MURPHY OIL CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Thousands of dollars, except share amounts) March 31, 2023 December 31, 2022 ASSETS Current assets Cash and cash equivalents $ 312,383 $ 491,963 Accounts receivable, net 394,936 391,152 Inventories 63,539 54,513 Prepaid expenses 30,983 34,697 Total current assets 801,841 972,325 Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $ 12,697,538 in 2023 and $ 12,489,970 in 2022 8,363,001 8,228,016 Operating lease assets 903,147 946,406 Deferred income taxes 74,060 117,889 Deferred charges and other assets 46,480 44,316 Total assets $ 10,188,529 $ 10,308,952 LIABILITIES AND EQUITY Current liabilities Current maturities of long-term debt, finance lease $ 697 $ 687 Accounts payable 516,855 543,786 Income taxes payable 24,772 26,544 Other taxes payable 28,185 22,819 Operating lease liabilities 239,374 220,413 Other accrued liabilities 218,130 443,585 Total current liabilities 1,028,013 1,257,834 Long-term debt, including finance lease obligation 1,822,979 1,822,452 Asset retirement obligations 830,358 817,268 Deferred credits and other liabilities 301,707 304,948 Non-current operating lease liabilities 679,909 742,654 Deferred income taxes 220,895 214,903 Total liabilities $ 4,883,861 $ 5,160,059 Equity Cumulative Preferred Stock, par $ 100 , authorized 400,000 shares, none issued $ – $ – Common Stock, par $ 1.00 , authorized 450,000,000 shares, issued 195,100,628 shares in 2023 and 195,100,628 shares in 2022 195,101 195,101 Capital in excess of par value 857,000 893,578 Retained earnings 6,204,217 6,055,498 Accumulated other comprehensive loss ( 529,919 ) ( 534,686 ) Treasury stock ( 1,588,841 ) ( 1,614,717 ) Murphy Shareholders' Equity 5,137,558 4,994,774 Noncontrolling interest 167,110 154,119 Total equity 5,304,668 5,148,893 Total liabilities and equity $ 10,188,529 $ 10,308,952 See Notes to Consolidated Financial Statements, page 7 . 2 Table of Contents MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, (Thousands of dollars, except per share amounts) 2023 2022 Revenues and other income Revenue from production $ 796,231 $ 834,528 Sales of purchased natural gas 43,737 36,846 Total revenue from sales to customers 839,968 871,374 Loss on derivative instruments – ( 320,777 ) Gain on sale of assets and other income 1,748 2,364 Total revenues and other income 841,716 552,961 Costs and expenses Lease operating expenses 199,984 136,825 Severance and ad valorem taxes 11,440 14,635 Transportation, gathering and processing 53,922 46,923 Costs of purchased natural gas 32,269 33,665 Exploration expenses, including undeveloped lease amortization 10,182 47,566 Selling and general expenses 18,308 33,529 Depreciation, depletion and amortization 195,670 164,124 Accretion of asset retirement obligations 11,157 11,876 Other operating expense 11,988 105,942 Total costs and expenses 544,920 595,085 Operating income (loss) from continuing operations 296,796 ( 42,124 ) Other income (loss) Other expenses ( 73 ) ( 2,495 ) Interest expense, net ( 28,855 ) ( 37,277 ) Total other loss ( 28,928 ) ( 39,772 ) Income (loss) from continuing operations before income taxes 267,868 ( 81,896 ) Income tax expense (benefit) 53,833 ( 16,961 ) Income (loss) from continuing operations 214,035 ( 64,935 ) Income (loss) from discontinued operations, net of income taxes 279 ( 551 ) Net income (loss) including noncontrolling interest 214,314 ( 65,486 ) Less: Net income attributable to noncontrolling interest 22,670 47,850 NET INCOME (LOSS) ATTRIBUTABLE TO MURPHY $ 191,644 $ ( 113,336 ) INCOME (LOSS) PER COMMON SHARE – BASIC Continuing operations $ 1.23 $ ( 0.73 ) Discontinued operations – – Net income (loss) $ 1.23 $ ( 0.73 ) INCOME (LOSS) PER COMMON SHARE – DILUTED Continuing operations $ 1.22 $ ( 0.73 ) Discontinued operations – – Net income (loss) $ 1.22 $ ( 0.73 ) Cash dividends per common share $ 0.275 $ 0.15 Average common shares outstanding (thousands) Basic 155,857 154,916 Diluted 157,389 154,916 See Notes to Consolidated Financial Statements, page 7 . 3 Table of Contents MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended March 31, (Thousands of dollars) 2023 2022 Net income (loss) including noncontrolling interest $ 214,314 $ ( 65,486 ) Other comprehensive income, net of tax Net gain from foreign currency translation 3,669 18,020 Retirement and postretirement benefit plans 1,098 3,336 Other comprehensive income 4,767 21,356 Comprehensive income (loss) including noncontrolling interest 219,081 ( 44,130 ) Less: Comprehensive income attributable to noncontrolling interest 22,670 47,850 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO MURPHY $ 196,411 $ ( 91,980 ) See Notes to Consolidated Financial Statements, page 7 . 4 Table of Contents MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED ) Three Months Ended March 31, (Thousands of dollars) 2023 2022 Operating Activities Net income (loss) including noncontrolling interest $ 214,314 $ ( 65,486 ) Adjustments to reconcile net income (loss) to net cash provided by continuing operations activities (Income) loss from discontinued operations ( 279 ) 551 Depreciation, depletion and amortization 195,670 164,124 Unsuccessful exploration well costs and previously suspended exploration costs 851 32,831 Amortization of undeveloped leases 2,653 4,198 Accretion of asset retirement obligations 11,157 11,876 Deferred income tax (benefit) expense 49,042 ( 20,253 ) Contingent consideration payment ( 123,965 ) — Mark to market loss on contingent consideration 3,938 98,126 Mark to market loss on derivative instruments – 188,509 Long-term non-cash compensation 8,536 17,288 Net increase in noncash working capital ( 75,031 ) ( 80,922 ) Other operating activities, net ( 7,110 ) ( 12,512 ) Net cash provided by continuing operations activities 279,776 338,330 Investing Activities Property additions and dry hole costs ( 345,319 ) ( 244,908 ) Net cash required by investing activities ( 345,319 ) ( 244,908 ) Financing Activities Borrowings on revolving credit facility 100,000 – Repayment of revolving credit facility ( 100,000 ) – Distributions to noncontrolling interest ( 9,679 ) ( 39,884 ) Contingent consideration payment ( 47,678 ) ( 55,169 ) Cash dividends paid ( 42,925 ) ( 23,300 ) Withholding tax on stock-based incentive awards ( 14,217 ) ( 15,421 ) Capital lease obligation payments ( 139 ) ( 158 ) Issue costs of debt facility ( 17 ) – Net cash required by financing activities ( 114,655 ) ( 133,932 ) Effect of exchange rate changes on cash and cash equivalents 618 ( 87 ) Net decrease in cash and cash equivalents ( 179,580 ) ( 40,597 ) Cash and cash equivalents at beginning of period 491,963 521,184 Cash and cash equivalents at end of period $ 312,383 $ 480,587 See Notes to Consolidated Financial Statements, page 7 . 5 Table of Contents MURPHY OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) Three Months Ended March 31, (Thousands of dollars except number of shares) 2023 2022 Cumulative Preferred Stock – par $ 100 , authorized 400,000 shares, none issued $ – $ – Common Stock – par $ 1.00 , authorized 450,000,000 shares, issued 195,100,628 shares at March 31, 2023 and 195,100,628 shares at March 31, 2022 Balance at beginning of period 195,101 195,101 Exercise of stock options – – Balance at end of period 195,101 195,101 Capital in Excess of Par Value Balance at beginning of period 893,578 926,698 Exercise of stock options, including income tax benefits ( 184 ) ( 7,220 ) Restricted stock transactions and other ( 39,910 ) ( 45,169 ) Share-based compensation 3,516 6,228 Balance at end of period 857,000 880,537 Retained Earnings Balance at beginning of period 6,055,498 5,218,670 Net income (loss) attributable to Murphy 191,644 ( 113,336 ) Cash dividends paid ( 42,925 ) ( 23,300 ) Balance at end of period 6,204,217 5,082,034 Accumulated Other Comprehensive Loss Balance at beginning of period ( 534,686 ) ( 527,711 ) Foreign currency translation (loss) gain, net of income taxes 3,669 18,020 Retirement and postretirement benefit plans, net of income taxes 1,098 3,336 Balance at end of period ( 529,919 ) ( 506,355 ) Treasury Stock Balance at beginning of period ( 1,614,717 ) ( 1,655,447 ) Awarded restricted stock, net of forfeitures – 32,297 Exercise of stock options 25,876 4,672 Balance at end of period – 39,002,553 shares of Common Stock in 2023 and 39,730,079 shares of Common Stock in 2022, at cost ( 1,588,841 ) ( 1,618,478 ) Murphy Shareholders’ Equity 5,137,558 4,032,839 Noncontrolling Interest Balance at beginning of period 154,119 163,485 Net income attributable to noncontrolling interest 22,670 47,850 Distributions to noncontrolling interest owners ( 9,679 ) ( 39,884 ) Balance at end of period 167,110 171,451 Total Equity $ 5,304,668 $ 4,204,290 See Notes to Consolidated Financial Statements, page 7 . 6 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS These notes are an integral part of the financial statements of Murphy Oil Corporation and Consolidated Subsidiaries (the Company or Murphy) on pages 2 through 6 of this Form 10-Q report. Note A – Nature of Business and Interim Financial Statements NATURE OF BUSINESS – Murphy Oil Corporation is an international oil and natural gas exploration and production company that conducts its business through various operating subsidiaries. The Company primarily produces oil and natural gas in the United States (U.S.) and Canada and conducts oil and natural gas exploration activities worldwide. 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 as Murphy is not considered the primary beneficiary. These non-consolidated VIEs are not material to our financial position or results of operations. As of March 31, 2023, our maximum exposure to loss was $ 3.1 million (excluding operational impacts), which represents our net investment in Delta House. We have not provided any financial support to Delta House other than amounts previously required by our membership interest. INTERIM FINANCIAL STATEMENTS – In the opinion of Murphy’s management, the unaudited financial statements presented herein include all accruals necessary to present fairly the Company’s financial position at March 31, 2023 and December 31, 2022, and the results of operations, statements of operations, cash flows and changes in stockholders’ equity for the interim periods ended March 31, 2023 and 2022, in conformity with U.S generally accepted accounting principles (GAAP). In preparing the financial statements of the Company in conformity with GAAP, management has made a number of estimates and assumptions that affect the reporting of amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from the estimates. Consolidated financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Company’s 2022 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report. Financial results for the three-month period ended March 31, 2023 are not necessarily indicative of future results. Note B – New Accounting Principles and Recent Accounting Pronouncements Accounting Principles Adopted None. Recent Accounting Pronouncements None affecting the Company. Note C – Revenue from Contracts with Customers Nature of Goods and Services The Company explores for and produces crude oil, natural gas and natural gas liquids (collectively oil and natural gas) in select basins around the globe. The Company’s revenue from sales of oil and natural gas production activities are primarily subdivided into two key geographic segments: the U.S. and Canada. Additionally, revenue from sales to customers is generated from three primary revenue streams: crude oil and condensate, natural gas liquids, and natural gas. For operated oil and natural 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 Gulf of Mexico, LLC (MP GOM) as prescribed by ASC 810-10-45. U.S. - In the U.S., the Company primarily produces oil and natural gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico. Revenue is generally recognized when oil and natural gas are transferred to the customer at the delivery point. Revenue recognized is largely index-based with price adjustments for floating market differentials. Canada - In Canada, contracts 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 7 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note C – Revenue from Contracts with Customers (Continued) of vessel load, based on the volumes on the bill of lading and point of custody transfer. The Company also purchases natural gas in Canada to meet certain sales commitments. Disaggregation of Revenue The Company reviews performance based on two key geographical segments and between onshore and offshore sources of revenue within these geographies. For the three-month periods ended March 31, 2023, and 2022, the Company recognized $ 840.0 million and $ 871.4 million, respectively, from total revenue from sales to customers, from sales of oil, natural gas liquids and natural gas. Three Months Ended March 31, (Thousands of dollars) 2023 2022 Net crude oil and condensate revenue United States Onshore $ 130,081 $ 171,696 Offshore 500,310 465,621 Canada Onshore 21,952 36,697 Offshore 16,130 28,832 Other 3,644 – Total crude oil and condensate revenue 672,117 702,846 Net natural gas liquids revenue United States Onshore 8,270 16,685 Offshore 14,629 13,979 Canada Onshore 3,463 4,867 Total natural gas liquids revenue 26,362 35,531 Net natural gas revenue United States Onshore 5,450 11,369 Offshore 22,132 26,201 Canada Onshore 70,170 58,581 Total natural gas revenue 97,752 96,151 Revenue from production 796,231 834,528 Sales of purchased natural gas Canada Onshore 43,737 36,846 Total sales of purchased natural gas 43,737 36,846 Total revenue from sales to customers 839,968 871,374 Loss on derivative instruments – ( 320,777 ) Gain on sale of assets and other income 1,748 2,364 Total revenues and other income $ 841,716 $ 552,961 Contract Balances and Asset Recognition As of March 31, 2023, and December 31, 2022, receivables from contracts with customers, net of royalties and associated payables, on the balance sheets from continuing operations, were $ 205.2 million and $ 201.1 million, respectively. Payment terms for the Company’s sales vary across contracts and geographical regions, with the majority of the cash receipts required within 30 days of billing. Based on a forward-looking expected loss model in accordance with ASU 2016-13, the Company did not recognize any impairment losses on receivables or contract assets arising from customer contracts during the reporting periods. The Company has not entered into any revenue contracts that have financing components as of March 31, 2023. 8 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note C – Revenue from Contracts with Customers (Continued) 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 natural gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer. Judgment is required to determine whether some customers simultaneously receive and consume the benefit of commodities. As a result of this assessment for the Company, each unit of measure of the specified commodity is considered to represent a distinct performance obligation that is satisfied at a point in time upon the transfer of control of the commodity. For contracts with market or index-based pricing, which represent the majority of sales contracts, the Company has elected the allocation exception and allocates the variable consideration to each single performance obligation in the contract. As a result, there is no price allocation to unsatisfied remaining performance obligations for delivery of commodity product in subsequent periods. The Company has entered into several long-term, fixed-price contracts in Canada. The underlying reason for entering a fixed price contract is generally unrelated to anticipated future prices or other observable data and serves a particular purpose in the Company’s long-term strategy. As of March 31, 2023, the Company had the following sales contracts in place which are expected to generate revenue from sales to customers for a period of more than 12 months starting at the inception of the contract: Current Long-Term Contracts Outstanding at March 31, 2023 Location Commodity End Date Description Approximate Volumes U.S. Natural Gas and NGL Q2 2023 Deliveries from dedicated acreage in Eagle Ford As produced Canada Natural Gas Q4 2023 Contracts to sell natural gas at USD index pricing 25 MMCFD Canada Natural Gas Q4 2023 Contracts to sell natural gas at CAD fixed prices 38 MMCFD Canada Natural Gas Q4 2024 Contracts to sell natural gas at USD index pricing 31 MMCFD Canada Natural Gas Q4 2024 Contracts to sell natural gas at CAD fixed prices 100 MMCFD Canada Natural Gas Q4 2024 Contracts to sell natural gas at CAD fixed prices 34 MMCFD Canada Natural Gas Q4 2024 Contracts to sell natural gas at USD index fixed prices 15 MMCFD Canada Natural Gas Q4 2024 Contracts to sell natural gas at CAD index prices 28 MMCFD Canada Natural Gas Q4 2026 Contracts to sell natural gas at USD index pricing 49 MMCFD Canada Natural Gas Q4 2027 Contracts to sell natural gas at CAD index prices 10 MMCFD Canada NGL Q3 2023 Contracts to sell natural gas liquids at CAD prices 952 BOEPD Fixed price contracts are accounted for as normal sales and purchases for accounting purposes. Note D – Property, Plant and Equipment Exploratory Wells Under Financial Accounting Standards Board guidance, exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. As of March 31, 2023, the Company had total capitalized exploratory well costs for continuing operations pending the determination of proved reserves of $ 196.5 million. The following table reflects the net changes in capitalized exploratory well costs during the three-month periods ended March 31, 2023 and 2022. 9 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note D – Property, Plant and Equipment (Continued) (Thousands of dollars) 2023 2022 Beginning balance at January 1 $ 171,860 $ 179,481 Additions pending the determination of proved reserves 24,685 3,698 Capitalized exploratory well costs charged to expense – ( 10,473 ) Balance at March 31 $ 196,545 $ 172,706 Capital well additions of $ 24.7 million are primarily related to Oso-1 well (Atwater Valley 138) in the Gulf of Mexico. In the first quarter of 2023, drilling of the Oso-1 well was temporarily suspended prior to reaching the objective. The Company plans to return to the well in the third quarter of 2023. There were no capitalized well costs charged to expense for the three months ended March 31, 2023. The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs have been capitalized. The projects are aged based on the last well drilled in the project. March 31, 2023 2022 (Thousands of dollars) Amount No. of Wells No. of Projects Amount No. of Wells No. of Projects Aging of capitalized well costs: Zero to one year $ 40,236 2 2 $ 2,810 2 2 One to two years 13,171 2 2 – – – Two to three years – – – 23,667 3 3 Three years or more 143,138 5 4 146,229 8 2 $ 196,545 9 8 $ 172,706 13 7 Of the $ 156.3 million of exploratory well costs capitalized more than one year at March 31, 2023, $ 97.2 million was in Vietnam, $ 37.0 million was in the U.S., $ 14.7 million was in Mexico, $ 4.7 million was in Canada, and $ 2.7 million was in Brunei. In all geographical areas, either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion. Impairments There were no impairments in the three months ended March 31, 2023 or 2022. Note E – Financing Arrangements and Debt As of March 31, 2023, the Company had an $ 800 million revolving credit facility (RCF). The RCF is a senior unsecured guaranteed facility which expires on November 17, 2027, unless the outstanding principal amount of the Company’s 5.75 % senior notes due 2025 (2025 Notes) as at February 15, 2025 exceeds $ 50.0 million, in which case, the RCF will expire on that date. At March 31, 2023, the Company had no outstanding borrowings under the RCF and $ 30.3 million of outstanding letters of credit, which reduce the borrowing capacity of the RCF. At March 31, 2023, the interest rate in effect on borrowings under the RCF would have been 7.40 %. At March 31, 2023, the Company was in compliance with all covenants related to the RCF. The Company also has a shelf registration statement on file with the U.S. Securities and Exchange Commission (SEC) that permits the offer and sale of debt and/or equity securities through October 15, 2024. 10 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note F – Other Financial Information Additional disclosures regarding cash flow activities are provided below. Three Months Ended March 31, (Thousands of dollars) 2023 2022 Net (increase) decrease in operating working capital, excluding cash and cash equivalents: (Increase) in accounts receivable $ ( 3,976 ) $ ( 117,928 ) (Increase) decrease in inventories ( 9,296 ) ( 4,541 ) (Increase) decrease in prepaid expenses 3,813 ( 515 ) Increase (decrease) in accounts payable and accrued liabilities ¹ ( 63,800 ) 40,426 Increase (decrease) in income taxes payable ( 1,772 ) 1,636 Net (increase) in noncash operating working capital $ ( 75,031 ) $ ( 80,922 ) Supplementary disclosures: Cash income taxes paid, net of refunds $ 3,342 $ 103 Interest paid, net of amounts capitalized of $ 3.3 million in 2023 and $ 5.3 million in 2022 19,358 40,181 Non-cash investing activities: Asset retirement costs capitalized $ 2,396 $ 3,889 (Increase) decrease in capital expenditure accrual 15,973 ( 49,352 ) 1 Excludes payable balances relating to mark-to-market of derivative instruments and contingent consideration relating to acquisitions. Note G – Employee and Retiree Benefit Plans The Company has defined benefit pension plans that are noncontributory and cover most full-time employees. All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plan and the U.S. director’s plan. All U.S. tax qualified plans meet the funding requirements of federal laws and regulations. Contributions to foreign plans meet the requirements of local laws and tax regulations. The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees. The health care benefits are contributory; the life insurance benefits are noncontributory. The table that follows provides the components of net periodic benefit expense for the three-month periods ended March 31, 2023 and 2022. Three Months Ended March 31, Pension Benefits Other Postretirement Benefits (Thousands of dollars) 2023 2022 2023 2022 Service cost $ 1,650 $ 2,129 $ 132 $ 292 Interest cost 8,507 5,243 874 574 Expected return on plan assets ( 8,194 ) ( 8,138 ) – – Amortization of prior service cost (credit) 155 600 ( 133 ) ( 133 ) Recognized actuarial loss (gain) 2,401 3,822 ( 781 ) ( 77 ) Net periodic benefit expense $ 4,519 $ 3,656 $ 92 $ 656 The components of net periodic benefit expense, other than the service cost, are recorded in “Other expenses” in the Consolidated Statements of Operations. During the three-month period ended March 31, 2023, the Company made contributions of $ 9.5 million to its defined benefit pension and postretirement benefit plans. Remaining funding in 2023 for the Company’s defined benefit pension and postretirement plans is anticipated to be $ 27.6 million. 11 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note H – Incentive Plans The costs resulting from all share-based and cash-based incentive plans are recognized as an expense in the Consolidated Statements of Operations using a fair value-based measurement method over the periods that the awards vest. The Annual Incentive Plan (AIP) authorizes the 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 AIP 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 Incentive Plan (2020 Long-Term Plan) authorizes the Committee to make grants of the Company’s Common Stock to employees. These grants may be in the form of stock options (nonqualified or incentive), stock appreciation rights (SAR), restricted stock, restricted stock units (RSU), performance units, performance shares, dividend equivalents and other stock-based incentives. The 2020 Long-Term Plan expires in 2030. A total of five million shares are issuable during the life of the 2020 Long-Term Plan. Shares issued pursuant to awards granted under the 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 the Plan. During the three months ended March 31, 2023, the Committee granted the following awards from the 2020 Long-Term Plan: 2020 Long-Term Incentive Plan Type of Award Number of Awards Granted Grant Date Grant Date Fair Value Valuation Methodology Performance Based RSUs 1 409,160 January 31, 2023 $ 60.46 Monte Carlo Time Based RSUs 2 499,220 January 31, 2023 43.27 Average Stock Price Cash Settled RSUs 3 123,230 January 31, 2023 43.27 Average Stock Price 1 Performance based RSUs are scheduled to vest over a three year performance period. 2 Time based RSUs are generally scheduled to vest over three years from the date of grant. 3 Cash settled RSUs are generally scheduled to vest over three years from the date of grant. The Company also has a Stock Plan for Non-Employee Directors that 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 Stock Plan for Non-Employee Directors (2021 NED Plan) and the 2018 Stock Plan for Non-Employee Directors. All awards on or after May 12, 2021, were made under the 2021 NED Plan. During the three months ended March 31, 2023, the Committee granted the following awards to Non-Employee Directors: 2021 Stock Plan for Non-Employee Directors Type of Award Number of Awards Granted Grant Date Grant Date Fair Value Valuation Methodology Time Based RSUs 1 56,880 February 1, 2023 $ 42.20 Closing Stock Price 1 Non-employee directors time-based RSUs are scheduled to vest in February 2024. All stock option exercises are non-cash transactions for the Company. The employee receives net shares, after applicable withholding obligations, upon each stock option exercise. The actual income tax benefit realized from the tax deductions related to stock option exercises of the share-based payment arrangements were immaterial for the three-month period ended March 31, 2023. Amounts recognized in the financial statements with respect to share-based plans are shown in the following table: Three Months Ended March 31, (Thousands of dollars) 2023 2022 Compensation charged against income before tax benefit $ 11,196 $ 13,962 Related income tax benefit recognized in income 1,581 2,272 12 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note H – Incentive Plans (Continued) Certain incentive compensation granted to the Company’s named executive officers, to the extent their total compensation exceeds $ 1.0 million per executive per year, is not eligible for a U.S. income tax deduction under the Tax Cuts and Jobs Act (2017 Tax Act). Note I – Earnings Per Share Net income (loss) attributable to Murphy was used as the numerator in computing both basic and diluted income per Common share for the three-month periods ended March 31, 2023 and 2022. The following table reports the weighted-average shares outstanding used for these computations. Three Months Ended March 31, (Weighted-average shares) 2023 2022 Basic method 155,856,509 154,916,004 Dilutive stock options and restricted stock units ¹ 1,532,057 – Diluted method 157,388,566 154,916,004 1 Due to a net loss recognized by the Company for the three-month period ended March 31, 2022, no unvested stock awards were included in the computation of diluted earnings per share because the effect would have been antidilutive. Note J – Income Taxes The Company’s effective income tax rate is calculated as the amount of income tax expense (benefit) divided by income (loss) from continuing operations before income taxes. For the three-month periods ended March 31, 2023 and 2022, the Company’s effective income tax rates were as follows: 2023 2022 Three months ended March 31, 20.1 % 20.7 % The effective tax rate for the three-month period ended March 31, 2023, was below the U.S. statutory tax rate of 21% primarily due to no tax applied to the pre-tax income of the noncontrolling interest in MP GOM, offset by the effects of income generated in foreign tax jurisdictions, certain of which have income tax rates higher than the U.S. Federal rate and certain expenses, including exploration and other expenses in certain foreign jurisdictions, for which no income tax benefits are currently available. The effective tax rate for the three-month period ended March 31, 2022, was below the statutory tax rate of 21% primarily due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is currently available, offset by no tax applied to the pre-tax income of the noncontrolling interest in MP GOM. The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities. These audits often take years to complete and settle. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future years from resolution of outstanding unsettled matters. Additionally, the Company has paid amounts into escrow, and may from time to time pay more amounts into escrow, in order to continue tax disputes with the relevant taxing authorities. As of March 31, 2023, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows: U.S. – 2016; Canada – 2016; and Malaysia – 2016. Following the sale in 2019, the Company has retained certain possible liabilities and rights to income tax receivables relating to the divested Malaysia business for the years prior to 2019. The Company believes current recorded liabilities are adequate. Note K – Financial Instruments and Risk Management Murphy, at times, uses derivative instruments, to manage certain risks related to commodity prices, foreign currency exchange rates and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features. Derivative instruments are traded with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (NYMEX). The Company has a risk management control system to monitor commodity price risks and any derivatives obtained to manage a portion of such risks. For accounting purposes, the Company has not designated commodity and foreign currency derivative contracts as 13 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note K – Financial Instruments and Risk Management (Continued) hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Operations. Commodity Price Risks During the first quarter of 2023, the Company did no t have any outstanding crude oil derivative contracts. During the first quarter of 2022, the Company had crude oil swaps and collar contracts. Under the swaps contracts, which matured monthly, the Company paid the average monthly price in effect and received 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 matured 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 required payments by the Company if the NYMEX average closing price was above the ceiling price or payments to the Company if the NYMEX average closing price was below the floor price. 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 derivatives outstanding at March 31, 2023 and 2022. For the three-month periods ended March 31, 2023 and 2022, the gains and losses recognized in the Consolidated Statements of Operations for derivative instruments not designated as hedging instruments are presented in the following table. Gain (Loss) (Thousands of dollars) Statement of Operations Location Three Months Ended March 31, Type of Derivative Contract 2023 2022 Commodity swaps Loss on derivative instruments $ – $ ( 156,359 ) Commodity collars Loss on derivative instruments – ( 164,418 ) Fair Values – Recurring The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants. The carrying value of assets and liabilities recorded at fair value on a recurring basis at March 31, 2023 and December 31, 2022, are presented in the following table. March 31, 2023 December 31, 2022 (Thousands of dollars) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Liabilities: Nonqualified employee savings plan 15,069 – – 15,069 15,135 – – 15,135 $ 15,069 $ – $ – $ 15,069 $ 15,135 $ – $ – $ 15,135 The nonqualified employee savings plan is an unfunded savings plan through which participants seek a return via phantom investments in equity securities and/or mutual funds. The fair value of this liability was based on quoted prices for these equity securities and mutual funds. The income effect of changes in the fair value of the nonqualified employee savings plan is recorded in “Selling and general expenses” in the Consolidated Statements of Operations. As of March 31, 2023, there were no outstanding commodity (WTI crude oil) swaps and collars contracts subject to fair value measurement. As of December 31, 2022, there were no outstanding commodity (WTI crude oil) swaps and collars contracts subject to fair value measurement. The liabilities associated with these contracts have been finalized as of December 31, 2022 and were based on realized WTI pricing. The commodity swaps and collars liability as of December 31, 2022 was $ 19.6 million and $ 2.3 million, respectively, and recorded as “Accounts payable” in the Consolidated Balance Sheet. 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, in addition to the consideration paid, Murphy had an 14 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note K – Financial Instruments and Risk Management (Continued) obligation to pay additional contingent consideration of up to $ 200 million in the event that certain revenue thresholds were exceeded between 2019 and 2022; and $ 50 million following first oil from certain development projects. The revenue threshold was not exceeded for 2019 or 2020; however, the threshold was met in 2021 and 2022. The obligation period related to LLOG revenue-related contingent consideration ended in 2022, with final payments being made in the first half of 2023. In 2018, the Company, through a subsidiary, acquired Gulf of Mexico producing assets from Petrobras America Inc. (PAI), a subsidiary of Petróleo Brasileiro S.A. Under the terms of the transaction, in addition to the consideration paid, Murphy had an obligation to pay additional contingent consideration of up to $ 150 million if certain price and production thresholds were exceeded beginning in 2019 through 2025; and $ 50 million carry for PAI development costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken. The price and production thresholds were not exceeded for 2019 and 2020; however, the thresholds were met in 2021 and 2022. As of December 31, 2021, Murphy had completely funded the carried interest. As of December 31, 2022, the $ 150 million obligation limit was achieved. As at March 31, 2023 and December 31, 2022, the Company’s liabilities with PAI and LLOG were based on realized inputs of volumes and pricing as a result of contractual thresholds or reaching time limitations which ended in 2022. As a result, the related liabilities as at March 31, 2023 and December 31, 2022, of $ 25.0 million and $ 192.7 million, respectively, were no longer subject to fair value measurement. The liability remaining is included in “Other accrued liabilities” in the Consolidated Balance Sheets. During the three months ended March 31, 2023, the Company paid a total of $ 171.7 million in contingent consideration payments, thereby reducing the liability balance. In the Consolidated Statement of Cash Flows, $ 124.0 million is shown in operating activities and $ 47.7 million is shown in financing activities. The remaining $ 25.0 million of contingent consideration liability at March 31, 2023, balance was paid in April 2023. The Company offsets certain assets and liabilities related to derivative contracts when the legal right of offset exists. There were no offsetting positions recorded at March 31, 2023 and December 31, 2022. The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at March 31, 2023 and December 31, 2022. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The table excludes cash and cash equivalents, trade accounts receivable, trade accounts payable and accrued expenses, all of which had fair values approximating carrying amounts. The fair value of current and long-term debt was estimated based on rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet exposures relating to certain letters of credit. The fair value of these, which represents fees associated with obtaining the instruments, was nominal. March 31, December 31, 2023 2022 (Thousands of dollars) Carrying Amount Fair Value Carrying Amount Fair Value Financial assets (liabilities): Current and long-term debt $ ( 1,823,676 ) ( 1,725,190 ) $ ( 1,823,139 ) ( 1,668,216 ) 15 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note L – Accumulated Other Comprehensive Loss The components of “Accumulated other comprehensive loss” on the Consolidated Balance Sheets at December 31, 2022 and March 31, 2023 and the changes during the three-month period ended March 31, 2023, are presented net of taxes in the following table. (Thousands of dollars) Foreign Currency Translation Gains (Losses) Retirement and Postretirement Benefit Plan Adjustments Total Balance at December 31, 2022 $ ( 418,230 ) $ ( 116,456 ) $ ( 534,686 ) Components of other comprehensive income (loss): Before reclassifications to income 3,669 – 3,669 Reclassifications to income ¹ – 1,098 1,098 Net other comprehensive income (loss) 3,669 1,098 4,767 Balance at March 31, 2023 $ ( 414,561 ) $ ( 115,358 ) $ ( 529,919 ) 1 Reclassifications before taxes of $ 1,334 thousand are included in the computation of net periodic benefit expense for the three-month period ended March 31, 2023. See Note G for additional information. Related income taxes of $ 236 thousand are included in Income tax expense (benefit) for the three-month period ended March 31, 2023. Note M – Environmental and Other Contingencies The Company’s operations and earnings have been and may be affected by various forms of governmental action both in the United States and throughout the world. Examples of such governmental action include, but are by no means limited to: tax legislation changes, including tax rate changes, and retroactive tax claims; royalty and revenue sharing increases; import and export controls; price controls; currency controls; allocation of supplies of crude oil and petroleum products and other goods; expropriation of property; restrictions and preferences affecting the issuance of oil and natural gas or mineral leases; restrictions on drilling and/or production; laws, regulations and government action intended for the promotion of safety and the protection and/or remediation of the environment including in connection with the purported causes or potential impacts of climate change; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Given the factors involved in various government actions, including political considerations, it is difficult to predict their likelihood, the form they may take, or the effect they may have on the Company. ENVIRONMENTAL MATTERS – Murphy and other companies in the oil and natural gas industry are subject to numerous federal, state, local and foreign laws and regulations dealing with the environment and protection of health and safety. The principal environmental, health and safety laws and regulations to which Murphy is subject address such matters as the generation, storage, handling, use, disposal and remediation of petroleum products, wastewater and hazardous materials; the emission and discharge of such materials to the environment, including GHG emissions; wildlife, habitat and water protection; the placement, operation and decommissioning of production equipment; and the health and safety of our employees, contractors and communities where our operations are located. These laws and regulations also generally require permits for existing operations, as well as the construction or development of new operations and the decommissioning facilities once production has ceased. Violation of federal or state environmental, health and safety laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and construction bans or delays. A discharge of hazardous substances into the environment could, to the extent such event is not adequately insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury and property damage that might result. In addition, Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to this item, the Company will be using a threshold of $ 1.0 million for such proceedings and the Company is not aware of environment legal proceedings likely to exceed this $ 1.0 million threshold. 16 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note M– Environmental and Other Contingencies (Continued) There continues to be an increase in regulatory oversight of the oil and gas industry at the federal level, with a focus on climate change and GHG emissions (including methane emissions). For example, the Inflation Reduction Act of 2022 contains provisions that impose fees for excess methane emissions from petroleum and natural gas facilities. In addition, there have been a number of executive orders issued that address climate change, including creation of climate-related task forces, directives to federal agencies to procure carbon-free electricity, and a goal of a carbon pollution-free power sector by 2035 and a net-zero emissions U.S. economy by 2050. Executive orders have also been issued related to oil and gas activities on federal lands, infrastructure and environmental justice. In addition, an international climate agreement (the Paris Agreement) was agreed to at the 2015 United Nations Framework Convention on Climate Change in Paris, France. The Paris Agreement entered into force in November 2016. Although the U.S. officially withdrew from the Paris Agreement on November 4, 2020, the U.S. has since rejoined the Paris Agreement, which became effective for the U.S. on February 19, 2021. The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. Hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company or on or under other locations where these wastes have been taken for disposal. In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes were not under Murphy’s control. Under existing laws, the Company could be required to investigate, remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to investigate and clean up contaminated property (including contaminated groundwater) or to perform remedial plugging operations to prevent future contamination. Certain of these historical properties are in various stages of negotiation, investigation, and/or cleanup, and the Company is investigating the extent of any such liability and the availability of applicable defenses. The Company has retained certain liabilities related to environmental matters at formerly owned U.S. refineries that were sold in 2011. The Company also obtained insurance covering certain levels of environmental exposures related to past operations of these refineries. Murphy USA Inc. has retained any environmental exposure associated with Murphy’s former U.S. marketing operations that were spun-off in August 2013. The Company believes costs related to these sites will not have a material adverse effect on Murphy’s net income, financial condition or liquidity in a future period. There is the possibility that environmental expenditures could be required at currently unidentified sites, and additional expenditures could be required at known sites. However, based on information currently available to the Company, the amount of future investigation and remediation costs incurred at known or currently unidentified sites is not expected to have a material adverse effect on the Company’s future net income, cash flows or liquidity. LEGAL MATTERS – Murphy and its subsidiaries are engaged in a number of other legal proceedings (including litigation related to climate change), all of which Murphy considers routine and incidental to its business. Based on information currently available to the Company, the ultimate resolution of environmental and legal matters referred to in this note is not expected to have a material adverse effect on the Company’s net income, financial condition or liquidity in a future period. Note N – Business Segments Information about business segments and geographic operations is reported in the following table. For geographic purposes, revenues are attributed to the country in which the sale occurs. Corporate, including interest income, other gains and losses (including foreign exchange gains/losses and realized and unrealized gains/losses on commodity price derivatives), interest expense and unallocated overhead, is shown in the table to reconcile the business segments to consolidated totals. The Company has accounted for its former United Kingdom (U.K.) and U.S. refining and marketing operations as discontinued operations for all periods presented. 17 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note N - Business Segments (Continued) Total Assets at March 31, 2023 Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 (Millions of dollars) External Revenues Income (Loss) External Revenues Income (Loss) Exploration and production ¹ United States $ 6,995.8 $ 682.3 $ 226.0 $ 707.4 $ 252.9 Canada 2,146.8 155.8 21.9 166.1 22.7 Other 234.5 3.6 ( 5.2 ) – ( 44.2 ) Total exploration and production 9,377.1 841.7 242.7 873.5 231.4 Corporate 810.7 – ( 28.7 ) ( 320.5 ) ( 296.3 ) Continuing operations 10,187.8 841.7 214.0 553.0 ( 64.9 ) Discontinued operations, net of tax 0.7 – 0.3 – ( 0.6 ) Total $ 10,188.5 $ 841.7 $ 214.3 $ 553.0 $ ( 65.5 ) 1 Additional details about results of oil and natural gas operations are presented in the table on page 22 . 18 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS Summary In the first quarter of 2023, crude oil and natural gas benchmark prices decreased compared to the same period of 2022. Prices were lower in the first quarter of 2023 as compared to the same period in 2022 principally due to concerns on the economy and potential recession, as well as short-term downward demand pressure related to global refinery outages resulting from maintenance activities in the first quarter of 2023. Similar to the overall inflation in the wider economy, the oil and natural gas industry, and hence the Company, is observing higher costs for goods and services used in exploration and production operations. Murphy continues to manage input costs through its dedicated procurement department focused on managing supply chain and other costs. For the three months ended March 31, 2023, West Texas Intermediate (WTI) crude oil prices averaged approximately $76.13 per barrel (compared to $94.29 in the first quarter of 2022 and $82.65 in the fourth quarter of 2022). The average price for WTI in March of 2023 was approximately $73.37 per barrel, reflecting a 32% reduction from March of 2022 and a 4% reduction from the average price from December of 2022. The average price in April 2023 was $79.44 per barrel. As of close on May 1, 2023, the NYMEX WTI forward curve prices for the remainder of 2023 and 2024 were $74.52 and $70.76 per barrel, respectively. For the three months ended March 31, 2023, the Company produced 179.7 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations and invested $336.0 million in capital expenditures (on a value of work done basis). The Company reported net income from continuing operations of $214.0 million for the three months ended March 31, 2023; this amount includes income attributable to noncontrolling interest of $22.7 million and after-tax losses for the contingent consideration adjustments of $3.1 million. For the three months ended March 31, 2022, the Company produced 149.9 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested $304.7 million in capital expenditures (on a value of work done basis) in the three months ended March 31, 2022. The Company reported a net loss from continuing operations of $64.9 million for the three months ended March 31, 2022. This amount included income attributable to noncontrolling interest of $47.9 million and after-tax losses on unrealized mark to market revaluations on commodity price derivative positions and contingent consideration adjustments of $148.9 million and $77.2 million, respectively. 19 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) Results of Operations (Continued) Results of Operations Murphy’s income (loss) by type of business is presented below. Income (Loss) Three Months Ended March 31, (Millions of dollars) 2023 2022 Exploration and production $ 242.7 $ 231.4 Corporate and other (28.7) (296.3) Income (loss) from continuing operations $ 214.0 (64.9) Discontinued operations ¹ 0.3 (0.6) Net income (loss) including noncontrolling interest $ 214.3 $ (65.5) 1 The Company has presented its former U.K. and U.S. refining and marketing operations as discontinued operations in its consolidated financial statements. Exploration and Production Results of E&P continuing operations are presented by geographic segment below. Income (Loss) Three Months Ended March 31, (Millions of dollars) 2023 2022 Exploration and production United States $ 226.0 $ 252.9 Canada 21.9 22.7 Other (5.2) (44.2) Total $ 242.7 $ 231.4 20 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) Results of Operations (Continued) Other key performance metrics The Company uses other operational performance and income metrics to review operational performance. The table below presents Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA. Management uses EBITDA and Adjusted EBITDA internally to evaluate the Company’s operational performance and trends between periods and relative to its industry competitors. EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for Net income (loss) or Cash provided by operating activities as determined in accordance with GAAP. Also presented below is Adjusted EBITDA per barrel of oil equivalent sold. Management uses Adjusted EBITDA per barrel of oil equivalent sold to evaluate the Company’s profitability of one barrel of oil equivalent sold in the period. Adjusted EBITDA per barrel of oil equivalent sold is a non-GAAP financial metric. Three Months Ended March 31, (Millions of dollars, except per barrel of oil equivalents sold) 2023 2022 Net income (loss) attributable to Murphy (GAAP) $ 191.6 $ (113.3) Income tax expense (benefit) 53.8 (17.0) Interest expense, net 28.9 37.3 Depreciation, depletion and amortization expense ¹ 189.3 156.6 EBITDA attributable to Murphy (Non-GAAP) 463.6 63.6 Accretion of asset retirement obligations ¹ 9.9 10.5 Mark-to-market loss on contingent consideration 3.9 98.1 Foreign exchange loss 0.4 – Discontinued operations (income) loss (0.3) 0.6 Mark-to-market loss on derivative instruments – 188.5 Adjusted EBITDA attributable to Murphy (Non-GAAP) $ 477.5 $ 361.3 Total barrels of oil equivalents sold from continuing operations attributable to Murphy (thousands of barrels) 15,541 12,565 Net income (loss) attributable to Murphy per barrel of oil equivalents sold $ 12.33 $ (9.02) Adjusted EBITDA per barrel of oil equivalents sold (Non-GAAP) $ 30.72 $ 28.75 1 Depreciation, depletion, and amortization expense and accretion of asset retirement obligations used in the computation of Adjusted EBITDA exclude the portion attributable to the non-controlling interest (NCI). 21 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) Results of Operations (Continued) OIL AND GAS OPERATING RESULTS – THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (Millions of dollars) United States 1 Canada Other Total Three Months Ended March 31, 2023 Oil and gas sales and other operating revenues $ 682.3 $ 112.1 $ 3.6 $ 798.0 Sales of purchased natural gas – 43.7 – 43.7 Lease operating expenses 162.6 36.8 0.6 200.0 Severance and ad valorem taxes 11.1 0.3 – 11.4 Transportation, gathering and processing 37.4 16.5 – 53.9 Costs of purchased natural gas – 32.3 – 32.3 Depreciation, depletion and amortization 160.3 31.6 0.9 192.8 Accretion of asset retirement obligations 9.1 1.9 0.1 11.1 Exploration expenses Dry holes and previously suspended exploration costs (0.2) – 1.1 0.9 Geological and geophysical 0.3 – 0.5 0.8 Other exploration 1.6 0.1 4.2 5.9 1.7 0.1 5.8 7.6 Undeveloped lease amortization 2.0 0.1 0.6 2.7 Total exploration expenses 3.7 0.2 6.4 10.3 Selling and general expenses 6.4 2.3 0.2 8.9 Other 9.4 4.4 (0.2) 13.6 Results of operations before taxes 282.3 29.5 (4.4) 307.4 Income tax provisions 56.3 7.6 0.8 64.7 Results of operations (excluding Corporate segment) $ 226.0 $ 21.9 $ (5.2) $ 242.7 Three months ended March 31, 2022 Oil and gas sales and other operating revenues $ 707.4 $ 129.3 – $ 836.7 Sales of purchased natural gas – 36.8 – 36.8 Lease operating expenses 99.9 36.9 – 136.8 Severance and ad valorem taxes 14.2 0.4 – 14.6 Transportation, gathering and processing 29.2 17.7 – 46.9 Costs of purchased natural gas – 33.7 – 33.7 Depreciation, depletion and amortization 126.5 34.2 0.1 160.8 Accretion of asset retirement obligations 9.4 2.5 – 11.9 Exploration expenses Dry holes and previously suspended exploration costs – – 32.8 32.8 Geological and geophysical 2.6 – 0.2 2.8 Other exploration 1.5 0.1 6.1 7.7 4.1 0.1 39.1 43.3 Undeveloped lease amortization 2.4 0.1 1.8 4.3 Total exploration expenses 6.5 0.2 40.9 47.6 Selling and general expenses 8.3 5.1 2.4 15.8 Other 102.8 5.1 0.4 108.3 Results of operations before taxes 310.6 30.3 (43.8) 297.1 Income tax provisions (benefits) 57.7 7.6 0.4 65.7 Results of operations (excluding Corporate segment) $ 252.9 $ 22.7 $ (44.2) $ 231.4 1 Includes results attributable to a noncontrolling interest in MP GOM. 22 Table of Contents