What changed in this filing

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Item 1A. Risk Factors

2024-02-23 compared with 2023-02-27 · 53 added, 74 removed, 161 unchanged (44% of the section changed)

Risk Factors - Continued

increased frequency and severity of storms, droughts, and floods and other climatic events.

If such effects were to occur, our operations could be adversely affected.

Although the Company maintains insurance for such risks as described elsewhere in this Form 10-K report, due to policy deductibles and possible coverage limits, weather-related risks to our operations are not fully insured.

In addition, certain customer and supplier assets, such as storage terminals, processing facilities, refineries and pipelines, are located in areas that may be prone to severe weather events, including hurricanes, winter storms, floods and major tropical storms.

Severe weather events that significantly affect facilities belonging to such customers or suppliers may reduce demand for our products and interrupt our ability to bring products to market and may therefore materially and adversely affect our results of operations, cash flows and financial condition, even if our own facilities escape significant damage.

Murphy is subject to numerous environmental, health and safety laws and regulations, and such existing and any potential future laws and regulations may result in material liabilities and costs.

The Company’s operations are subject to various international, foreign, national, state, provincial and local environmental, health and safety laws, regulations, governmental actions and permit requirements, including related to 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;

related to 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 methane and other GHG emissions;

wildlife, habitat and water protection;

water access, use and disposal;

the placement, operation and decommissioning of production equipment;

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They can impose permitting and financial assurance obligations, as well as operational controls and/or siting constraints on our business, and can result in additional capital and operating expenditures.

It is possible in the future, certain regulatory bodies such as the Railroad Commission of Texas may enact regulation that bans or reduces flaring for U.S.

For example, in December 2023, the U.S.

EPA announced its final rule regulating methane and volatile organic compounds emissions in the oil and gas industry which, among other things, requires periodic inspections to detect leaks (and subsequent repairs), places stringent restrictions on venting and flaring of methane, and establishes a program whereby third-parties can monitor and report large methane emissions to the EPA.

In addition, it is possible in the future, that certain regulatory bodies such as the Railroad Commission of Texas may enact regulation that bans or reduces flaring for U.S.

Onshore operations, and certain regulatory bodies in Canada may decide to revoke permits or pause the issuance of permits as a result of non-compliance with, or litigation related to, environmental, health and safety laws and regulations.

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In addition to significant investigation and remediation costs, such matters can result in fines and also give rise to third-party claims for personal injury and property or other environmental damage.

The Company’s onshore North America oil and natural gas production is dependent on a technique known as hydraulic fracturing whereby water, sand and certain chemicals are injected into deep oil and natural gas bearing reservoirs in North America.

This process occurs thousands of feet below the surface and creates fractures in the rock formation within the reservoir which enhances migration of oil and natural gas to the wellbore.

The Company primarily uses this technique in the Eagle Ford Shale in South Texas and in Kaybob Duvernay and Tupper Montney in Western Canada.

The Company primarily uses hydraulic fracturing in the Eagle Ford Shale in South Texas and in Kaybob Duvernay and Tupper Montney in Western Canada.

Texas law imposes permitting, disclosure, disposal and well construction requirements on hydraulic fracturing operations, as well as public disclosure of certain information regarding the components used in the hydraulic fracturing process.

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Once new laws and/or regulations have been enacted and adopted, the costs of compliance are appraised.

Hydraulic fracturing operations subject the Company to operational risks inherent in the drilling and production of oil and natural gas.

These risks include underground migration or surface spillage due to releases of oil,

Risk Factors - Continued

natural gas, formation water or well fluids, as well as any related surface or groundwater contamination, including from petroleum constituents or hydraulic fracturing chemical additives.

Ineffective containment of surface spillage and surface or groundwater contamination resulting from hydraulic fracturing operations, including from petroleum constituents or hydraulic fracturing chemical additives, could result in environmental pollution, remediation expenses and third-party claims alleging damages, which could adversely affect the Company’s financial condition and results of operations.

In addition, hydraulic fracturing requires significant quantities of water;

the wastewater from oil and natural gas operations is often disposed of through underground injection.

Certain increased seismic activities have been linked to underground water injection.

Any diminished access to water for use in the hydraulic fracturing process, any inability to properly dispose of wastewater, or any further restrictions placed on wastewater, could curtail the Company’s operations or otherwise result in operational delays or increased costs.

In addition, BOEM and BSEE have regulations applicable to lessees in federal waters that impose various safety, permitting and certification requirements applicable to exploration, development and production activities in the Gulf of Mexico, and also require lessees to have substantial U.S.

In addition, the U.S.

Bureau of Ocean Energy Management (BOEM) and the U.S.

Bureau of Safety and Environmental Enforcement (BSEE) have regulations applicable to lessees in federal waters that impose various safety, permitting and certification requirements applicable to exploration, development and production activities in the Gulf of Mexico, and also require lessees to have substantial U.S.

assets and net worth or post bonds or other acceptable financial assurance that the regulatory obligations will be met.

These include, in the Gulf of Mexico, well design, well control, casing, cementing, real-time monitoring, and subsea containment, among other items.

Under applicable requirements, BOEM evaluates the financial strength and reliability of lessees and operators active on the OCS.

Under applicable requirements, BOEM evaluates the financial strength and reliability of lessees and operators active on the U.S.

Outer Continental Shelf.

If the BOEM determines that a company does not have the financial ability to meet its decommissioning and other obligations, that company will be required to post additional financial security as assurance.

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Congress and included provisions which required the Department of Interior to hold previously announced offshore lease sales in the Gulf of Mexico and Alaska within two years.

These developments demonstrate the uncertainty regarding the current presidential administration’s approach to oil and gas leasing and permitting.

For further details, see “Risk Factors – General Risk Factors – Murphy’s operations and earnings have been and will continue to be affected by domestic and worldwide political developments.”

These developments demonstrate the uncertainty regarding the current presidential administration’s approach to oil

Risk Factors - Continued

and gas leasing and permitting.

We face various risks associated with increased activism against, or change in public sentiment for, oil and gas exploration, development, and production activities and sustainability considerations, including climate change and the transition to a lower carbon economy.

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As of December 31, 2023, the Company had no outstanding borrowings under the RCF.

See Note G for further details on the RCF.

See Note F for further details on the RCF.

The Company’s ability to obtain additional financing is affected by a number of factors, including the market environment, our operating and financial performance, investor sentiment, our ability to incur additional debt in compliance with agreements governing our outstanding debt, and the Company’s credit ratings.

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As a result, fewer financial institutions and other investors may be willing to invest in, and provide capital to, companies in the oil and gas sector, which, in turn, could adversely impact our cost of capital.

In 2022, the Company undertook several actions to reduce overall debt.

Since 2022, the Company undertook several actions to reduce overall debt.

Murphy plans to continue with the Company’s deleveraging initiatives, but there can be no assurance that these efforts will be successful and, if not, the Company’s financial conditions and prospects could be adversely affected.

See Note G for information regarding the Company’s outstanding debt as of December 31, 2022.

See Note F for information regarding the Company’s outstanding debt as of December 31, 2023.

Murphy’s operations could be adversely affected by changes in foreign exchange rates.

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On occasions, the Canadian business may hold assets or incur liabilities denominated in a currency which is not Canadian dollars which could lead to exposure to foreign exchange rate fluctuations.

See also Note L for additional information on derivative contracts.

See also Note K for additional information on derivative contracts.

The costs and funding requirements related to the Company’s retirement plans are affected by several factors.

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Murphy has a dedicated procurement department focused on managing supply chain and input costs.

Murphy also has certain transportation, processing and production handling services costs fixed through long-term contracts and commitments and therefore is partly protected from increasing price of services.

However, from time to time, Murphy will seek to enter new commitments, exercise options to extend contracts and retender contracts for rigs and other industry services which could expose Murphy to the impact of higher prices.

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The Company is exposed to credit risks associated with (i) sales of certain of its products to customers, (ii) joint venture partners and (iii) other counterparties.

Murphy is exposed to credit risk in three principle areas:

Murphy is exposed to credit risk in three principal areas:

• Accounts receivable credit risk from selling its produced commodity to customers;

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• Counterparty credit risk related to forward price commodity hedge contracts to protect the Company’s cash flows against lower oil and natural gas prices

To mitigate these risks the Company:

• Actively monitors the credit worthiness of all its customers, joint venture partners and forward commodity hedge counterparties;

• Given the inherent credit risks in a cyclical commodity price business, the Company has increased the focus on its review of joint venture partners, the magnitude of potential exposure and planning suitable actions should a joint venture partner fail to pay its share of capital and operating expenditures.

The inability of a purchaser of the Company’s produced commodity, a joint venture partner of the Company, or counterparty in a forward price commodity hedge to meet their respective payment obligations to the Company could have an adverse effect on Murphy’s future earnings and cash flows.

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We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

As the COVID-19 pandemic has evolved from its emergence in early 2020, so has its global impact.

In 2020 the spread of COVID-19 led to disruption in the global economy and weakness in demand in crude oil, natural gas liquids and natural gas, which applied downward pressure on global commodity prices.

The combination of vaccine availability and the relaxation of government-imposed lockdowns in 2021 led to a rebound in global economic activity in 2021, which continued throughout 2022.

However, the future impact of COVID-19, or that of any other pandemic, cannot be predicted and any resurgence of disease may cause additional volatility in commodity prices.

The future impact of COVID-19, or that of any other pandemic, cannot be predicted and any resurgence of disease may cause additional volatility in commodity prices.

See Risk Factors, “Price Risk Factors – Volatility in the global prices of crude oil, natural gas liquids and natural gas can significantly affect the Company’s operating results.”

If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 or other pandemic, our operations will likely be impacted and decrease our ability to produce oil, natural gas liquids and natural gas.

We may be unable to perform fully on our commitments and our costs may increase as a result of the COVID-19 outbreak.

We may be unable to perform fully on our commitments and our costs may increase as a result of the COVID-19 or other outbreak.

These cost increases may not be fully recoverable or adequately covered by insurance.

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and cause other unpredictable events.

We continue to work with our stakeholders (including customers, employees, suppliers, financial and lending institutions and local communities) to address the COVID-19 pandemic responsibly.

We continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

The Company continues to exercise financial discipline in managing costs and capital expenditures.

We cannot predict the ongoing impact of the COVID-19 or other pandemic.

The extent to which the COVID-19 or other health pandemics or epidemics may impact our results will depend on future developments, including, among other factors, the duration and spread of the virus and its variants, availability, acceptance and effectiveness of vaccines along with related travel advisories, quarantines and restrictions, the recovery time of

Risk Factors - Continued

the disrupted supply chains and industries, the impact of labor market interruptions, and the impact of government interventions.

Changes in U.S.

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For example, on August 16, 2022, the United States enacted the Inflation Reduction Act of 2022, which is highly complex, subject to interpretation and contains significant changes to U.S.

tax law, including, but not limited to, a 15% corporate book minimum tax for taxpayers with adjusted financial statement income in excess of $1 billion and a 1% excise tax on certain stock repurchases made after December 31, 2022.

tax law, including, but not limited to, a 15% corporate book minimum tax for taxpayers with adjusted financial statement income exceeding an average of $1 billion over three years and a 1% excise tax on certain stock repurchases made after December 31, 2022.

Department of the Treasury and the IRS are expected to release further regulations and interpretive guidance implementing the legislation contained in the Inflation Reduction Act of 2022, but the details and timing of such regulations are subject to uncertainty at this time.

The tax provisions of the Inflation Reduction Act of 2022 that may apply to us are generally effective in 2023 or later and therefore tax impacts to us in 2022 were immaterial.

The tax provisions of the Inflation Reduction Act of 2022 that

Risk Factors - Continued

may apply to us are generally effective in 2023 or later.

We continue to analyze the potential impact of the Inflation Reduction Act of 2022 on our consolidated financial statements and to monitor guidance to be issued by the U.S.

Department of the Treasury.

However, it is possible that the enactment of changes in the U.S.

corporate tax system, including in connection with the Inflation Reduction Act of 2022, could have a material effect on our consolidated cash taxes in the future.

Murphy’s Information Technology environment may be exposed to cyber threats.

However, it is possible that further changes may be enacted to U.S.

and international tax rules and regulations, including the U.S.

corporate tax system, which could have a material effect on our consolidated cash taxes in the future.

We may not be able to hire or retain qualified personnel to support our operations.

The success of our operations is dependent upon our ability to hire and retain qualified and experienced personnel.

Changes in public sentiment for oil and gas exploration, development, and production activities and considerations including climate change and the transition to a lower carbon economy may make it more difficult for us to attract such qualified personnel.

Additionally, the cost to attract and retain qualified personnel has increased in recent years due to competition and may increase substantially in the future.

If there is a decrease in the availability of qualified personnel, this may materially and adversely affect our results of operations, cash flows and financial condition.

Murphy’s sensitive information and operational technology systems and critical data may be exposed to cyber threats.

The oil and gas industry has become increasingly dependent on digital technologies to conduct exploration, development, and production activities.

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We rely on our information systems, and our cybersecurity training and policies, to protect and secure intellectual property, strategic plans, customer information, and personally identifiable information, such as employee information.

A failure of our cyber infrastructure or a successful or undetected cyberattack has the potential to halt business operations, impair our reputation, weaken our competitive advantage, and/or adversely impact our financial condition.

Given the increasing global threats from cybercrime, the Company’s approach to mitigate cybersecurity risk focuses on three key elements:

• People - Security awareness education and readiness-testing throughout the year for employees and contractors;

• Process - Incorporating “cyber awareness” in our day to day processes and maturing key controls such as recurring internal and external cyber risk assessments, physical and digital asset protection, and security vulnerability remediation via preventative and detective measures;

• Technology - Investing in industry aligned security technology and threat intelligence capabilities.

A cyber infrastructure failure or a successfully executed, undetected cyber attack could significantly disrupt business operations.

It might lead to downtime, revenue loss, and increased costs for remediation.

Additionally, the compromise, theft, or unauthorized release of critical data could damage our reputation, weaken our competitive edge, and negatively impact our financial stability.

Due to the nature of cyber-attacks, breaches to our systems could go undetected for a prolonged period of time.

As the sophistication of cyber threats continues to evolve, we may be required to dedicate additional resources to continue to modify or enhance our security measures, or to investigate and remediate any vulnerabilities to cyber-attacks.

Risk Factors - Continued

In addition, laws and regulations governing, or proposed to govern, cybersecurity, data privacy and protection and the unauthorized disclosure of confidential or protected information, including legislation in domestic and international jurisdictions, pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

Murphy’s operations and earnings have been and will continue to be affected by domestic and worldwide political developments.

From time to time, some governments intervene in the market for crude oil and natural gas produced in their countries through such actions as setting prices, determining rates of production, and controlling who may buy and sell the production.

Murphy is exposed to regulation, legislation and policies enacted by the federal government.

Murphy is exposed to regulation, legislation and policies enacted by policy makers, regulators or other parties to delay or deny necessary licenses and permits to produce or transport crude oil and natural gas.

As an example, following the election and inauguration of the current U.S.

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This order served to potentially impact the timing of issuance of oil and gas leases, lease amendments and extension, and drilling permits on federal lands and offshore waters.

However, following this notice, the Department of Interior has continued to approve permits and Murphy has not experienced a delay in project approvals.

Following this notice, the Department of Interior has continued to approve permits, however, Murphy may experience delays in project approvals when the order is enforced.

An extension or permanency of this regime could impact the options available to Murphy for future development, reserves available for production and hence future cash flows and profitability.

In the event leasing delays or cancellations alter Murphy’s plans in the Gulf of Mexico, the Company believes it will be able to re-focus activities and allocate capital to other areas.

The Company does not hold any onshore federal lands in the U.S.

Risk Factors - Continued

In addition, the current presidential administration has pursued other initiatives related to environmental, health and safety standards applicable to the oil and gas industry.

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Congress and included provisions which required the Department of Interior to hold previously announced offshore lease sales in the Gulf of Mexico and Alaska within two years.

However, on December 14, 2023, the Secretary of the Interior approved the 2024-2029 National Outer Continental Shelf Oil and Gas Leasing Program, which contemplates only three potential oil and gas lease sales in the Gulf of Mexico through 2029.

These developments demonstrate the uncertainty regarding the current presidential administration’s approach to oil and gas leasing and permitting.

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and disclosure of Scope 1, Scope 2 and (for certain companies) Scope 3 emissions.

Similar laws and regulations regarding climate change-related disclosures have been proposed or enacted in other jurisdictions, including California and the European Union.

The SEC’s proposed climate disclosure rules have not yet been finalized, but implementation of the rules as proposed could be costly and time consuming.

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Prices and availability of crude oil, natural gas and refined products could be influenced by political factors and by various governmental policies to restrict or increase petroleum usage and supply.

Other governmental actions that could affect Murphy’s operations and earnings include expropriation, tax law changes, royalty increases, redefinition of international boundaries, preferential and discriminatory awarding of oil and natural gas leases, restrictions on drilling and/or production, restraints and controls on imports and exports, safety, and relationships between employers and employees.

Other governmental actions that could affect Murphy’s operations and earnings include expropriation, tax law changes, royalty increases, redefinition of international boundaries, preferential and discriminatory awarding of oil and gas leases, restrictions on drilling and/or production, restraints and controls on imports and exports, safety, and relationships between employers and employees.

Governments could also initiate regulations concerning matters such as currency fluctuations, currency conversion, protection and remediation of the environment, and concerns over the possibility of global warming caused by the production and use of hydrocarbon energy.

As of December 31, 2023, 1.7% of the Company’s proved reserves, as defined by the SEC, were located in countries other than the U.S.

Risk Factors - Continued

fracturing with the desire to minimize the emission of GHG such as carbon dioxide, which may harm air quality, and to restrict hydrocarbon spills, which may harm land and/or groundwater.

A number of non-governmental entities routinely attempt to influence industry members and government energy policy in an effort to limit industry activities, such as hydrocarbon production, drilling and hydraulic fracturing with the desire to minimize the emission of GHG such as carbon dioxide, which may harm air quality, and to restrict hydrocarbon spills, which may harm land and/or groundwater.

Additionally, because of the numerous countries in which the Company operates, certain other risks exist, including the application of the U.S.

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It is not possible to predict the actions of governments and hence the impact on Murphy’s future operations and earnings.

Risk Factors - Continued

Murphy’s insurance may not be adequate to offset costs associated with certain events, and there can be no assurance that insurance coverage will continue to be available in the future on terms that justify its purchase.

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The issue of climate change has caused considerable attention to be directed towards initiatives to reduce global GHG emissions.

The Paris Agreement and subsequently yearly “conferences of the parties” to the Paris Agreement have resulted in commitments from many countries to reduce GHG emissions and have called for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs.

Most recently, in November 2022, the international community gathered in Egypt at the 27th Conference of the Parties on the UN Framework Convention on Climate Change (COP27), during which multiple announcements were made, including the EPA’s announcement of more stringent revisions to previously proposed methane emissions rules for the oil and gas sector.

The previously proposed rules and EPA’s November 2022 revisions, establish requirements for methane emissions from existing and modified oil and gas sources and impose additional requirements for new sources.

The Paris Agreement and subsequent yearly “conferences of the parties” to the Paris Agreement have resulted in commitments from many countries to reduce GHG emissions and have called for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs.

In November and December 2023, the international community gathered in Dubai at the 28th Conference to the Parties on the UN Framework Convention on Climate Change (COP28), during which multiple announcements were made, including a global agreement that calls for transitioning away from fossil fuels, and a pledge by about 50 oil and gas producing countries to achieve near-zero methane emissions by 2030.

In addition, the federal government could issue various executive orders that may result in additional laws, rules and regulations in the area of climate change.

It is possible that the Paris Agreement, COP28, government executive orders and other such initiatives, including foreign, federal and state laws, rules or regulations related to GHG emissions and climate change, may reduce the demand for crude oil and natural gas globally.

In addition to regulatory risk, other market and social initiatives such as public and private initiatives that aim to subsidize the development of non-fossil fuel energy sources, may reduce the competitiveness of carbon-based fuels, such as oil and gas.

While the magnitude of any reduction in hydrocarbon demand is difficult to predict, such a development could adversely impact the Company and other companies engaged in the exploration and production business.

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The Company continually monitors the global climate change agenda initiatives and plans accordingly based on its assessment of such initiatives on its business.

Risk Factors - Continued

Lawsuits against Murphy and its subsidiaries could adversely affect its operating results.

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In the opinion of management and based upon currently known facts and circumstances, the currently pending legal proceedings are not expected, individually or in the aggregate, to have a material adverse effect upon the Company’s operations or financial condition.

UNRESOLVED STAFF COMMENTS

The Company had no unresolved comments from the staff of the U.S.

Securities and Exchange Commission as of December 31, 2022.

Descriptions of the Company’s oil and natural gas properties are included in Item 1 of this Form 10-K report beginning on page 1.

Information required by the Securities Exchange Act Industry Guide No.

2 can be found in the Supplemental Oil and Gas Information section of this Annual Report on Form 10-K on pages 110 to 125 and in Note D beginning on page 80.

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

What changed 10-K

Item 1A. Risk Factors