest semi-annually on June 1 and December 1 of each year, beginning June 1, 2020.

The proceeds of the $ 550 million notes were used to repurchase and cancel $ 239.7 million of the Company’s 4.00 % notes due 2022 and $ 281.6 million of the Company’s 4.45 % notes due 2022 (originally issued as 3.70 % notes due 2022, see table footnote below) (collectively the 2022 Notes) during November and December.

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.

The Company incurred transaction costs of $ 8.1 million on the issuance of these new notes and the Company will pay interest semi-annually on January 15 and July 15 of each year.

The proceeds of the $ 550.0 million notes, along with cash on hand, were used to redeem and cancel $ 259.3 million of the Company’s 4.00 % notes due June 2022 and $ 317.1 million of the Company’s 4.95 % notes due December 2022 (originally issued as 3.70 % notes due 2022;

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 year ended December 31, 2021.

The cash costs of $ 34.2 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note H – Financing Arrangements and Long-Term Debt (Contd.)

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 year ended December 31, 2021.

The cash costs of $ 2.6 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

In December 2021, the Company redeemed an additional $ 150.0 million aggregate principal amount of the 2024 Notes.

The cost of the debt extinguishment of $ 3.4 million is included in Interest expense, net on the Consolidated Statement of Operations for the year ended December 31, 2021.

The cash costs of $ 2.6 million are shown as a financing activity on the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

Long-term debt consisted of the following as of December 31, 2021 and 2020:

(Thousands of dollars) 2021 2020

1 unchanged sentence

4.00 % notes, due June 2022

$ 259,291 260,251

4.95 % notes, due December 2022 ¹

317,067 318,417

6.875 % notes, due August 2024

4 unchanged sentences

543,249 543,249

6.375 % notes, due July 2028

7.05 % notes, due May 2029

5 unchanged sentences

Total notes payable, net of unamortized discount 2,460,579 2,788,067

Capitalized lease obligation, due through March 2029 ¹ 5,489 —

Total debt including current maturities 2,466,068 2,788,067

Senior Unsecured Revolving Credit Facility — 200,000

Current maturities ( 654 ) —

Total long-term debt $ 2,465,414 2,988,067

1 Coupon rate may fluctuate 25 basis points if rating is periodically downgraded or upgraded by S&P and Moody’s.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note G - Financing Arrangements and Long-Term Debt (Contd.)

The amount of long-term debt repayable over each of the next five years and thereafter are as follows:

nil in 2021, $ 576.4 million in 2022, $ 200.0 million in 2023, $ 542.4 million in 2024, $ 548.7 million in 2025 and $ 1.14 billion thereafter.

Note I – Asset Retirement Obligations

nil in 2022, nil in 2023, $ 242.4 million in 2024, $ 548.7 million in 2025, nil in 2026 and $ 1.69 billion thereafter.

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

Securities and Exchange Commission that permits the offer and sale of debt and/or equity securities through October 15, 2024.

Note H – Asset Retirement Obligations

The asset retirement obligations liabilities (ARO) recognized by the Company at December 31, 2021 and 2020 are related to the estimated costs to dismantle and abandon its producing oil and natural gas properties and related equipment.

4 unchanged sentences

Liabilities incurred 54,439 14,736

Liabilities assumed from acquisitions — 64,810

Revisions of previous estimates 48,737 ( 70,098 )

5 unchanged sentences

Noncurrent portion of liability at end of year $ 839,776 816,308

1 Included in Other accrued liabilities on the Consolidated Balance Sheet.

1 Included in Other accrued liabilities on the Consolidated Balance Sheets.

The estimation of future ARO is based on a number of assumptions requiring professional judgment.

1 unchanged sentence

prices for oil field services, technological changes, governmental requirements and other factors.

Liabilities assumed in 2019, primarily represent obligations assumed as part of the LLOG acquisition (see Note D ).

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Income Taxes

Note I – Income Taxes

The components of income (loss) from continuing operations before income taxes for each of the three years presented and income tax expense (benefit) attributable thereto were as follows.

14 unchanged sentences

Total $ ( 5,862 ) ( 293,741 ) 14,683

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note I – Income Taxes (Contd.)

The following table reconciles income taxes based on the U.S.

4 unchanged sentences

statutory tax rate $ 9,007 ( 325,299 ) 42,735

$ ( 325,299 ) 42,735 9,031

Alberta tax rate reduction and tax impact of deemed repatriation of foreign invested earnings (U.S.

— ( 17,019 ) ( 135,700 )

Foreign income (loss) subject to foreign tax rates different than the U.S.statutory rate ( 3,791 ) ( 1,122 ) 5,822

tax reform) — — ( 17,019 )

Foreign income (loss) subject to foreign tax rates different than the U.S.

statutory rate 13,270 ( 3,791 ) ( 1,122 )

State income taxes, net of federal benefit 2,500 ( 6,646 ) 4,060

( 6,646 ) 4,060 2,607

tax benefit on certain foreign upstream investments ( 8,916 ) — ( 14,975 )

— ( 14,975 ) ( 14,702 )

Increase in deferred tax asset valuation allowance related to other foreign exploration expenditures 4,814 7,707 10,927

7,707 10,927 3,283

Tax effect on income attributable to noncontrolling interest ( 25,450 ) 23,712 ( 21,750 )

1 unchanged sentence

Total $ ( 5,862 ) ( 293,741 ) 14,683

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Income Taxes (Contd.)

An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 showing the tax effects of significant temporary differences follows.

4 unchanged sentences

Postretirement and other employee benefits 114,790 128,281

Alternative minimum tax — 9,765

net operating loss 577,531 589,067

7 unchanged sentences

Accumulated depreciation, depletion and amortization ( 786,846 ) ( 665,255 )

Investment in partnership — ( 14,250 )

Other deferred tax liabilities ( 41,387 ) ( 27,250 )

9 unchanged sentences

net operating loss being carried forward will more likely than not be utilized in future periods prior to expirations in 2036 and 2037.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note I – Income Taxes (Contd.)

Other Information

7 unchanged sentences

A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the three years presented is shown in the following table.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Income Taxes (Contd.)

( Thousands of dollars )

8 unchanged sentences

The Company also had other recorded liabilities as of December 31, 2021, 2020 and 2019 for interest and penalties of $ 0.3 million, $ 0.3 million and $ 0.1 million, respectively, associated with uncertain tax positions.

Income tax expense for the years ended December 31, 2020, 2019 and 2018 included net benefits for interest and penalties of $ 0.1 million, $ 0.1 million and $ 0.1 million, respectively, associated with uncertain tax positions.

Income tax expense for the years ended December 31, 2021, 2020 and 2019 included net benefits for interest and penalties of nil , $ 0.1 million and $ 0.1 million, respectively, associated with uncertain tax positions.

In 2022, the Company currently expects to add between $ 0.1 million and $ 1.0 million to the provision for uncertain tax positions.

3 unchanged sentences

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.

Additionally, the Company could be required to pay amounts into an escrow account as any matters are identified and appealed with the relevant taxing authorities.

As of December 31, 2021, the earliest years remaining open for audit and/or settlement in the Company’s major taxing jurisdictions are as follows:

1 unchanged sentence

Canada – 2016;

Malaysia – 2014;

and United Kingdom – 2018.

and Malaysia – 2014.

The Company has retained certain possible liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019.

The Company believes current recorded liabilities are adequate.

The Tax Cuts and Jobs Act and The Coronavirus Aid, Relief, and Economic Security Act

On December 22, 2017, the U.S.

enacted into legislation the Tax Cuts and Jobs Act (2017 Tax Act).

For the year ended December 31, 2017, the Company recorded a provisional tax expense of $ 274 million directly related to the impacts of the 2017 Tax Act.

The charge included the impact of a deemed repatriation of foreign earnings and the re-measurement of deferred tax assets and liabilities.

During 2018, the Company completed the accounting for the income tax effects related to the 2017 Tax Act.

The Company revised the provisional amount recorded in 2017 and recognized a favorable income tax adjustment of $ 135.7 million primarily related to the reinstatement of a deferred tax asset for 2017 net operating losses, which in 2017 was assumed utilized against the deemed repatriation.

This reinstatement followed April 2, 2018 Internal Revenue Service guidance which allowed the Company to preserve the 2017 tax net operating loss as a carryforward.

In the fourth quarter of 2020, under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted earlier in the year, the Company received a refund of its remaining outstanding AMT credit balance of approximately $ 18.5 million.

Coronavirus Aid, Relief, and Economic Security Act

In the fourth quarter of 2020, under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Company received a refund of its remaining outstanding AMT credit balance of approximately $ 18.5 million.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note K – Incentive Plans

Note J – Incentive Plans

Murphy utilizes cash-based and/or share-based incentive awards to supplement normal salaries as compensation for executive management and certain employees.

For share-based awards that qualify for equity accounting, costs are recognized as an expense in the Consolidated Statements of Operations using a grant date fair value-based measurement method over the periods that the awards vest.

For share-based awards that are required to be accounted for under liability accounting rules, costs are recognized as expense using a fair value-based measurement method over the vesting period, but expense is adjusted as necessary through the date the award value is finally determined.

For share-based awards that settle in cash that are required to be accounted for under liability accounting rules, costs are recognized as expense using a fair value-based measurement method over the vesting period, but expense is adjusted as necessary through the date the award value is finally determined.

Total expense for liability awards is ultimately adjusted to the final intrinsic value for the award.

At the Company’s annual stockholders’ meeting held on May 13, 2020, 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).

The 2020 Long-Term Plan authorizes the Committee to make grants of the Company’s Common Stock to employees in the same form as the 2018 Long-Term Plan.

The new plan can be found in the Company’s Definitive Proxy statement (Definitive 14A) dated March 30, 2020.

All awards on or after May 13, 2020 will be made under the 2020 Long-Term Plan.

The Company currently has outstanding incentive awards issued to certain employees under the 2017 Annual Incentive Plan, the 2012 Long-Term Plan and the 2018 Long-Term Plan.

The 2017 Annual Incentive Plan authorizes the Executive Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and certain other employees.

The Company currently has outstanding incentive awards issued to certain employees under the 2017 Annual Incentive Plan (2017 AIP), the 2012 Long-Term Incentive Plan (2012 Long-Term Plan), the 2018 Long-Term Incentive Plan (2018 Long-Term Plan) and the 2020 Long-Term Incentive Plan (2020 Long-Term Plan).

The 2017 AIP authorizes the Executive Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and certain other employees.

Cash awards under the 2017 Annual Incentive Plan are determined based on the Company’s actual financial and operating results as measured against the performance goals established by the Committee.

The 2020 Long-Term Plan, the 2018 Long-Term Plan and the 2012 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, performance units, performance shares, dividend equivalents and other stock-based incentives.

the 2017 AIP expired on December 31, 2021 and has been replaced with the 2022 Annual Incentive Plan, effective January 1, 2022.

The 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.

The 2020 Long-Term Plan expires in 2030.

A total of 5 million and 6.75 million shares are issuable during the life of the 2020 Long-Term Plan and the 2018 Long-Term Plan.

There have been no awards granted from the 2020 Long Term Plan to date.

In 2018, the Company’s shareholders approved the 2018 Stock Plan for Non-Employee Directors (2018 NED Plan) that permits the issuance of restricted stock, restricted stock units and stock options or a combination thereof to the Company’s Non-Employee Directors.

A total of 5 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.

Based on awards made to date, 3.48 million shares are available for grant under the 2020 Long-Term Plan at December 31, 2021.

At the Company’s annual stockholders’ meeting held on May 12, 2021, shareholders approved the replacement of the 2018 Stock Plan for Non-Employee Directors (2018 NED Plan) with the 2021 Stock Plan for Non-Employee Directors (2021 NED Plan).

The 2021 NED Plan permits the issuance of restricted stock, restricted stock units and stock options or a combination thereof to the Company’s Non-Employee Directors.

The Company currently has outstanding incentive awards issued to Directors under the 2021 NED Plan and the 2018 NED Plan.

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

The Company generally expects to issue treasury shares to satisfy future stock option exercises and vesting of restricted stock and restricted stock units.

4 unchanged sentences

Related income tax benefit recognized in income 7,196 2,672 7,389

As of December 31, 2020, there were $ 42.6 million in compensation costs to be expensed over approximately the next five years related to unvested share-based compensation arrangements granted by the Company.

As of December 31, 2021, there were $ 45.8 million in compensation costs to be expensed over approximately the next three years related to unvested share-based compensation arrangements granted by the Company.

Employees receive net shares, after applicable withholding obligations, upon each stock option exercise and restricted stock award.

1 unchanged sentence

Equity-Settled Awards

PERFORMANCE-BASED RESTRICTED STOCK UNITS – Performance-based restricted stock units (PSUs) to be settled in Common shares were granted in 2021 under the 2020 Long-Term Plan and 2020 and 2019 under the

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Incentive Plans (Contd.)

2018 Long-Term Plan.

Each grant will vest if the Company achieves specific performance objectives at the end of the designated performance period.

Additional shares may be awarded if performance objectives are exceeded.

If performance goals are not met, PSUs will not vest, but recognized compensation cost associated with the stock award would not be reversed.

For PSUs, the performance conditions are based on the Company’s total shareholder return ( 80 % weighting), compared to an industry peer group of companies, and the EBITDA divided by Average Capital Employed (ACE) metric ( 20 % weighting) for PSU awards beginning in 2020, over the performance period.

During the performance period, PSUs are subject to transfer restrictions and are subject to forfeiture if a grantee terminates for reasons other than retirement, disability or death.

Termination for these three reasons will lead to a pro rata award of amounts earned.

No dividends are paid nor do voting rights exist on awards of PSUs prior to their settlement.

Changes in PSUs outstanding for each of the last three years are presented in the following table.

( Number of stock units )

2021 2020 2019

Outstanding at beginning of year 2,207,429 2,129,733 1,660,417

Granted 1,156,800 999,700 957,600

Vested and issued ( 642,473 ) ( 429,194 ) ( 331,917 )

Forfeited ( 51,000 ) ( 492,810 ) ( 156,367 )

Outstanding at end of year 2,670,756 2,207,429 2,129,733

The fair value of the equity-settled performance-based awards granted in each year was estimated on the date of grant using a Monte Carlo valuation model.

Expected volatility was based on daily historical volatility of the Company’s stock price compared to a peer group average over a three-year period.

The risk-free interest rate is based on the yield curve of three-year U.S.

Treasury bonds and the stock beta was calculated using three years of historical averages of daily stock data for Murphy and the peer group.

The assumptions used in the valuation of the performance awards granted in 2021, 2020 and 2019 are presented in the following table.

2021 2020 2019

Fair value per share at grant date $ 16.03 $ 21.51 $ 28.09

Expected volatility 74.00 % 39.00 % 46.00 %

Risk-free interest rate 0.18 % 1.40 % 2.50 %

Stock beta 1.169 0.864 1.037

Expected life 3.0 years 3.0 years 3.0 years

TIME-BASED RESTRICTED STOCK UNITS – Time-based restricted stock units (RSUs) have been granted to the Company’s Non-Employee Directors (NED) under the 2018 NED Plan and 2021 NED Plan and to certain employees under the 2012 Long-Term Plan, 2018 Long-Term Plan and 2020 Long-Term Plan.

The fair value of the time-based restricted stock units awarded in 2021, 2020 and 2019 are presented in the following table.

Type of Plan Valuation Methodology 2021 2020 2019

Non-Employee Directors 1, 2

Closing Stock Price at Grant Date $ 13.14 - 23.58

$ 22.59 $ 21.68

Long-Term Incentive Plan 3

Average High/Low Stock Price at Grant Date $ 12.30 $ 21.68 $ 28.16

1 Under the 2018 NED Plan, the RSUs granted in 2019 vest on the third anniversary of the date of grant and the RSUs granted in 2020 vest on the first anniversary of the date of grant.

2 Under the 2021 NED Plan, RSUs granted in 2021 are scheduled to vest in February 2022.

3 The RSUs granted under the 2012 Plan will vest on the fifth anniversary of the date of grant.

The RSUs granted under the 2018 and 2020 Long-Term Plan generally vest on the third anniversary of the date of grant.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Incentive Plans (Contd.)

Changes in RSUs outstanding for each of the last three years are presented in the following table.

( Number of share units )

2021 2020 2019

Outstanding at beginning of year 1,383,043 1,535,080 1,538,854

Granted 573,907 446,848 409,692

Vested and issued ( 476,012 ) ( 271,285 ) ( 275,738 )

Forfeited ( 29,500 ) ( 327,600 ) ( 137,728 )

Outstanding at end of year 1,451,438 1,383,043 1,535,080

STOCK OPTIONS – In 2018, the Company ceased the inclusion of stock options and stock appreciation rights as a part of the long-term incentive compensation mix.

Previously, the Committee fixed the option price of each option granted at no less than fair market value (FMV) on the date of the grant and fixed the option term at no more than seven years from such date.

Prior to 2018, the Committee fixed the option price of each option granted at no less than fair market value (FMV) on the date of the grant and fixed the option term at no more than seven years from such date.

Each option granted to date under the 2012 Long-Term Plan has been nonqualified, with a term of seven years and an option price equal to FMV at date of grant.

1 unchanged sentence

For stock options, the number of shares issued upon exercise is reduced for settlement of applicable statutory income tax withholdings owed by the grantee.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note K – Incentive Plans (Contd.)

The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on the assumptions noted in the following table.

The fair value of each option award was estimated on the date of grant using the Black-Scholes pricing model based on the assumptions noted in the following table.

Expected volatility is based on historical volatility of the Company’s stock and implied volatility on publicly traded at-the-money options on the Company’s stock.

28 unchanged sentences

546,000 0.1 — 546,000 0.1 —

$ 51.00 to $ 65.00

1,319,500 1.0 $ 3,097,563 1,319,500 1.0 $ 3,097,563

2,048,400 1.6 $ — 2,048,400 1.6 $ —

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note J – Incentive Plans (Contd.)

The total intrinsic value of options exercised during 2021 was $ 1.2 million.

1 unchanged sentence

Aggregate intrinsic value is nil when the exercise price of the stock option exceeds the market price of the Company’s common stock.

PERFORMANCE-BASED RESTRICTED STOCK UNITS – Performance-based restricted stock units (PSUs) to be settled in Common shares were granted in 2020 and 2019 under the 2018 Long-Term Plan and 2018 under the 2012 Long-Term Plan.

Each grant will vest if the Company achieves specific performance objectives at the end of the designated performance period.

Additional shares may be awarded if performance objectives are exceeded.

If performance goals are not met, PSUs will not vest, but recognized compensation cost associated with the stock award would not be reversed.

For PSUs, the performance conditions are based on the Company’s total shareholder return ( 80 % weighting) and the EBITDA divided by Average Capital Employed (ACE) metric ( 20 % weighting) for PSU awards beginning in 2020, over the performance period compared to an industry peer group of companies.

During the performance period, PSUs are subject to transfer restrictions and are subject to forfeiture if a grantee terminates for reasons other than retirement, disability or death.

Termination for these three reasons will lead to a pro rata award of amounts earned.

No dividends are paid nor do voting rights exist on awards of PSUs prior to their settlement.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note K – Incentive Plans (Contd.)

Changes in PSUs outstanding for each of the last three years are presented in the following table.

( Number of stock units )

2020 2019 2018

Outstanding at beginning of year 2,129,733 1,660,417 1,187,921

Granted 999,700 957,600 905,500

Vested and issued ( 429,194 ) ( 331,917 ) ( 311,866 )

Forfeited ( 492,810 ) ( 156,367 ) ( 121,138 )

Outstanding at end of year 2,207,429 2,129,733 1,660,417

The fair value of the equity-settled performance-based awards granted in each year was estimated on the date of grant using a Monte Carlo valuation model.

Expected volatility was based on daily historical volatility of the Company’s stock price compared to a peer group average over a three-year period.

The risk-free interest rate is based on the yield curve of three-year U.S.

Treasury bonds and the stock beta was calculated using three years of historical averages of daily stock data for Murphy and the peer group.

The assumptions used in the valuation of the performance awards granted in 2020, 2019 and 2018 are presented in the following table.

2020 2019 2018

Fair value per share at grant date 21.51 $ 28.09 $ 22.99 - $ 30.56

Expected volatility 39.00 % 46.00 % 48.00 %

Risk-free interest rate 1.40 % 2.50 % 2.30 %

Stock beta 0.864 1.037 1.103

Expected life 3.0 years 3.0 years 3.0 years

TIME-BASED RESTRICTED STOCK UNITS – Time-based restricted stock units (RSUs) have been granted to the Company’s Non-Employee Directors (NED) under the 2013 NED Plan and 2018 NED Plan and to certain employees under the 2012 Long-Term Plan and 2018 Long-Term Plan.

The RSUs granted under the 2012 Long-Term Plan, the 2013 NED Plan and the 2018 Long-Term Plan vest on the third anniversary of the date of grant.

Under the 2018 NED Plan, the RSUs granted in 2019 vest on the third anniversary of the date of grant and the RSUs granted in 2020 vest on the first anniversary of the date of grant.

The fair value of these awards was estimated based on the market value of the Company’s stock on the date of grant, which were $ 22.59 to $ 21.68 per share in 2020, $ 21.68 to $ 28.16 per share in 2019, and $ 25.69 to $ 28.43 per share in 2018.

Changes in RSUs outstanding for each of the last three years are presented in the following table.

( Number of share units )

2020 2019 2018

Outstanding at beginning of year 1,535,080 1,538,854 1,035,980

Granted 446,848 409,692 823,803

Vested and issued ( 271,285 ) ( 275,738 ) ( 233,456 )

Forfeited ( 327,600 ) ( 137,728 ) ( 87,473 )

Outstanding at end of year 1,383,043 1,535,080 1,538,854

Cash-Settled Awards

The Company has granted stock-based incentive awards to be settled in cash to certain employees in the form of Stock Appreciation Rights (SARs), Performance-based restricted stock units (CPSUs), Time-based restricted stock units (CRSUs) and Phantom units.

The Company has granted phantom stock-based incentive awards to be settled in cash to certain employees in the form of Stock Appreciation Rights (SARs), Performance-based restricted stock units (CPSUs), Time-based restricted stock units (CRSUs) and Phantom units.

SAR awards have terms similar to stock options.

3 unchanged sentences

Each award granted is settled, net of applicable income tax withholdings, in cash rather than with Common shares.

Total expense recorded in the Consolidated Statements of Operations for all cash-settled stock-based awards was $ 1.5 million in 2020, $ 16.9 million in 2019 and $ 6.5 million in 2018.

Total pre-tax expense recorded in the Consolidated Statements of Operations for all cash-settled stock-based awards was $ 18.2 million in 2021, $ 1.5 million in 2020 and $ 16.9 million in 2019.

The Committee also administers the Company’s incentive compensation plans, which provide for annual or periodic cash awards to officers, directors and certain other employees.

1 unchanged sentence

Compensation expense of $ 29.0 million, $ 9.8 million and $ 34.1 million was recorded in 2021, 2020 and 2019, respectively, for these plans.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans

Note K – Employee and Retiree Benefit Plans

PENSION AND OTHER POSTRETIREMENT PLANS – The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees.

4 unchanged sentences

Contributions to foreign plans are based on local laws and tax regulations.

The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S.

The Company also sponsors other postretirement benefits such as health care and life insurance benefit plans, which are not funded, that cover most retired U.S.

The health care benefits are contributory;

5 unchanged sentences

GAAP requires the Company to recognize the overfunded or underfunded status of its defined benefit plans as an asset or liability in its consolidated balance sheet and to recognize changes in that funded status between periods through Accumulated other comprehensive loss.

On May 6, 2020, the Company announced that it was closing its headquarters office in El Dorado, Arkansas, its office in Calgary, Alberta, and consolidating all worldwide staff activities to its existing office location in Houston, Texas.

As a result of this decision and the subsequent restructuring activities, a pension remeasurement was triggered and the Company incurred pension curtailment and special termination benefit charges as a result of the associated reduction in force.

The Company elected the use of a practical expedient to perform the pension remeasurement as of May 31, 2020, which resulted in an increase in our pension and other postretirement benefit liabilities of $ 63.0 million (as of May 31, 2020) due to a lower discount rate and lower plan assets compared to December 31, 2019.

In 2020, the Company announced that it was closing its headquarters office in El Dorado, Arkansas, its office in Calgary, Alberta, and consolidating all worldwide staff activities to its existing office location in Houston, Texas.

The tables that follow provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets for the years ended December 31, 2021 and 2020 and a statement of the funded status as of December 31, 2021 and 2020.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

Note K – Employee and Retiree Benefit Plans (Contd.)

Benefits Other

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Special termination benefits — 8,434 — —

Plan amendments — — ( 5,002 ) —

Obligation at December 31 939,380 981,467 96,133 108,378

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Benefits paid ( 38,866 ) ( 46,066 ) ( 4,041 ) ( 4,238 )

Other — ( 2,510 ) — —

Fair value of plan assets at December 31 611,302 586,720 — —

13 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

Note K – Employee and Retiree Benefit Plans (Contd.)

The table that follows includes projected benefit obligations, accumulated benefit obligations and fair value of plan assets for plans where the accumulated benefit obligation exceeded the fair value of plan assets.

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Unfunded nonqualified and directors’ plans where accumulated benefit obligation exceeds fair value of plan assets 188,713 201,372 188,530 198,792 — —

201,372 177,999 198,792 171,934 — —

Unfunded other postretirement plans 96,133 108,378 96,133 108,378 — —

8 unchanged sentences

Amortization of prior service cost (credit) 591 640 964 — — —

Recognized actuarial loss 22,828 14,106 21,893 ( 31 ) ( 193 ) —

Recognized actuarial (gain) loss 20,565 22,828 14,106 ( 29 ) ( 31 ) ( 193 )

Net periodic benefit expense 24,917 28,246 25,150 3,337 3,968 5,230

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The following table provides the weighted-average assumptions used in the measurement of the Company’s benefit obligations at December 31, 2021 and 2020 and net periodic benefit expense for 2021 and 2020.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note K – Employee and Retiree Benefit Plans (Contd.)

Benefit Obligations Net Periodic Benefit Expense

9 unchanged sentences

Rate of compensation increase 3.04 % 3.04 % — — 3.04 % 3.28 % — —

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

The discount rates used for determining the plan obligations and expense are based on the universe of high-quality corporate bonds that are available within each country.

15 unchanged sentences

During 2021, the Company made contributions of $ 31.2 million to its domestic defined benefit pension plans and $ 1.1 million to its domestic postretirement benefits plan.

During 2021, Company currently expects to make contributions of $ 31.3 million to its domestic defined benefit pension plans, $ 5.3 million to its foreign defined benefit pension plans and $ 5.3 million to its domestic postretirement benefits plan.

During 2022, the Company currently expects to make contributions of $ 35.0 million to its domestic defined benefit pension plans, $ 3.2 million to its foreign defined benefit pension plans and $ 4.9 million to its domestic postretirement benefits plan.

Plan Investments – Murphy Oil Corporation maintains an Investment Policy Statement (Statement) that establishes investment standards related to its funded domestic qualified retirement plan.

The Statement specifies that all assets will be held in a Trust sponsored by the Company, which is administrated by a trustee appointed by the Investment Committee (Committee).

Members of the Committee are appointed by the Chief Executive Officer of Murphy.

The Committee hires Investment Managers to invest trust assets within the guidelines established by the Committee as allowed by the Statement.

The investment goals call for a portfolio of assets consisting of equity, fixed income and cash equivalent securities.

The primary consideration for investments is the preservation of capital, and investment growth should exceed the rate of inflation.

The Committee has directed the asset investment advisors of its benefit plans to maintain a portfolio consisting of both equity and fixed income securities.

The Company believes that over time a balanced to slightly heavier weighting of the portfolio in equity securities compared to fixed income securities represents the most appropriate long-term mix for future investment return on assets held by domestic plans.

Generally, no more than 10 % of an Investment Manager’s portfolio is to be held in equity securities of any one issuer, and equity securities should have a minimum market capitalization of $ 100.0 million.

Equities held in the trust should be listed on the New York or American Stock Exchanges, principal U.S.

regional exchanges, major foreign exchanges or quoted in significant over-the-counter markets.

Equity or fixed income securities issued by the Company may not be held in the trust.

Fixed income securities include maturities greater than one year to maturity.

The fixed income portfolio should not exceed an average maturity of 11 years.

The portfolio may include investment grade corporate bonds, bond issues of the U.S.

government, its agencies and government sponsored entities, government agency issued collateralized mortgage backed securities, agency issued mortgage backed securities, municipal bonds, asset backed securities, commercial mortgage backed securities and international and emerging markets bond funds.

The Committee routinely reviews the investment performance of Investment Managers.

retirement plan, trustees have been appointed by the wholly-owned subsidiary that sponsors the plan for U.K.

The trustees have hired Hewitt Risk Management Services Limited (the Manager) as fiduciary investment manager of the plan’s assets.

The trustees have adopted a de-risking strategy which permits the Manager discretion to vary the investment allocation as needed to meet a target return.

The target return is reduced over time as pre-determined funding level triggers are met in proportion to pension liability changes.

As of December 31, 2020 , one of seven funding level triggers have been met which led to a reduction in growth assets to more low-risk assets.

The plan primarily invests in two fund s, the Delegated Growth Fund (DGF) and the Delegated Liability Fund (DLF).

The DGF is diversified by style, strategy and asset

Our investment strategy is to maximize long-term returns at an acceptable level of risk through broad diversification of plan assets in a variety of asset classes.

Asset classes and target allocations are determined by our investment committee and include equities, fixed income and other investments, including hedge funds, real estate and cash equivalent securities.

Investment managers are prohibited from investing in equity or fixed income securities issues by the Company.

The majority of plan assets are highly liquid, providing flexibility for benefit payment requirements.

The current target allocations for plan assets are 40 - 70 % equity securities, 30 - 60 % fixed income securities, 0 - 15 % alternatives and 0 - 15 % cash and equivalents.

Asset allocations are rebalanced on a periodic basis throughout the year to bring assets to within an acceptable range of target levels.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

class by investing with underlying funds that may include equity funds, fixed income funds, debt funds, currency funds, hedge funds, fund of hedge funds and other collective investment schemes covering a broad range of asset classes and strategies.

The DLF aims to provide returns in line with the liabilities of typical pension plans on an exposure basis in the relevant tenures and instruments (long/short, real/nominal).

The DLF also holds cash as collateral for the leveraged positions along with small working cash balances to facilitate daily management of payments and receipts within the plan.

The trustee routinely reviews the investment performance of the plan.

For the Canadian retirement plan, the wholly-owned subsidiary that sponsors the plan has a Statement of Investment Policies and Procedures (Policy) applicable to the plan assets.

A pension committee appointed by the board of directors of the subsidiary oversees the plan, selects the investment advisors and routinely reviews performance of the asset portfolio.

The Policy permits assets to be invested in various Canadian and foreign equity securities, various fixed income securities, real estate, natural resource properties or participation rights and cash.

The objective for plan investments is to achieve a total rate of return equal to the long-term interest rate assumption used for the going-concern actuarial funding valuation.

The following table provides the asset allocation of each plan on December 31, 2020.

Allocation of Plan Assets

Domestic Plan Canadian Plan U.K.

Target Allocation at Target Allocation at Target Allocation at

Allocation December 31, 2020 Allocation December 31, 2020 Allocation December 31, 2020

Equity securities 40 - 70 %

31.0 % N/A 65.0 %

Fixed income securities 28 - 60 %

68.0 % N/A 11.7 %

Alternatives 0 - 18 %

11.4 % — % — % N/A 18.0 %

Cash and equivalents 0 - 15 %

1.0 % N/A 5.3 %

Note K – Employee and Retiree Benefit Plans (Contd.)

The weighted average asset allocation for the Company’s funded pension benefit plans at December 31, 2021 and 2020 are presented in the following table.

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At December 31, 2021, the fair value measurements of retirement plan assets within the fair value hierarchy are included in the table that follows.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

Fair Value Measurements Using

9 unchanged sentences

small/midcap 73,222 73,222 — —

Hedged funds and other alternative strategies 42,040 — — 42,040

International commingled trust fund 76,095 987 55,433 19,675

Emerging market commingled equity fund 32,058 10,480 21,578 —

Other alternative strategies 47,248 — — 47,248

International equity 47,546 47,546 — —

Emerging market equity 14,937 14,937 — —

Fixed income securities:

fixed income 92,231 36,888 55,343 —

International commingled trust fund 9,456 — 9,456 —

Cash and equivalents 8,951 8,951 — —

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

Note K – Employee and Retiree Benefit Plans (Contd.)

At December 31, 2020, the fair value measurements of retirement plan assets within the fair value hierarchy are included in the table that follows.

26 unchanged sentences

Total $ 586,720 124,407 364,628 97,685

The definition of levels within the fair value hierarchy in the tables above is included in Note Q – Assets and Liabilities Measured at Fair Value .

The definition of levels within the fair value hierarchy in the tables above is included in Note P – Assets and Liabilities Measured at Fair Value .

For domestic plans, U.S.

core and small/midcap equity securities are valued based on daily market prices as quoted on national stock exchanges or in the over-the-counter market.

Hedge funds and other alternative strategies funds consist of three investments.

One of these investments is valued based on daily market prices as quoted on national stock exchanges, another investment is valued monthly based on net asset value and permits withdrawals semi-annually after a 90 -day notice, and the third investment is also valued monthly based on net asset values and has a two-year lock-up period and a 95 -day notice following the lock-up period.

International equities held in a commingled trust are valued monthly based on prices as quoted on various international stock exchanges.

The emerging market commingled equity fund is valued monthly based on net asset value.

These commingled equity funds can be withdrawn monthly and have a 10 -day notice period.

fixed income securities are valued daily based on bids for the same or similar securities or using net asset values.

International fixed income securities held in a commingled trust are valued on a monthly basis using net asset values.

The fixed income emerging market mutual fund is valued daily based on net asset value.

core, small/midcap, international, emerging market equity securities and U.S.

treasury securities are quoted prices in active markets.

For commercial paper securities, the prices received generally utilize observable inputs in the pricing methodologies.

Other alternative strategies funds consist of three investments.

One of these investments is valued quarterly based on net asset value and permits withdrawals after a 45 -day notice, another investment is valued annually based on net asset value and permits withdrawals semi-annually after a 90 -day notice, and the third investment is also valued quarterly based on net asset values and has a two-year lock-up period and a 95 -day notice following the lock-up period.

For foreign plans, the equity securities funds are comprised of U.K.

1 unchanged sentence

Fixed income securities funds are U.K.

securities valued daily at net asset values.

The diversified pooled fund is valued daily at net asset value and contains a combination of Canadian and foreign equity securities, Canadian fixed income securities and cash.

and Canadian securities valued daily at net asset values.

The diversified pooled fund is valued daily at net asset value and contains a combination of U.K.

and foreign equity securities.

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Note L – Employee and Retiree Benefit Plans (Contd.)

Note K – Employee and Retiree Benefit Plans (Contd.)

The effects of fair value measurements using significant unobservable inputs on changes in Level 3 plan assets are outlined below:

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Amounts charged to expense for the Company’s match to these plans were $ 5.4 million in 2021, $ 6.6 million in 2020 and $ 8.4 million in 2019.

Note M – Financial Instruments and Risk Management

DERIVATIVE INSTRUMENTS – Murphy often uses derivative instruments to manage certain risks related to commodity prices, foreign currency exchange rates and interest rates.

Note L – Financial Instruments and Risk Management

DERIVATIVE INSTRUMENTS – 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.

The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features.

Derivative instruments are traded primarily with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (NYMEX).

Derivative instruments are traded with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (NYMEX).

The Company has a risk management control system to monitor commodity price risks and any derivatives obtained to manage a portion of such risks.

For accounting purposes, the Company has not designated commodity and foreign currency derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Operations.

Certain interest rate derivative contracts were accounted for as hedges and the gain or loss associated with recording the fair value of these contracts was deferred in AOCL and amortized to Interest expense over the life of the related liability.

Commodity Purchase Price Risks

The Company is subject to commodity price risk related to products it produces and sells.

During the last three years, the Company had West Texas Intermediate (WTI) crude oil price swap financial contracts to economically hedge a portion of its United States production.

Under these contracts, which matured monthly, the Company paid the average monthly price in effect and received the fixed contract prices.

At December 31, 2020, the Company had 45,000 barrels per day in WTI crude oil swap financial contracts maturing ratably during 2021 at an average price of $ 42.77 and 15,000 barrels per day in WTI crude oil swap financial contracts maturing ratably during 2022 at an average price of $ 44.27 .

At December 31, 2019, the Company had 45,000 barrels per day in WTI crude oil swap financial contracts maturing ratably during 2020 at an average price of $ 56.42 .

At December 31, 2020 and 2019, the fair value of derivative instruments not designated as hedging instruments are presented in the following table.

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 AOCL and amortized to Interest expense over time.

In 2021, the Company redeemed all of the remaining notes due 2022, which were associated with the interest rate derivative contracts, 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

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 December 31, 2021, volumes per day associated with outstanding crude oil derivative contracts and the weighted average prices for these contracts are as follows:

MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

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

December 31, 2020 December 31, 2019

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

NYMEX WTI swap contracts:

Volume per day (Bbl):

Price per Bbl:

NYMEX WTI collar contracts:

Volume per day (Bbl):

Price per Bbl:

Average Ceiling:

Average Floor:

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 derivative instruments outstanding as of December 31, 2021 and 2020.

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

What changed 10-K

Item 9A. Controls and Procedures