Murphy Oil(MUR) - 2022 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presents Murphy Oil Corporation's unaudited consolidated financial statements and detailed notes for interim periods ended June 30, 2022 and 2021 Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific interim dates | Metric (Thousands of dollars) | June 30, 2022 | December 31, 2021 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Total assets | $10,572,211 | $10,304,940 | +2.6% | | Cash and cash equivalents | $432,019 | $521,184 | -17.1% | | Accounts receivable, net | $522,023 | $258,150 | +102.2% | | Property, plant and equipment, net | $8,295,655 | $8,127,852 | +2.1% | | Total liabilities | $6,083,981 | $5,984,144 | +1.7% | | Accounts payable | $910,009 | $623,129 | +46.0% | | Total equity | $4,488,230 | $4,320,796 | +3.9% | Consolidated Statements of Operations Details the company's revenues, costs, and net income (loss) from continuing operations for the interim periods | Metric (Thousands of dollars, except per share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (YoY) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Total revenues and other income | $1,101,057 | $549,643 | +100.3% | $1,654,018 | $929,628 | +77.9% | | Total costs and expenses | $549,449 | $539,859 | +1.8% | $1,144,534 | $1,181,594 | -3.1% | | Operating income (loss) from continuing operations | $551,608 | $9,784 | +5537.9% | $509,484 | -$251,966 | N/A | | Income (loss) from continuing operations | $410,447 | -$26,938 | N/A | $345,512 | -$293,970 | N/A | | NET INCOME (LOSS) ATTRIBUTABLE TO MURPHY | $350,557 | -$63,082 | N/A | $237,221 | -$350,520 | N/A | | Basic EPS (Net income (loss)) | $2.26 | -$0.41 | N/A | $1.53 | -$2.27 | N/A | | Diluted EPS (Net income (loss)) | $2.23 | -$0.41 | N/A | $1.50 | -$2.27 | N/A | | Cash dividends per Common share | $0.175 | $0.125 | +40.0% | $0.325 | $0.250 | +30.0% | Consolidated Statements of Comprehensive Income Presents net income (loss) and other comprehensive income (loss) components, including foreign currency translation adjustments | Metric (Thousands of dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (YoY) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Net income (loss) including noncontrolling interest | $409,504 | -$27,040 | N/A | $344,018 | -$293,864 | N/A | | Net (loss) gain from foreign currency translation | -$51,545 | $17,945 | N/A | -$33,525 | $37,842 | N/A | | Other comprehensive (loss) income | -$48,372 | $22,091 | N/A | -$27,016 | $47,814 | N/A | | COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO MURPHY | $302,185 | -$40,991 | N/A | $210,205 | -$302,706 | N/A | Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the interim periods | Metric (Thousands of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash provided by continuing operations activities | $959,241 | $686,282 | +39.8% | | Net cash (required) by investing activities | -$599,269 | -$193,685 | +209.4% | | Net cash (required) by financing activities | -$447,542 | -$386,655 | +15.7% | | Net (decrease) increase in cash and cash equivalents | -$89,165 | $107,494 | N/A | | Cash and cash equivalents at end of period | $432,019 | $418,100 | +3.3% | Consolidated Statements of Stockholders' Equity Outlines changes in equity attributable to Murphy shareholders and noncontrolling interests over the interim periods | Metric (Thousands of dollars) | June 30, 2022 | June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------ | :------------ | :----------- | | Murphy Shareholders' Equity | $4,312,802 | $3,880,600 | +11.1% | | Noncontrolling Interest | $175,428 | $161,228 | +8.8% | | Total Equity | $4,488,230 | $4,041,828 | +11.0% | | Net income (loss) attributable to Murphy (Six Months) | $237,221 | -$350,520 | N/A | | Cash dividends paid (Six Months) | -$50,491 | -$38,590 | +30.8% | | Foreign currency translation (loss) gain, net of income taxes (Six Months) | -$33,525 | $37,842 | N/A | Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements Note A – Nature of Business and Interim Financial Statements Describes Murphy Oil Corporation as an international E&P company, detailing interim financial statement preparation and minor VIE interests - Murphy Oil Corporation is an international oil and natural gas exploration and production company, primarily operating in the United States and Canada[17] - The company holds a 0.5% interest in two variable interest entities (Delta House) which are not consolidated and are not material to financial position or results of operations. Maximum exposure to loss from Delta House was $3.2 million as of June 30, 2022[18] - Interim financial statements are unaudited and include all necessary accruals, prepared in conformity with U.S. GAAP, and should be read with the 2021 Form 10-K[19][20] Note B – New Accounting Principles and Recent Accounting Pronouncements Details the adoption of ASU 2019-12 with no material impact and notes no other significant recent accounting pronouncements - The company adopted ASU 2019-12 (Income Taxes) in Q1 2021, with no material impact on financial statements[21] - No other recent accounting pronouncements were identified as affecting the company[22] Note C – Revenue from Contracts with Customers Outlines revenue recognition policies for crude oil, natural gas, and NGLs, including sales figures and long-term fixed-price contracts - Revenue is generated from crude oil and condensate, natural gas liquids, and natural gas sales in the U.S. (Eagle Ford Shale, Gulf of Mexico) and Canada (offshore, onshore)[24][26][27] Revenue from Sales to Customers | Revenue Source (Thousands of dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total revenue from sales to customers | $1,196,238 | $758,829 | $2,067,612 | $1,351,356 | | Crude oil and condensate revenue | $969,774 | $656,810 | $1,672,620 | $1,147,606 | | Natural gas liquids revenue | $41,156 | $23,602 | $76,687 | $45,171 | | Natural gas revenue | $135,369 | $78,417 | $231,520 | $158,579 | | Sales of purchased natural gas | $49,939 | $0 | $86,785 | $0 | - The company has several long-term fixed-price and index-priced natural gas and NGL sales contracts in Canada and the U.S., extending up to Q4 2026[37] Note D – Property, Plant and Equipment Details accounting for exploratory well costs, impairments, and the $46.5 million acquisition of an additional Kodiak field interest - Capitalized exploratory well costs for continuing operations totaled $178.4 million at June 30, 2022, with $10.5 million charged to expense in 2022 due to an unsuccessful well in Brazil[41][42] Aging of Capitalized Well Costs | Aging of Capitalized Well Costs (Thousands of dollars) | June 30, 2022 Amount | June 30, 2022 No. of Projects | June 30, 2021 Amount | June 30, 2021 No. of Projects | | :------------------------------------- | :------------------- | :---------------------------- | :------------------- | :---------------------------- | | Zero to one year | $4,268 | 2 | $13,881 | 3 | | One to two years | $2,813 | 2 | $23,811 | 3 | | Two to three years | $26,848 | 2 | $30,562 | 2 | | Three years or more | $144,492 | 2 | $129,283 | 0 | | Total | $178,421 | 8 | $197,537 | 8 | - In June 2022, the company acquired an additional 11.0% working interest in the Kodiak field for $46.5 million. No impairments or divestments occurred in the first six months of 2022[45][46][47] Note E – Assets Held for Sale and Discontinued Operations Presents financial results for discontinued operations and details assets held for sale, including the Brunei CA-2 project and former headquarters (Loss) Income from Discontinued Operations | Metric (Thousands of dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | (Loss) income from discontinued operations | -$943 | -$102 | -$1,494 | $106 | Assets Held for Sale | Assets Held for Sale (Thousands of dollars) | June 30, 2022 | December 31, 2021 | | :---------------------------------------- | :------------ | :---------------- | | Property, plant, and equipment, net | $15,561 | $15,453 | | Total current assets associated with assets held for sale | $15,561 | $15,453 | Note F – Financing Arrangements and Debt Details the $1.6 billion RCF, $200 million debt redemption, and subsequent debt management actions including tender offers - As of June 30, 2022, the company had a $1.6 billion revolving credit facility (RCF) with no outstanding borrowings and $27.6 million in outstanding letters of credit[50] - On June 2, 2022, the company redeemed $200.0 million of its 6.875% senior notes due 2024, incurring a $4.3 million debt extinguishment cost[51] - Subsequent to quarter-end, the company issued a notice to redeem the remaining $42.4 million of 2024 notes by August 19, 2022, and commenced tender offers to purchase up to $200.0 million of other senior notes due 2025, 2028, and 2027[54][55][56] Note G – Other Financial Information Provides supplementary cash flow disclosures, including changes in operating working capital, cash income taxes, and interest paid Other Financial Information | Metric (Thousands of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Net decrease (increase) in noncash operating working capital | -$121,598 | $26,565 | | Cash income taxes paid, net of refunds | $1,783 | $1,474 | | Interest paid, net of capitalized amounts | $78,747 | $80,546 | | Asset retirement costs capitalized | $9,007 | $6,669 | Note H – Employee and Retiree Benefit Plans Details defined benefit pension and postretirement plans, including expenses, contributions, and anticipated future funding - The company sponsors defined benefit pension plans (mostly funded) and unfunded health care and life insurance benefit plans for retirees[60] Net Periodic Benefit Expense | Net Periodic Benefit Expense (Thousands of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Pension Benefits | $7,371 | $10,706 | | Other Postretirement Benefits | $1,311 | $1,680 | - Contributions to defined benefit pension and postretirement plans totaled $18.4 million for the six months ended June 30, 2022, with an anticipated $24.4 million remaining for 2022[63] Note I – Incentive Plans Outlines share-based and cash-based incentive plans, including RSU grants and compensation expense for the period - The company uses Annual Incentive Plan (AIP) for cash awards and the 2020 Long-Term Incentive Plan for stock options, SARs, restricted stock, RSUs, and other stock-based incentives[65][66] Type of Award (2020 Long-Term Incentive Plan) | Type of Award (2020 Long-Term Incentive Plan) | Number of Awards Granted (Six Months Ended Feb 1, 2022) | Grant Date Fair Value | | :-------------------------------------------- | :-------------------------------------- | :-------------------- | | Performance Based RSUs | 580,600 | $47.37 | | Time Based RSUs | 273,400 | $32.12 | | Cash Settled RSUs | 674,300 | $32.12 | Share-Based Plans | Share-Based Plans (Thousands of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Compensation charged against income before tax benefit | $34,016 | $18,045 | | Related income tax benefit recognized in income | $5,822 | $2,478 | Note J – Earnings Per Share Provides weighted-average shares outstanding for basic and diluted EPS computations, including dilutive instruments Weighted-Average Shares | Weighted-Average Shares (Thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Basic method | 155,389 | 154,395 | 155,121 | 154,153 | | Diluted method | 157,455 | 154,395 | 157,852 | 154,153 | - Dilutive stock options and restricted stock units of 2.1 million for Q2 2022 and 2.7 million for the six months ended June 30, 2022, were included in diluted EPS computation, compared to none in 2021[74] Note K – Income Taxes Details effective income tax rates, reasons for deviation from statutory rates, and open audit years for major taxing jurisdictions Effective Income Tax Rate | Effective Income Tax Rate | 2022 | 2021 | | :------------------------ | :--- | :--- | | Three months ended June 30, | 20.4% | 29.3% | | Six months ended June 30, | 20.3% | 25.3% | - The effective tax rate was below the U.S. statutory rate of 21% primarily due to no tax applied to the pre-tax income of the noncontrolling interest in MP GOM[76][78] - The earliest open audit years for major taxing jurisdictions are 2016 for the United States and Canada, and 2014 for Malaysia[80] Note L – Financial Instruments and Risk Management Describes the use of derivative instruments for commodity price risk management and their fair value impact on financial statements - Murphy uses crude oil swaps and collar contracts to manage commodity price risks but does not designate them as hedges, recognizing all gains/losses in operations[82][83] Crude Oil Derivative Contracts (June 30, 2022) | Crude Oil Derivative Contracts (June 30, 2022) | Volume per day (Bbl) | Price per Bbl | | :--------------------------------------------- | :------------------- | :------------ | | NYMEX WTI swap contracts | 20,000 | $44.88 | | NYMEX WTI collar contracts (Average Ceiling) | 25,000 | $75.20 | | NYMEX WTI collar contracts (Average Floor) | 25,000 | $63.24 | Derivative Fair Value | Derivative Fair Value (Thousands of dollars) | June 30, 2022 | December 31, 2021 | | :----------------------------------------- | :------------ | :---------------- | | Commodity swaps (Liability) | -$239,382 | -$239,882 | | Commodity collars (Liability) | -$146,780 | -$19,533 | | Commodity collars (Asset) | $0 | $4,280 | | Contingent consideration (Liability) | -$244,226 | -$196,151 | Note M – Accumulated Other Comprehensive Loss Details components of Accumulated Other Comprehensive Loss, primarily driven by foreign currency translation losses Accumulated Other Comprehensive Loss Components | Component (Thousands of dollars) | Balance at Dec 31, 2021 | Net Other Comprehensive Income (Loss) (Six Months) | Balance at June 30, 2022 | | :------------------------------- | :---------------------- | :----------------------------------------------- | :----------------------- | | Foreign Currency Translation Gains (Losses) | -$311,895 | -$33,525 | -$345,420 | | Retirement and Postretirement Benefit Plan Adjustments | -$215,816 | $6,509 | -$209,307 | | Total Accumulated Other Comprehensive Loss | -$527,711 | -$27,016 | -$554,727 | Note N – Environmental and Other Contingencies Addresses environmental, health, and safety regulations, potential liabilities, and the expected non-material impact on financial condition - The company is subject to extensive environmental, health, and safety laws and regulations, with potential for significant civil/criminal penalties and remediation costs for violations or hazardous substance discharges[97][98] - The Biden administration's focus on climate change and greenhouse gas emissions is expected to increase regulatory oversight of the oil and gas industry[99][100] - The company believes that costs related to known or currently unidentified environmental and legal matters are not expected to have a material adverse effect on its future net income, cash flows, or liquidity[102][103] Note O – Business Segments Disaggregates financial performance by E&P segments (U.S., Canada, Other international) and Corporate, highlighting income improvements Segment Income (Loss) | Segment (Millions of dollars) | Three Months Ended June 30, 2022 Income (Loss) | Three Months Ended June 30, 2021 Income (Loss) | Six Months Ended June 30, 2022 Income (Loss) | Six Months Ended June 30, 2021 Income (Loss) | | :---------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | United States E&P | $491.5 | $194.7 | $744.4 | $313.7 | | Canada E&P | $47.2 | $12.7 | $69.9 | -$111.6 | | Other E&P | -$3.5 | -$10.4 | -$47.7 | -$17.3 | | Corporate | -$124.8 | -$223.9 | -$421.1 | -$478.8 | | Total Continuing Operations | $410.4 | -$26.9 | $345.5 | -$294.0 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Analyzes Murphy Oil Corporation's financial condition and results, highlighting improved profitability, segment performance, and outlook Summary Provides an overview of key financial and operational highlights, including commodity prices and strategic developments - Crude oil and natural gas benchmark prices increased significantly in Q2 2022 due to supply concerns, demand recovery, and geopolitical events. WTI averaged $108.41/Bbl in Q2 2022, up from $66.07/Bbl in Q2 2021[107][109] Key Financial and Operational Metrics | Metric (Millions of dollars) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--------------------------- | :------------------------------- | :------------------------------- | | Net income from continuing operations | $410.4 | $345.5 | | Capital expenditures (value of work done) | $317.1 | $621.9 | | Production (MBOEPD, including NCI) | 173 | 162 | - The company achieved first production from the Khaleesi, Mormont, Samurai field development project in the Gulf of Mexico and acquired an additional 11.0% working interest in the Kodiak field for $46.5 million in June 2022[111] Results of Operations Analyzes the financial performance of the company's business segments, including E&P and Corporate Exploration and Production Details significant income improvements in U.S. and Canadian E&P, driven by higher prices, and continued losses in other international E&P E&P Segment Income (Loss) | E&P Segment Income (Loss) (Millions of dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | United States | $491.5 | $194.7 | $744.4 | $313.7 | | Canada | $47.2 | $12.7 | $69.9 | -$111.6 | | Other | -$3.5 | -$10.4 | -$47.7 | -$17.3 | | Total E&P | $535.2 | $197.0 | $766.6 | $184.8 | - U.S. E&P income increased by $296.8 million in Q2 2022 YoY, primarily due to $328.9 million higher revenues (higher commodity prices, lower volumes) and lower DD&A ($26.3 million), partially offset by higher income tax expense and lease operating expense[128] - Canadian E&P income improved by $181.5 million for the six months ended June 30, 2022, compared to a loss in 2021, largely due to higher revenues, lower DD&A, and the absence of a $171.3 million impairment charge recorded in Q1 2021 for Terra Nova[133] - Other international E&P operations reported a $47.7 million loss for the six months ended June 30, 2022, primarily due to expensing the Cutthroat-1 exploration well in Brazil after no hydrocarbons were discovered[134][135] Corporate Reports a narrowed Corporate segment loss, primarily due to lower derivative losses and reduced interest expense - Corporate loss decreased by $99.1 million in Q2 2022 YoY, mainly due to lower losses on derivative instruments ($123.2 million favorable variance) as oil prices increased[136] - For the six months ended June 30, 2022, Corporate loss decreased by $57.7 million, driven by lower interest expense ($60.1 million) due to lower debt redemption premiums and overall debt, and lower losses on derivative instruments ($16.8 million favorable variance)[137] Production Volumes and Prices Presents detailed production volumes and weighted-average sales prices for crude oil, NGLs, and natural gas Production Volumes | Production (Barrels per day unless otherwise noted) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (YoY) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Total net hydrocarbons - continuing operations (MBOEPD) | 173,173 | 182,050 | -5.0% | 161,579 | 173,762 | -7.0% | | Net crude oil and condensate (Bbl/d) | 98,661 | 109,327 | -9.7% | 91,154 | 103,434 | -11.9% | | Net natural gas liquids (Bbl/d) | 10,950 | 11,252 | -2.7% | 10,150 | 10,552 | -3.8% | | Net natural gas (MMCFD) | 381,373 | 368,825 | +3.4% | 361,651 | 358,654 | +0.8% | Weighted Average Sales Prices | Weighted Average Sales Prices (Dollars per barrel/MCF) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (YoY) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Crude oil and condensate | $109.25 (Worldwide) | $65.57 (Worldwide) | +66.6% | $102.86 (Worldwide) | $62.14 (Worldwide) | +65.5% | | Natural gas liquids (U.S.) | $39.37 | $22.18 | +77.5% | $40.00 | $22.41 | +78.5% | | Natural gas (Total Company) | $3.90 | $2.34 | +66.7% | $3.54 | $2.44 | +45.1% | - The decrease in production volumes is primarily due to an ongoing focused effort to reduce capital expenditures that began in 2020 to prioritize corporate debt reduction and return funds to shareholders[138][144] Financial Condition Assesses the company's liquidity and capital resources, including cash flows, working capital, and debt structure Cash Provided by Operating Activities Details the increase in net cash provided by operating activities, driven by higher revenue and partially offset by working capital Net Cash Provided by Continuing Operating Activities | Metric (Millions of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash provided by continuing operating activities | $959.2 | $686.3 | +39.8% | - The increase in operating cash flow was primarily due to higher revenue from production ($629.5 million), partially offset by working capital settlements ($148.2 million) and higher realized losses on derivative instruments ($167.2 million)[155] Cash Required by Investing Activities Explains the significant increase in cash required for investing activities, driven by property additions and the Kodiak field acquisition Net Cash Required by Investing Activities | Metric (Millions of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash required by investing activities | -$599.3 | -$193.7 | +209.4% | | Property additions and dry hole costs | $552.8 | $422.8 | +30.8% | | Acquisition of oil and gas properties | $46.5 | $22.5 | +106.7% | | Total capital expenditures (accrual basis) | $621.9 | $458.2 | +35.7% | - The increase in capital expenditures in 2022 was primarily due to the Kodiak acquisition ($46.5 million), the Cutthroat-1 exploration well in Brazil ($24.3 million), and development activities at Khaleesi, Mormont, Samurai, Tupper Montney, and Kaybob Duvernay[159] Cash Required by Financing Activities Details increased cash required for financing activities, including debt redemption, contingent payments, and increased dividends Net Cash Required by Financing Activities | Metric (Millions of dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (YoY) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash required by financing activities | -$447.5 | -$386.7 | +15.7% | | Retirement of debt | -$200.0 | -$576.4 | -65.3% | | Distributions to noncontrolling interest | -$94.9 | -$75.2 | +26.2% | | Cash dividends paid | -$50.5 | -$38.6 | +30.8% | - Subsequent to quarter-end, the company declared a quarterly cash dividend of $0.25 per share, representing a 43% increase from Q1 2022 and a 100% increase from Q4 2021, and announced a capital allocation framework to return further capital to shareholders[160] Working Capital Reports a working capital deficit, primarily due to increased accounts payable and accrued liabilities, partially offset by higher receivables - Working capital deficit was $566.9 million at June 30, 2022, a $268.0 million decrease from December 31, 2021[163] - The decrease was primarily driven by higher accounts payable ($286.9 million increase), higher other accrued liabilities ($122.6 million increase), and lower cash, partially offset by higher accounts receivable ($263.9 million increase)[163] - Higher accounts payable and accrued liabilities were due to unrealized losses on derivative instruments, trade payables for the Khaleesi, Mormont, Samurai project, and increased contingent consideration obligations[164] Capital Employed Details a slight decrease in total capital employed, driven by reduced long-term debt and increased Murphy shareholders' equity Capital Employed | Capital Employed (Millions of dollars) | June 30, 2022 Amount | June 30, 2022 % | December 31, 2021 Amount | December 31, 2021 % | | :------------------------------------- | :------------------- | :-------------- | :----------------------- | :------------------ | | Long-term debt | $2,267.9 | 34.5% | $2,465.4 | 37.2% | | Murphy shareholders' equity | $4,312.8 | 65.5% | $4,157.3 | 62.8% | | Total capital employed | $6,580.7 | 100.0% | $6,622.7 | 100.0% | - Long-term debt decreased by $197.5 million primarily due to the partial redemption of notes due 2024. The fixed-rate notes had a weighted average maturity of 7.4 years and a weighted average coupon of 6.2%[165] Outlook Provides forward-looking guidance on production, capital expenditures, funding strategies, and derivative contracts - Q3 production is expected to average between 180.0 and 188.0 MBOEPD, excluding noncontrolling interest[167] - Total capital expenditure for 2022 is projected to be between $900.0 million and $950.0 million, excluding acquisitions[168] - The company plans to fund its capital program using operating cash flow and available cash, with surplus cash utilized for debt repayment[168][169] Derivative/Forward Contracts (as of Aug 2, 2022) | Derivative/Forward Contracts (as of Aug 2, 2022) | Volumes | Price | Remaining Period | | :----------------------------------------------- | :------ | :---- | :--------------- | | WTI Fixed price derivative swap (USD/Bbl) | 20,000 Bbl/d | $44.88 | Jul 1, 2022 - Dec 31, 2022 | | WTI Derivative collars (Put/Call USD/Bbl) | 25,000 Bbl/d | $63.24 / $75.20 | Jul 1, 2022 - Dec 31, 2022 | | Canada Natural Gas Fixed price forward sales (C$/Mcf) | 247 MMcf/d | C$2.34 | Jul 1, 2022 - Oct 31, 2022 | | Canada Natural Gas Fixed price forward sales (C$/Mcf) | 266 MMcf/d | C$2.36 | Nov 1, 2022 - Dec 31, 2022 | | Canada Natural Gas Fixed price forward sales (C$/Mcf) | 269 MMcf/d | C$2.36 | Jan 1, 2023 - Mar 31, 2023 | | Canada Natural Gas Fixed price forward sales (C$/Mcf) | 250 MMcf/d | C$2.35 | Apr 1, 2023 - Dec 31, 2023 | | Canada Natural Gas Fixed price forward sales (C$/Mcf) | 162 MMcf/d | C$2.39 | Jan 1, 2024 - Dec 31, 2024 | | Canada Natural Gas Fixed price forward sales (US$/Mcf) | 45 MMcf/d | US$2.05 | Jul 1, 2022 - Dec 31, 2022 | | Canada Natural Gas Fixed price forward sales (US$/Mcf) | 25 MMcf/d | US$1.98 | Jan 1, 2023 - Oct 31, 2024 | | Canada Natural Gas Fixed price forward sales (US$/Mcf) | 15 MMcf/d | US$1.98 | Nov 1, 2024 - Dec 31, 2024 | Forward-Looking Statements Highlights inherent risks and uncertainties associated with forward-looking statements and disclaims any duty to update them - Forward-looking statements are subject to inherent risks and uncertainties, including macro oil and gas industry conditions, exploration success rates, customer demand, foreign exchange, political/regulatory instability, health pandemics, and capital market developments[171] - The company undertakes no duty to publicly update or revise any forward-looking statements[171] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Discusses exposure to market risks from interest rates, commodity prices, and foreign currency, managed through derivative instruments - The company is exposed to market risks from interest rates, crude oil, natural gas, petroleum product prices, and foreign currency exchange rates, managed through derivative instruments[172] - A 10% increase in benchmark prices for commodity derivative contracts outstanding at June 30, 2022, would have increased the net payable by approximately $78.5 million[173] - There were no derivative foreign exchange contracts in place at June 30, 2022[173] ITEM 4. CONTROLS AND PROCEDURES Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[175] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[176] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Addresses routine legal proceedings and their expected non-material impact on the company's financial position - The company is engaged in routine legal proceedings, the ultimate resolution of which is not expected to materially affect net income, financial condition, or liquidity[178] ITEM 1A. RISK FACTORS Discusses inherent risks in the oil and natural gas business and confirms no new material risk factors - The company's oil and natural gas business involves inherent risks and uncertainties[179] - No new risk factors were identified in this report that were not previously disclosed in the 2021 Form 10-K[179] ITEM 6. EXHIBITS Lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and XBRL taxonomy documents - The exhibit index lists certifications required by Rule 13a-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2) and certifications pursuant to 18 U.S.C. Section 1350 (Exhibit 32)[187] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Labels Linkbase, and Presentation Linkbase are included as exhibits[187]