MURPHY OIL CORP 10-K

Item 1A. Risk Factors - Continued 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, the Biden Administration pursued initiatives related to environmental, health and safety standards applicable to the oil and natural gas industry. These included an executive order in January 2021 that directed the Secretary of the Interior to halt indefinitely new oil and natural gas leases on federal lands and offshore waters pending a since-completed review by the Secretary of the Interior of federal oil and natural gas permitting and leasing practices; however, a June 2021 preliminary injunction in the U.S. District Court for the Western District of Louisiana barred the implementation of the pause in new federal oil and natural gas leases. This executive order also set forth other initiatives and goals, including procurement of carbon pollution-free electricity, elimination of fossil fuel subsidies, a carbon pollution-free power sector by 2035 and a net-zero emissions U.S. economy by 2050. Another executive order from January 2021 called for a climate change-focused review of regulations and other executive actions promulgated, issued or adopted during the prior presidential administration. In August 2022, the IRA of 2022 was passed by the U.S. Congress and included provisions which required the Department of Interior to hold previously announced offshore lease sales in the Gulf of America 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 natural gas lease sales in the Gulf of America through 2029. These developments demonstrate the uncertainty that can arise from the U.S. Administration’s approach to oil and natural gas leasing and permitting. In March 2024, the SEC adopted rules requiring disclosure of a wide range of climate change-related information, including, among other things, companies’ climate change risk management; short-, medium-, and long-term climate-related financial risks; and disclosure of Scope 1 and Scope 2 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 climate disclosure rules have been stayed pending legal challenges, but implementation of the rules as finalized could be costly and time consuming. On February 11, 2025, the SEC notified the U.S. Court of Appeals of a statement issued by the SEC’s Acting Chairman regarding, among other things, the fact that the majority of current SEC Commissioners had previously voted against adopting the rules, and requested that the U.S. Court of Appeals not schedule the case for argument to provide time for the SEC to deliberate and determine the appropriate next steps in the cases. These actions and any future changes to applicable environmental, health and safety, regulatory and legal requirements promulgated by the U.S. Administration and Congress may restrict our access to additional acreage and new leases in the Gulf of America or lead to limitations or delays on our ability to secure additional permits to drill and develop our acreage and leases or otherwise lead to limitations on the scope of our operations, or may lead to increases to our compliance costs. The potential impacts of these changes on our future financial condition, results of operations or cash flows cannot be predicted. 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, tariffs, restraints and controls on imports and exports, safety, and relationships between employers and employees. For example, the Trump Administration has proposed additional tariffs on Canada and Mexico. Such tariffs may put upwards pressure on the prices of goods and services across the jurisdictions in which we operate, which could reduce our ability to offer competitive pricing to potential customers. We cannot predict what changes to trade policy will be made by the Trump Administration, the U.S. Congress or other governments, including whether existing tariff policies will be maintained or modified or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict the effects that any such changes would have on our business. Changes in trade policy have resulted and could again result in reactions from trading partners, including adopting responsive trade policies making it more difficult or costly for us to conduct business across the jurisdictions in which we operate. Such changes in trade policy or in laws and policies governing foreign trade, and any resulting negative sentiments as a result of such changes, could materially and adversely affect our business, financial condition, results of operations and liquidity. 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, 2024, 1.7% of the Company’s proved reserves, as defined by the SEC, were located in countries other than the U.S. and Canada. 24 Table of Contents PART I Item 1A. Risk Factors - Continued 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 GHGs 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. Foreign Corrupt Practices Act and other similar anti-corruption compliance statutes in the jurisdictions in which we operate. It is not possible to predict the actions of governments, including the U.S. Administration, and hence the impact on Murphy’s future operations and earnings. 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. Murphy maintains insurance against certain, but not all, hazards that could arise from its operations. The Company maintains liability insurance sufficient to cover its share of gross insured claim costs up to approximately $500 million per occurrence and in the annual aggregate. Generally, this insurance covers various types of third-party claims related to personal injury, death and property damage, including claims arising from “sudden and accidental” pollution events. The Company also maintains insurance coverage for property damage and well control with a limit of $450 million per occurrence ($850 million for Gulf of America claims), all or part of which could apply to certain sudden and accidental pollution events. These policies have deductibles ranging from $10 million to $25 million. The occurrence of an event that is not insured or not fully insured could have a material adverse effect on the Company’s financial condition and results of operations in the future. Murphy could face long-term challenges to the fossil fuels business model reducing demand and price for hydrocarbon fuels. Murphy’s business model may come under more pressure from changing environmental and social trends and the related global demands for non-fossil fuel energy sources. This demand in alternative forms of energy may cause the price of our products to become more volatile and decline. Further, a reduction in demand for fossil fuels could adversely impact the availability of future financing. As part of Murphy’s strategy review process, the Company reviews hydrocarbon demand forecasts and assesses the impact on its business model, plans and future estimates of reserves. In addition, the Company evaluates other lower-carbon technologies that could complement our existing assets, strategy and competencies as part of its long-term capital allocation strategy. The Company also has significant natural gas reserves which emit lower carbon compared to crude oil and NGLs. The issue of climate change has caused considerable attention to be directed towards initiatives to reduce global GHG emissions. International agreements such as the Paris Agreement and subsequent yearly “conferences of the parties” 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 addition to calls for transitioning away from fossil fuels and a pledge to achieve near-zero methane emissions by a specified future date. In addition, presidential administrations could issue various executive orders that may result in additional laws, rules and regulations in the area of climate change. It is possible that international agreements, presidential 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 efforts that aim to subsidize the development of non-fossil fuel energy sources, may reduce the competitiveness of carbon-based fuels, such as oil and natural 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. With or without renewable-energy subsidies, the unknown pace and strength of technological advancement of non-fossil-fuel energy sources creates uncertainty about the timing and pace of effects on our business model. The Company continually monitors global climate change initiatives and plans accordingly based on its assessment of the effects of such initiatives on its business. 25 Table of Contents PART I Item 1A. Risk Factors - Continued Lawsuits against Murphy and its subsidiaries could adversely affect its operating results. The Company or certain of its consolidated subsidiaries are involved in numerous legal proceedings, including lawsuits for alleged personal injuries, environmental and/or property damages, climate change and other business-related matters. Certain of these claims may take many years to resolve through court and arbitration proceedings or negotiated settlements. 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.