Murphy Oil(MUR) - 2020 Q3 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements This section presents Murphy Oil Corporation's unaudited consolidated financial statements for Q3 and nine months ended September 30, 2020, including balance sheets, statements of operations, cash flows, and detailed notes Consolidated Balance Sheets Total assets decreased to $10.47 billion from $11.72 billion by September 30, 2020, primarily due to reduced property, plant, and equipment, while total equity significantly declined to $4.51 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $733,656 | $974,327 | | Property, Plant and Equipment, net | $8,592,834 | $9,969,743 | | Total Assets | $10,469,351 | $11,718,504 | | Total Current Liabilities | $609,386 | $942,789 | | Long-term Debt | $2,987,057 | $2,803,381 | | Total Liabilities | $5,955,306 | $5,913,893 | | Total Equity | $4,514,045 | $5,804,611 | Consolidated Statements of Operations The company reported a net loss of $243.6 million in Q3 2020, a reversal from $1.09 billion net income in Q3 2019, driven by lower revenues and a $219.1 million asset impairment Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue from sales to customers | $425,324 | $750,337 | $1,311,627 | $2,060,127 | | Total revenues and other income | $421,865 | $817,077 | $1,637,135 | $2,191,573 | | Impairment of assets | $219,138 | $— | $1,206,284 | $— | | Operating (loss) income from continuing operations | ($278,055) | $226,464 | ($1,206,709) | $482,029 | | Net (loss) income attributable to Murphy | ($243,553) | $1,089,002 | ($976,841) | $1,221,456 | | Net (loss) income per share - Diluted | ($1.59) | $6.76 | ($6.36) | $7.27 | Consolidated Statements of Cash Flows Net cash from continuing operations decreased to $578.0 million for the nine months ended September 30, 2020, while investing activities required $723.7 million, significantly less than prior year Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by continuing operations | $578,031 | $1,153,227 | | Net cash required by investing activities | ($723,661) | ($2,203,023) | | Net cash (required) provided by financing activities | $59,091 | ($961,386) | | Net (decrease) in cash and cash equivalents | ($87,124) | $74,976 | | Cash and cash equivalents at end of period | $219,636 | $434,899 | Notes to Consolidated Financial Statements These notes detail accounting policies and financial results, including $1.21 billion in asset impairments due to declining oil and gas prices and $46.4 million in restructuring charges - The company's primary business is producing oil and natural gas in the United States and Canada, with worldwide exploration activities[18] Revenue from Contracts with Customers (Nine Months Ended Sep 30, in thousands) | Revenue Source | 2020 | 2019 | | :--- | :--- | :--- | | Crude oil and condensate | $1,110,365 | $1,850,542 | | Natural gas liquids | $35,490 | $49,668 | | Natural gas | $165,772 | $159,917 | | Total | $1,311,627 | $2,060,127 | - The company recorded pretax noncash impairment charges of $1,206.3 million in the first nine months of 2020 to reduce the carrying values of certain U.S. Offshore and Other Foreign properties to their estimated fair values, driven by declines in oil and gas prices[45] - Restructuring charges of $46.4 million were recognized in the first nine months of 2020, primarily for severance and pension costs related to the closure of offices in El Dorado, Arkansas, and Calgary, Alberta[105][106] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the significant negative impact of COVID-19 and lower commodity prices, resulting in a $265.8 million net loss in Q3 2020 and a 20% production decrease to 163 MBOED, leading to reduced capital spending and restructuring - The global economic disruption from COVID-19 and increased supply from major oil producers led to lower commodity prices, which reduced the company's profits and operating cash flows[107] Key Performance Metrics (Q3 2020 vs Q3 2019) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Production (MBOED) | 163 | 203 | | Capital Expenditures ($M) | $122.7 | $356.6 | | Net Loss from Continuing Ops ($M) | ($265.8) | $158.3 (Income) | | WTI Average Price ($/bbl) | ~$41 | ~$56 | Adjusted EBITDA Reconciliation (in millions) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income attributable to Murphy (GAAP) | ($243.6) | $1,089.0 | ($976.8) | $1,221.5 | | Adjusted EBITDA attributable to Murphy (Non-GAAP) | $249.4 | $437.5 | $661.1 | $1,110.3 | - In response to market conditions, the 2020 capital expenditure budget was reduced from an original plan of $1.4-$1.5 billion to a range of $680-$720 million[160] Results of Operations The E&P segment incurred a $192.9 million loss in Q3 2020, primarily from U.S. operations due to lower revenues, volumes, and a $205.1 million impairment charge, while corporate activities also reported a larger loss - U.S. E&P operations results were unfavorable by $343.4 million in Q3 2020 compared to Q3 2019, driven by lower revenues ($326.0 million) and higher impairment charges ($205.1 million)[125] - Canadian E&P operations reported a slightly smaller loss of $8.6 million in Q3 2020 compared to $9.1 million in Q3 2019, as higher gas prices and lower DD&A offset other factors[126] - Corporate activities reported a net loss of $72.9 million in Q3 2020, an unfavorable variance of $73.2 million from Q3 2019, mainly due to mark-to-market losses on commodity swap contracts[131] Production Volumes and Prices Total hydrocarbon production decreased by 20% to 162,824 BOED in Q3 2020, driven by Gulf of Mexico shut-ins and reduced Eagle Ford Shale output, while average crude oil and condensate prices fell 33% to $39.79 per barrel Production Volumes (Continuing Operations) | Product | Q3 2020 | Q3 2019 | Change | | :--- | :--- | :--- | :--- | | Crude Oil & Condensate (bbl/d) | 95,391 | 122,950 | -22% | | Natural Gas Liquids (bbl/d) | 10,523 | 13,601 | -23% | | Natural Gas (MMCFD) | 341 | 399 | -15% | | Total (BOED) | 162,824 | 203,035 | -20% | Weighted Average Sales Prices (Continuing Operations) | Product | Q3 2020 | Q3 2019 | Change | | :--- | :--- | :--- | :--- | | Crude Oil & Condensate ($/bbl) | $39.79 | $59.47 | -33% | | Natural Gas ($/MCF) | $1.78 | $1.46 | +22% | Financial Condition Net cash from continuing operations decreased to $578.0 million for the first nine months of 2020, with capital expenditures significantly lower at $680.3 million, while long-term debt increased to $2.99 billion - Net cash provided by continuing operating activities decreased to $578.0 million for the first nine months of 2020 from $1,153.2 million in the same period of 2019, primarily due to lower revenue[150] - Total accrual basis capital expenditures for the first nine months of 2020 were $680.3 million, a significant decrease from $2,329.1 million in 2019, which included the LLOG acquisition[152] - As of September 30, 2020, the company had $1,396.3 million available on its committed revolving credit facility (RCF)[154] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, commodity prices, and foreign currency using derivatives, with a 10% change in benchmark prices impacting net receivables by approximately $44.7 million - The company uses derivative instruments to manage risks associated with commodity prices, foreign currency exchange rates, and interest rates[164] - A 10% increase in benchmark commodity prices would decrease the net receivable from derivative contracts by approximately $44.7 million, while a 10% decrease would increase it by a similar amount[165] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[167] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[168] Part II – Other Information Legal Proceedings The company is involved in routine legal proceedings, which management does not expect to have a material adverse effect on its financial condition or results - The company considers its ongoing legal proceedings to be routine and incidental to its business and does not expect them to have a material adverse effect[170] Risk Factors This section highlights key risks, primarily the volatility of global crude oil and natural gas prices exacerbated by COVID-19 and OPEC+ actions, alongside operational and credit risks - The most significant variable factor impacting results is the sales price for crude oil and natural gas, which is influenced by factors beyond the company's control, including the COVID-19 pandemic and OPEC+ actions[172][173] - The COVID-19 pandemic poses risks to operations through potential workforce disruptions, supply chain issues, and increased costs, which could materially affect business and financial results[178][181] - The company is exposed to credit risks from customers, joint venture partners, and counterparties to commodity hedge contracts, which it mitigates through active credit monitoring[182][185] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications under Sarbanes-Oxley and XBRL data files - The report includes required certifications under the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2, and 32) and XBRL interactive data files (Exhibit 101)[190] Signature - The report was signed on November 5, 2020, by Christopher D. Hulse, Vice President and Controller[188]