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Murphy Oil(MUR) - 2024 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presents the company's unaudited consolidated financial statements for the quarter ended March 31, 2024 Consolidated Balance Sheets (Thousands of dollars) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total assets | $9,668,660 | $9,766,697 | | Total liabilities | $4,176,155 | $4,217,044 | | Total equity | $5,492,505 | $5,549,653 | - Total assets decreased by approximately $98 million from December 31, 2023, to March 31, 2024, while total liabilities also decreased by approximately $41 million7 Consolidated Statements of Operations (Thousands of dollars, except per share amounts) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues and other income | $796,412 | $841,716 | | Total costs and expenses | $642,355 | $544,920 | | Operating income from continuing operations | $154,057 | $296,796 | | Net income attributable to Murphy | $90,002 | $191,644 | | Income per common share – Basic | $0.59 | $1.23 | | Cash dividends per common share | $0.300 | $0.275 | - Net income attributable to Murphy decreased by over 50% year-over-year, from $191.6 million in Q1 2023 to $90.0 million in Q1 20248 Consolidated Statements of Comprehensive Income (Thousands of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income including noncontrolling interest | $114,658 | $214,314 | | Other comprehensive (loss) income, net of tax | $(34,618) | $4,767 | | Comprehensive income attributable to Murphy | $55,384 | $196,411 | - Comprehensive income attributable to Murphy significantly decreased from $196.4 million in Q1 2023 to $55.4 million in Q1 2024, largely due to a net loss from foreign currency translation of $35.5 million in 20249 Consolidated Statements of Cash Flows (Thousands of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by continuing operations activities | $398,791 | $279,776 | | Net cash required by investing activities | $(249,085) | $(345,319) | | Net cash required by financing activities | $(144,208) | $(114,655) | | Net increase (decrease) in cash and cash equivalents | $6,356 | $(179,580) | - Net cash provided by continuing operations activities increased by $119.0 million year-over-year, while net cash required by investing activities decreased by $96.2 million11122128 Consolidated Statements of Stockholders' Equity (Thousands of dollars) | | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Murphy Shareholders' Equity | $5,303,991 | $5,137,558 | | Total Equity | $5,492,505 | $5,304,668 | - Murphy Shareholders' Equity increased by $166.4 million year-over-year but decreased by $58.8 million from December 31, 2023, due to share repurchases and dividends13135 Notes to Consolidated Financial Statements Note A – Basis of Presentation - The unaudited financial statements are prepared in conformity with U.S. GAAP and include all necessary accruals, with actual results potentially differing from management's estimates15 Note B – New Accounting Principles and Recent Accounting Pronouncements - The company is evaluating the impact of new FASB ASUs on Income Tax Disclosures (ASU 2023-09) and Reportable Segment Disclosures (ASU 2023-07)1819 Note C – Revenue from Contracts with Customers - Murphy Oil Corporation explores for and produces crude oil, natural gas, and natural gas liquids primarily in the U.S. and Canada202223 (Thousands of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total crude oil and condensate revenue | $691,532 | $672,117 | | Total natural gas liquids revenue | $19,647 | $26,362 | | Total natural gas revenue | $83,424 | $97,752 | | Total revenue from sales to customers | $794,848 | $839,968 | - Receivables from contracts with customers, net of royalties, increased from $193.7 million at December 31, 2023, to $215.2 million at March 31, 20242627 Note D – Property, Plant and Equipment (Thousands of dollars) | | 2024 | 2023 | | :--- | :--- | :--- | | Beginning balance at January 1 | $49,118 | $171,860 | | Additions pending proved reserves | $11,538 | $24,685 | | Capitalized exploratory well costs charged to expense | $(26,471) | $– | | Balance at March 31 | $34,185 | $196,545 | - Capitalized exploratory well costs decreased significantly from $196.5 million in Q1 2023 to $34.2 million in Q1 202437 - The company recorded pre-tax impairments of $34.5 million in Q1 2024 related to the Calliope field in the Gulf of Mexico40 Note E – Financing Arrangements and Debt - As of March 31, 2024, the Company had an $800 million revolving credit facility with $796.3 million available borrowing capacity42129 - The interest rate on RCF borrowings at March 31, 2024, would have been 7.68%, and the Company was in compliance with all RCF covenants42 Note F – Other Financial Information (Thousands of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net increase in noncash working capital | $(24,353) | $(75,031) | | Cash income taxes paid, net of refunds | $405 | $3,342 | | Interest paid, net | $11,062 | $19,358 | - Net increase in noncash working capital was $(24.4) million in Q1 2024, a favorable change from $(75.0) million in Q1 202345 Note G – Asset Retirement Obligations (Thousands of dollars) | | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Balance at beginning of year | $914,763 | $911,653 | | Accretion | $12,774 | $11,157 | | Liabilities incurred | $8,960 | $3,605 | | Liabilities settled | $(737) | $(4,855) | | Balance at end of period | $934,612 | $921,132 | | Noncurrent portion of liability | $916,815 | $830,358 | - The noncurrent portion of asset retirement obligations increased to $916.8 million at March 31, 2024, from $830.4 million at March 31, 202347 Note H – Employee and Retiree Benefit Plans (Thousands of dollars) | | Pension Benefits 2024 | Pension Benefits 2023 | Other Postretirement Benefits 2024 | Other Postretirement Benefits 2023 | | :--- | :--- | :--- | :--- | :--- | | Total net periodic benefit expense | $4,734 | $4,519 | $(28) | $92 | - Total net periodic pension benefit expense increased slightly to $4.7 million in Q1 202450 - The Company made $9.5 million in contributions to its defined benefit pension and postretirement plans in Q1 202451 Note I – Incentive Plans - In Q1 2024, the Company granted various performance-based and time-based RSUs under the 2020 Long-Term Incentive Plan56 - Compensation charged against income before tax benefit for share-based plans decreased from $11.2 million in Q1 2023 to $8.9 million in Q1 202458 Note J – Earnings Per Share (Weighted-average shares) | | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Basic method | 152,664,422 | 155,856,509 | | Diluted method | 153,816,626 | 157,388,566 | - Both basic and diluted weighted-average shares outstanding decreased year-over-year, reflecting share repurchases60 Note K – Income Taxes Effective Income Tax Rate | | 2024 | 2023 | | :--- | :--- | :--- | | Three months ended March 31, | 20.6% | 20.1% | - The effective income tax rate for Q1 2024 was 20.6%, slightly higher than 20.1% in Q1 202361 Note L – Financial Instruments and Risk Management - Murphy uses derivative instruments to manage commodity price, foreign currency, and interest rate risks, but not for speculative purposes636465 (Thousands of dollars) | | March 31, 2024 Carrying Amount | March 31, 2024 Fair Value | December 31, 2023 Carrying Amount | December 31, 2023 Fair Value | | :--- | :--- | :--- | :--- | :--- | | Current and long-term debt | $1,329,399 | $1,284,012 | $1,329,075 | $1,265,185 | - The fair value of current and long-term debt was $1,284.0 million at March 31, 2024, lower than its carrying amount of $1,329.4 million76 Note M – Accumulated Other Comprehensive Loss (Thousands of dollars) | | Foreign Currency Translation Gains (Losses) | Retirement and Postretirement Benefit Plan Adjustments | Total | | :--- | :--- | :--- | :--- | | Balance at December 31, 2023 | $(381,632) | $(139,485) | $(521,117) | | Net other comprehensive income (loss) | $(35,528) | $910 | $(34,618) | | Balance at March 31, 2024 | $(417,160) | $(138,575) | $(555,735) | - Accumulated other comprehensive loss increased from $(521.1) million to $(555.7) million in Q1 2024, primarily due to a foreign currency translation loss of $35.5 million78 Note N – Environmental and Other Contingencies - The Company's operations are subject to extensive environmental, health, and safety laws and regulations798082 - Murphy is not aware of any environmental legal proceedings likely to exceed the $1.0 million disclosure threshold81 - Future remediation costs for environmental sites are not expected to have a material adverse effect on the company's financial condition85 Note O – Common Stock Issued and Outstanding (Number of shares outstanding) | | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Beginning of period | 152,748,642 | 155,467,319 | | Treasury shares purchased | (1,273,245) | – | | End of period | 152,576,156 | 156,098,075 | - The Company repurchased 1.3 million shares of common stock for $50.0 million in Q1 2024, with $400 million remaining available under its repurchase program89 Note P – Business Segments (Millions of dollars) | | Total Assets at March 31, 2024 | External Revenues March 31, 2024 | Income (Loss) March 31, 2024 | | :--- | :--- | :--- | :--- | | United States E&P | $7,030.7 | $659.6 | $134.5 | | Canada E&P | $2,059.1 | $136.9 | $19.4 | | Other E&P | $210.2 | $(0.1) | $(10.8) | | Total E&P | $9,300.0 | $796.4 | $143.1 | - U.S. Exploration and Production (E&P) remains the largest segment, contributing $134.5 million to income in Q1 202492 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Analyzes Q1 2024 financial performance, segment results, production, pricing, and capital outlook - Net income from continuing operations decreased by $98.5 million year-over-year to $115.6 million in Q1 2024, due to higher operating expenses, exploration costs, and asset impairments95 - Total hydrocarbon production was 176,671 barrels of oil equivalent per day in Q1 2024, a 2% decrease year-over-year96 - The Company repurchased $50.0 million of common stock and expanded exploration areas with six new deepwater blocks in the Gulf of Mexico97 Overview - Murphy Oil Corporation is a global oil and gas exploration and production company with operations in the U.S. and Canada94 - Key financial highlights for Q1 2024 include a net income of $115.6 million from continuing operations and 176,671 barrels of oil equivalent per day production959697 Results of Operations (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total exploration and production income | $143.1 | $242.7 | | Corporate and other loss | $(27.5) | $(28.7) | | Income from continuing operations | $115.6 | $214.0 | | Net income attributable to Murphy | $90.0 | $191.6 | - Total exploration and production income decreased by $99.6 million year-over-year, primarily driven by lower U.S. E&P income99 Exploration and Production Continuing Operations (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues and other income | $796.4 | $841.7 | | Total Cost and Expenses | $642.3 | $544.9 | | Results of operations before taxes | $180.5 | $307.4 | | Income tax provisions | $37.4 | $64.7 | | Results of operations (excluding Corporate segment) | $143.1 | $242.7 | - E&P revenues decreased slightly, but total costs and expenses increased significantly by $97.4 million, leading to a substantial reduction in operating results101 Pricing (Weighted average sales prices) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Crude oil and condensate – U.S. Offshore ($/BBL) | $77.58 | $73.27 | | Crude oil and condensate – Canada Onshore ($/BBL) | $67.59 | $74.29 | | Natural gas liquids – U.S. Onshore ($/BBL) | $20.67 | $22.11 | | Natural gas – U.S. Onshore ($/MCF) | $1.94 | $2.51 | (Average price for the period) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | WTI ($/BBL) | $76.96 | $76.13 | | NYMEX ($/MMBTU) | $2.42 | $2.67 | | AECO (C$/MCF) | $2.50 | $3.22 | - While WTI crude oil prices slightly increased year-over-year, natural gas benchmark prices (NYMEX and AECO) decreased significantly104 Production Volumes (Barrels per day unless otherwise noted) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total net crude oil and condensate | 95,224 | 100,987 | | Total net natural gas liquids | 9,306 | 11,325 | | Total net natural gas – thousands of cubic feet per day | 432,847 | 404,595 | | Total net hydrocarbons - including NCI | 176,671 | 179,745 | - Total net crude oil and condensate production decreased by 5.7% year-over-year, while total net natural gas production increased by 7.0%106 Revenues from Production (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | United States - Oil | $623.0 | $630.4 | | United States - Natural gas liquids | $18.2 | $22.9 | | United States - Natural gas | $17.2 | $27.6 | | Canada - Oil | $68.6 | $38.1 | | Canada - Natural gas | $66.3 | $70.2 | | Total revenue from production | $794.6 | $796.2 | - Total revenue from production slightly decreased by $1.6 million year-over-year, as lower U.S. E&P revenue was offset by higher Canadian E&P revenue107 Lease Operating and Transportation, Gathering and Processing Expenses (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total lease operating expenses | $234.3 | $200.0 | | Total TGP expenses | $56.5 | $53.9 | - Total lease operating expenses increased by $34.3 million (17.2%) year-over-year, primarily due to workovers and production ramp-up110 Depreciation, Depletion and Amortization Expense (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total DD&A expense | $208.3 | $192.8 | - Total DD&A expense increased by $15.5 million (8.0%) year-over-year, driven by higher sales volumes and increased rates111 Impairment of Assets - The Company recorded $34.5 million in asset impairments in Q1 2024 related to the Calliope field in the Gulf of Mexico112 Exploration Expenses (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total exploration expenses | $44.4 | $10.3 | - Total exploration expenses increased significantly by $34.1 million (331%) year-over-year, primarily due to dry hole expenses in the Gulf of Mexico113 Other Expenses - Other expenses decreased by $4.8 million in Q1 2024 compared to Q1 2023, mainly due to an unfavorable contingent consideration adjustment in 2023114 Income Taxes - Income taxes decreased by $27.3 million in Q1 2024 compared to Q1 2023, primarily as a result of lower pre-tax income115 Corporate - Corporate activities reported a loss of $27.5 million in Q1 2024, a favorable variance of $1.2 million compared to Q1 2023118 Financial Condition - The Company's primary liquidity sources are cash on hand, net cash from continuing operations, and available borrowing capacity120 Cash Flows (Thousands of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by continuing operations activities | $398.8 | $279.8 | | Net cash required by investing activities | $(249.1) | $(345.3) | | Net cash required by financing activities | $(144.2) | $(114.7) | | Net increase (decrease) in cash and cash equivalents | $6.4 | $(179.6) | Cash Provided by Continuing Operations Activities - Net cash provided by continuing operations activities increased by $119.0 million in Q1 2024, due to no contingent consideration payments and favorable working capital timing122 Cash Required by Investing Activities - Net cash required by investing activities decreased by $96.2 million in Q1 2024, mainly due to lower property additions and dry hole costs123 (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total capital expenditures | $271.3 | $336.0 | - Total capital expenditures decreased by $64.7 million, primarily due to lower development expenditures at Eagle Ford Shale assets126 Cash Required by Financing Activities - Net cash required by financing activities increased by $29.5 million in Q1 2024, primarily due to $50.0 million in common share repurchases128 Liquidity - At March 31, 2024, the Company had approximately $1.1 billion in liquidity, comprising cash and available credit129 - Approximately $98.1 million of cash and cash equivalents were held outside the U.S., mainly in Canada, Mexico, and the U.K131 Working Capital (Millions of dollars) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net working capital liability | $(57.3) | $(94.3) | - Net working capital liability improved by $37.0 million to $(57.3) million at March 31, 2024132 Capital Employed (Millions of dollars) | | March 31, 2024 Amount | March 31, 2024 % | December 31, 2023 Amount | December 31, 2023 % | | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $1,328.7 | 20.0 % | $1,328.3 | 19.9 % | | Murphy shareholders' equity | $5,304.0 | 80.0 % | $5,362.8 | 80.1 % | | Total capital employed | $6,632.7 | 100.0 % | $6,691.1 | 100.0 % | - Murphy shareholders' equity decreased by $58.8 million in Q1 2024, mainly due to share repurchases, cash dividends, and foreign currency translation losses135 Critical Accounting Estimates - There have been no significant changes to critical accounting estimates since the Annual Report on Form 10-K for the year ended December 31, 2023136 Accounting Changes and Recent Accounting Pronouncements - Refer to Note B for details on the impact or potential impact of recent accounting pronouncements on financial position and results of operations137 Other Key Performance Metrics - Management uses non-GAAP measures like adjusted net income, EBITDA, and adjusted EBITDA to evaluate operational performance138 (Millions of dollars) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income attributable to Murphy (GAAP) | $90.0 | $191.6 | | Adjusted net income from continuing operations attributable to Murphy (Non-GAAP) | $130.8 | $194.7 | | Adjusted EBITDA attributable to Murphy (Non-GAAP) | $405.2 | $477.5 | - Adjusted net income from continuing operations decreased by $63.9 million year-over-year, and Adjusted EBITDA decreased by $72.3 million140142 Outlook - The oil and gas industry faces volatile commodity pricing, with WTI crude oil forward prices for 2024 at $79.92/BBL144145 - Q2 2024 production is expected to average between 176 and 184 thousand barrels of oil equivalents per day (MBOEPD)146 - Capital expenditures for 2024 are projected to be between $920 million and $1,020 million147 - The Company has $400 million remaining available under its $600 million share repurchase program as of March 31, 2024148 Forward-Looking Statements - The report contains forward-looking statements subject to inherent risks, uncertainties, and assumptions150 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Details the company's exposure to market risks from interest rates, commodity prices, and foreign currency - Murphy is exposed to market risks from interest rates, crude oil, natural gas, and petroleum product prices, and foreign currency exchange rates152 - The Company uses derivative instruments for risk management but had no derivative commodity or foreign exchange contracts in place at March 31, 2024152153 ITEM 4. CONTROLS AND PROCEDURES Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - The Company's disclosure controls and procedures were effective as of March 31, 2024, ensuring timely and accurate reporting of material information155 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024156 PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS States that routine legal proceedings are not expected to materially impact the company's financial condition - Murphy and its subsidiaries are engaged in routine legal proceedings incidental to their business158 - The ultimate resolution of these legal matters is not expected to materially adversely affect the Company's net income, financial condition, or liquidity158 ITEM 1A. RISK FACTORS Refers to the risk factors disclosed in the 2023 Form 10-K, with no new factors identified - The Company's operations in the oil and gas business inherently involve various risks and uncertainties, as detailed in its 2023 Form 10-K159 - No additional risk factors have been identified beyond those previously disclosed or related to the SEC's stayed climate disclosure rule159 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Summarizes common stock repurchases during Q1 2024, with $400 million remaining under the program Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | February 1 through February 29, 2024 | 1,273,245 | $39.25 | - The Company repurchased 1,273,245 shares of its common stock in February 2024, with $400 million remaining available under the $600 million share repurchase program161 ITEM 5. OTHER INFORMATION Confirms no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2024163 ITEM 6. EXHIBITS Provides an index of exhibits filed with the Form 10-Q, including certifications and XBRL documents - The Exhibit Index lists exhibits filed or incorporated by reference, including certifications and Inline XBRL documents171