Murphy Oil (MUR) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	MUR
Entity Registrant Name	MURPHY OIL CORP /DE
Entity Central Index Key	0000717423
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	191,482,649

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
Current assets
Cash and cash equivalents	$299,973	$301,144
Canadian government securities with maturities greater than 90 days at the date of acquisition	895,643	779,025
Accounts receivable, less allowance for doubtful accounts of $7,872 in 2010 and $7,761 in 2009	1,390,131	1,463,297
Inventories, at lower of cost or market
Crude oil and blend stocks	157,817	128,936
Finished products	377,659	384,250
Materials and supplies	218,733	220,796
Prepaid expenses	91,290	83,218
Deferred income taxes	54,713	15,029
Total current assets	3,485,959	3,375,695
Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $5,057,057 in 2010 and $4,714,826 in 2009	9,307,027	9,065,088
Goodwill	42,115	40,652
Deferred charges and other assets	334,741	274,924
Total assets	13,169,842	12,756,359
Current liabilities
Current maturities of long-term debt	29	38
Accounts payable and accrued liabilities	2,003,515	1,794,406
Income taxes payable	447,836	387,164
Total current liabilities	2,451,380	2,181,608
Long-term debt	1,231,235	1,353,183
Deferred income taxes	1,052,274	1,018,767
Asset retirement obligations	502,331	476,938
Deferred credits and other liabilities	379,037	379,837
Stockholders' equity
Cumulative Preferred Stock, par $100, authorized 400,000 shares, none issued
Common Stock, par $1.00, authorized 450,000,000 shares, issued 191,988,394 shares in 2010 and 191,797,600 shares in 2009	191,988	191,798
Capital in excess of par value	688,344	680,509
Retained earnings	6,305,396	6,204,316
Accumulated other comprehensive income	381,041	287,187
Treasury stock, 505,745 shares of Common Stock in 2010 and 682,222 shares of Common Stock in 2009, at cost	(13,184)	(17,784)
Total stockholders' equity	7,553,585	7,346,026
Total liabilities and stockholders' equity	$13,169,842	$12,756,359

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Dec. 31, 2009
Accounts receivable, allowance for doubtful accounts	$7,872	$7,761
Property, plant and equipment, accumulated depreciation, depletion and amortization	$5,057,057	$4,714,826
Cumulative Preferred Stock, par	$100	$100
Cumulative Preferred Stock, authorized	400,000	400,000
Cumulative Preferred Stock, issued	0	0
Common Stock, par	$1	$1
Common Stock, authorized	450,000,000	450,000,000
Common Stock, issued	191,988,394	191,797,600
Treasury stock, shares of Common Stock	505,745	682,222

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
REVENUES
Sales and other operating revenues	$5,228,675	$3,416,427
Gain on sale of assets	676	15
Interest and other income (expense)	(49,191)	29,110
Total revenues	5,180,160	3,445,552
COSTS AND EXPENSES
Crude oil and product purchases	3,978,959	2,556,044
Operating expenses	465,607	362,361
Exploration expenses, including undeveloped lease amortization	66,364	111,105
Selling and general expenses	65,131	56,832
Depreciation, depletion and amortization	292,680	194,769
Accretion of asset retirement obligations	7,613	6,253
Redetermination of Terra Nova working interest	5,516
Interest expense	14,809	11,988
Interest capitalized	(2,665)	(10,323)
Total costs and expenses	4,894,014	3,289,029
Income from continuing operations before income taxes	286,146	156,523
Income tax expense	137,255	85,283
Income from continuing operations	148,891	71,240
Income from discontinued operations, net of income taxes		99,864
NET INCOME	$148,891	$171,104
INCOME PER COMMON SHARE - BASIC
Income from continuing operations	0.78	0.37
Income from discontinued operations		0.53
Net Income - Basic	0.78	0.9
INCOME PER COMMON SHARE - DILUTED
Income from continuing operations	0.77	0.37
Income from discontinued operations		0.52
Net income - Diluted	0.77	0.89
Average Common shares outstanding - basic	191,219,265	190,545,771
Average Common shares outstanding - diluted	192,929,735	192,281,803

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net income	$148,891	$171,104
Other comprehensive income, net of income taxes
Net gain (loss) from foreign currency translation	91,660	(80,987)
Retirement and postretirement benefit plan adjustments	2,194	2,188
COMPREHENSIVE INCOME	$242,745	$92,305

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
OPERATING ACTIVITIES
Net income	$148,891		$171,104
Income from discontinued operations			99,864
Income from continuing operations	148,891		71,240
Adjustments to reconcile income from continuing operations to net cash provided by operating activities
Depreciation, depletion and amortization	292,680		194,769
Amortization of deferred major repair costs	7,181		6,501
Expenditures for asset retirements	(7,521)		(2,098)
Dry hole costs	22,274		67,471
Amortization of undeveloped leases	20,857		25,734
Accretion of asset retirement obligations	7,613		6,253
Deferred and noncurrent income tax charges (benefits)	18,272		(785)
Pretax gain from disposition of assets	(676)		(15)
Net decrease in noncash operating working capital	244,327		44,970
Other operating activities, net	75,499		(36,589)
Net cash provided by continuing operations	829,397		377,451
Net cash provided by discontinued operations			2,576
Net cash provided by operating activities	829,397		380,027
INVESTING ACTIVITIES
Property additions and dry hole costs	(481,005)		(511,358)
Purchases of investment securities	(630,169)	[1]	(599,751)	[1]
Proceeds from maturity of investment securities	513,551	[1]	406,528	[1]
Expenditures for major repairs	(50,516)		(7,408)
Proceeds from sales of assets	1,545		116
Other - net	(7,580)		(1,836)
Investing activities of discontinued operations
Sales proceeds			78,908
Other			(845)
Net cash required by investing activities	(654,174)		(635,646)
FINANCING ACTIVITIES
Repayment of notes payable	(122,000)		(30,000)
Repayment of nonrecourse debt of a subsidiary			(2,572)
Proceeds from exercise of stock options and employee stock purchase plans	5,620		4,420
Withholding tax on stock-based incentive awards	(4,930)
Excess tax benefits related to exercise of stock options	191		1,957
Cash dividends paid	(47,811)		(47,639)
Net cash required by financing activities	(168,930)		(73,834)
Effect of exchange rate changes on cash and cash equivalents	(7,464)		(9,254)
Net decrease in cash and cash equivalents	(1,171)		(338,707)
Cash and cash equivalents at January 1	301,144		666,110
Cash and cash equivalents at March 31	299,973		327,403
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Cash income taxes paid	122,959		82,401
Interest paid more than (less than) amounts capitalized	$911		($8,975)
[1]Investments are Canadian government securities with maturities greater than 90 days at the date of acquisition.

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands	Common Stock - par $1.00, authorized 450,000,000 shares, issued 191,988,394 shares at March 31, 2010 and 191,508,641 shares at March 31, 2009	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Total
Balance at beginning of period at Dec. 31, 2008	$191,249	$631,859	$5,557,483	($87,697)	($13,949)
Exercise of stock options	260	7,440
Foreign currency translation gains (losses), net of income taxes				(80,987)		(80,987)
Net income for the period			171,104			171,104
Restricted stock transactions and other		5,439
Retirement and postretirement benefit plan adjustments, net of income taxes				2,188		2,188
Cash dividends			(47,639)
Amortization, forfeitures and other		8,114
Sale of stock under employee stock purchase plans		191			587
Cancellation of performance-based restricted stock and forfeitures					(5,440)
Balance at end of period at Mar. 31, 2009	191,509	653,043	5,680,948	(166,496)	(18,802)	6,340,202
Balance at beginning of period at Dec. 31, 2009	191,798	680,509	6,204,316	287,187	(17,784)	7,346,026
Exercise of stock options	190	5,300
Foreign currency translation gains (losses), net of income taxes				91,660		91,660
Net income for the period			148,891			148,891
Restricted stock transactions and other		(9,229)
Retirement and postretirement benefit plan adjustments, net of income taxes				2,194		2,194
Cash dividends			(47,811)
Amortization, forfeitures and other		11,502
Sale of stock under employee stock purchase plans		262			301
Awarded restricted stock, net of forfeitures					4,299
Balance at end of period at Mar. 31, 2010	$191,988	$688,344	$6,305,396	$381,041	($13,184)	$7,553,585

Interim Financial Statements

Interim Financial Statements
	3 Months Ended Mar. 31, 2010
Interim Financial Statements	Note A Interim Financial Statements The consolidated financial statements of the Company presented herein have not been audited by independent auditors, except for the Consolidated Balance Sheet at December31, 2009. In the opinion of Murphys management, the unaudited financial statements presented herein include all accruals necessary to present fairly the Companys financial position at March31, 2010, and the results of operations, cash flows and changes in stockholders equity for the three-month periods ended March31, 2010 and 2009, in conformity with accounting principles generally accepted in the United States. In preparing the financial statements of the Company in conformity with accounting principles generally accepted in the United States, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from the estimates. Financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Companys 2009 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report. Financial results for the three months ended March31, 2010 are not necessarily indicative of future results.

Discontinued Operations

Discontinued Operations
	3 Months Ended Mar. 31, 2010
Discontinued Operations	Note B Discontinued Operations On March12, 2009, the Company sold its operations in Ecuador for net cash proceeds of $78.9million, subject to post-closing adjustments. The acquirer also assumed certain tax and other liabilities associated with the Ecuador properties sold. The Ecuador properties sold included 20% interests in producing Block16 and the nearby Tivacuno area. The Company recorded a preliminary gain of $104.0 million, net of income taxes of $14.0 million, from the sale of the Ecuador properties. At the time of the sale, the Ecuador properties produced approximately 6,700 net barrels per day of heavy oil and had net oil reserves of approximately 4.3million barrels. All Ecuador operating results prior to the sale, and the resulting gain on disposal, have been reported as discontinued operations. The major assets (liabilities) associated with the Ecuador properties at the date of sale were as follows: (Thousands of dollars) Current assets $ 4,214 Property, plant and equipment, net of accumulated depreciation, depletion and amortization 65,178 Other noncurrent assets 683 Assets sold $ 70,075 Current liabilities $ 105,185 Other noncurrent liabilities 35 Liabilities associated with assets sold $ 105,220 The following table reflects the results of operations from the sold properties including the gain on sale. (Thousands of dollars) ThreeMonthsEnded March31, 2009 Revenues, including a pretax gain on sale of $117,926 $ 126,023 Income before income tax expense 113,825 Income tax expense 13,961

Property, Plant and Equipment

Property, Plant and Equipment
	3 Months Ended Mar. 31, 2010
Property, Plant and Equipment	Note C Property, Plant and Equipment Under U.S. generally accepted accounting principles for companies that use the successful efforts method of accounting, exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic and operating viability of the project. At March31, 2010, the Company had total capitalized exploratory well costs pending the determination of proved reserves of $379.2 million. The following table reflects the net changes in capitalized exploratory well costs during the three-month periods ended March31, 2010 and 2009. (Thousands of dollars) 2010 2009 Beginning balance at January1 $ 369,862 310,118 Additions pending the determination of proved reserves 9,310 2,326 Reclassifications to proved properties based on the determination of proved reserves Balance at March31 $ 379,172 312,444 The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs have been capitalized. The projects are aged based on the last well drilled in the project. March31 2010 2009 (Thousands of dollars) Amount No.of Wells No. of Projects Amount No.of Wells No. of Projects Aging of capitalized well costs: Zero to one year $ 122,085 14 6 31,261 3 2 One to two years 32,400 4 2 18,046 2 2 Two to three years 17,946 2 2 71,101 14 3 Three years or more 206,741 32 4 192,036 25 5 $ 379,172 52 14 312,444 44 12 Of the $257.1 million of exploratory well costs capitalized more than one year at March31, 2010, $177.7 million is in Malaysia, $59.8 million is in the U.S., $10.1million is in Canada and $9.5 million is in the U.K. In Malaysia either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion. In the U.S. drilling and development operations are planned, in Canada a continuing drilling and development program is underway, and in the U.K. further studies to evaluate the discovery are ongoing.

Employee and Retiree Benefit Pl

Employee and Retiree Benefit Plans
	3 Months Ended Mar. 31, 2010
Employee and Retiree Benefit Plans	Note D Employee and Retiree Benefit Plans The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees. All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plans and the U.S. directors plan. All U.S. tax qualified plans meet the funding requirements of federal laws and regulations. Contributions to foreign plans are based on local laws and tax regulations. The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees. The health care benefits are contributory; the life insurance benefits are noncontributory. The table that follows provides the components of net periodic benefit expense for the three-month periods ended March31, 2010 and 2009. Three Months Ended March31, PensionBenefits Other PostretirementBenefits (Thousands of dollars) 2010 2009 2010 2009 Service cost $ 5,259 4,118 888 776 Interest cost 7,448 6,988 1,431 1,391 Expected return on plan assets (5,851 ) (5,346 ) Amortization of prior service cost 387 398 (64 ) (66 ) Amortization of transitional asset (127 ) (106 ) Recognized actuarial loss 2,965 2,944 578 421 Net periodic benefit expense $ 10,081 8,996 2,833 2,522 During the three-month period ended March31, 2010, the Company made contributions of $3.7 million to its defined benefit pension and postretirement benefit plans. Remaining funding in 2010 for the Companys defined benefit pension and postretirement plans is anticipated to be $22.3 million. In March 2010, the U.S. enacted a health care reform law. Along with other provisions, the law (a)eliminates the tax free status of federal subsidies to companies with qualified retiree prescription drug plans that are actuarially equivalent to Medicare Part D plans beginning in 2013; (b)imposes a 40% excise tax on high-cost health plans as defined in the law beginning in 2018; (c)eliminates lifetime or annual coverage limits and required coverage for preventative health services beginning in September 2010; and (d)imposes a fee of $2 (subsequently adjusted for inflation) for each person covered by a health insurance policy beginning in September 2010. The Company provides a health care benefit plan to eligible U.S. employees and most U.S. retired employees. The new law did not significantly affect the Companys consolidated financial statements as of March31, 2010 and for the three-month period then ended. The Company is still evaluating the various components of the new law and cannot predict with certainly all the ways it may impact the Company. However, based on the evaluation performed to date, the Company currently believes that the health care reform law will not have a material effect on its financial condition, net income or cash flow in future periods.

Incentive Plans

Incentive Plans
	3 Months Ended Mar. 31, 2010
Incentive Plans	Note E Incentive Plans The costs resulting from all share-based payment transactions are recognized as an expense in the financial statements using a fair value-based measurement method over the periods that the awards vest. The 2007 Annual Incentive Plan (2007 Annual Plan) authorizes the Executive Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and other key employees. Cash awards under the 2007 Annual Plan are determined based on the Companys actual financial and operating results as measured against the performance goals established by the Committee. The 2007 Long-Term Incentive Plan (2007 Long-Term Plan) authorizes the Committee to make grants of the Companys Common Stock to employees. These grants may be in the form of stock options (nonqualified or incentive), stock appreciation rights (SAR), restricted stock, restricted stock units, performance units, performance shares, dividend equivalents and other stock-based incentives. The 2007 Long-Term Plan expires in 2017. A total of 6,700,000 shares are issuable during the life of the 2007 Long-Term Plan, with annual grants limited to 1% of Common shares outstanding. The Company has an Employee Stock Purchase Plan that permits the issuance of up to 980,000 shares through June30, 2017. The Company also has a Stock Plan for Non-Employee Directors that permits the issuance of restricted stock and stock options or a combination thereof to the Companys Directors. In February 2010, the Committee granted stock options for 1,605,628 shares at an exercise price of $52.845 per share. The Black-Scholes valuation for these awards was $18.75 per option. The Committee also granted 449,100 performance-based restricted stock units in February 2010 under the 2007 Long-Term Plan. The fair value of the performance-based restricted stock units, using a Monte Carlo valuation model, ranged from $42.38 to $50.95 per unit. Also in February the Committee granted 43,370 shares of time-lapse restricted stock to the Companys Directors under the 2008 Non-employee Director Plan. These shares vest on the third anniversary of the date of grant. The fair value of these awards was estimated based on the fair market value of the Companys stock on the date of grant, which was $52.49 per share. Cash received from options exercised under all share-based payment arrangements for the three-month periods ended March31, 2010 and 2009 was $5.6 million and $4.4 million, respectively. The actual income tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled $2.5 million for each of the three-month periods ended March31, 2010 and 2009. Amounts recognized in the financial statements with respect to share-based plans are as follows. ThreeMonthsEnded March 31 (Thousands of dollars) 2010 2009 Compensation charged against income before tax benefit $ 11,932 8,127 Related income tax benefit recognized in income 3,181 2,707

Earnings per Share

Earnings per Share
	3 Months Ended Mar. 31, 2010
Earnings per Share	Note F Earnings per Share Net income was used as the numerator in computing both basic and diluted income per Common share for the three months ended March31, 2010 and 2009. The following table reconciles the weighted-average shares outstanding used for these computations. Three Months Ended March31 (Weighted-average shares) 2010 2009 Basic method 191,219,265 190,545,771 Dilutive stock options 1,710,470 1,736,032 Diluted method 192,929,735 192,281,803 Certain options to purchase shares of common stock were outstanding during the 2010 and 2009 periods but were not included in the computation of diluted EPS because the incremental shares from assumed conversion were antidilutive. These included 3,271,753 shares at a weighted average share price of $54.27 in 2010 and 3,354,875 shares at a weighted average share price of $55.71 in 2009.

Financial Instruments and Risk

Financial Instruments and Risk Management
	3 Months Ended Mar. 31, 2010
Financial Instruments and Risk Management	Note G Financial Instruments and Risk Management Murphy periodically utilizes derivative instruments to manage certain risks related to commodity prices, foreign currency exchange rates and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Companys senior management. The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with creditworthy major financial institutions or over national exchanges. The Company has a risk management control system to monitor commodity price risks and any derivatives obtained to manage a portion of such risks. Crude Oil Purchase Price Risks The Company purchases crude oil as feedstock at its U.S. and U.K. refineries and is therefore subject to commodity price risk. Short-term derivative instruments were outstanding at March31, 2009 to manage the cost of about 0.5million barrels of crude oil at the Companys Meraux, Louisiana and Superior, Wisconsin refineries. The total impact of marking these contracts to market increased income from continuing operations before income taxes by $0.2million in the three-month period ended March31, 2009. There were no open crude oil purchase derivative contracts at March31, 2010. Foreign Currency Exchange Risks The Company is subject to foreign currency exchange risk associated with operations in countries outside the U.S. Short-term derivative instruments were outstanding at March31, 2010 to manage the risk of certain income tax payments due in 2010 and later years that are payable in Malaysian ringgits. The equivalent U.S. dollars of such Malaysian ringgit contracts outstanding at March31, 2010 and 2009 were approximately $361 million and $140 million, respectively. Short-term derivative instruments were outstanding at March31, 2010 and 2009 to manage the risk of certain U.S. dollar accounts receivable associated with sale of the Companys Canadian crude oil. A total of $45.0 million and $16.0 million U.S. dollar contracts were outstanding at March31, 2010 and 2009, respectively, related to these Canadian receivables. The impact on consolidated income from continuing operations before income taxes from marking these derivative contracts to market was a gain of $14.3 million for first quarter 2010 and loss of $0.5 million for first quarter 2009. The outstanding Malaysian instruments mature by December 2010 and the outstanding Canadian instruments mature in April 2010. At March31, 2010 and December 31, 2009, the fair value of derivative instruments not designated as hedging instruments are presented in the following table. March31, 2010 December31,2009 Asset(Liability)Derivatives Asset(Liability)Derivatives (Thousands of dollars) Balance Sheet Location Fair Value BalanceSheetLocation Fair Value Commodity derivative contracts Accountspayableand accrued liabilities $ (2,344 ) Accountsreceivable $ 2,296 Foreign exchange derivative contracts Accounts receivable 14,

Accumulated Other Comprehensive

Accumulated Other Comprehensive Income
	3 Months Ended Mar. 31, 2010
Accumulated Other Comprehensive Income	Note H Accumulated Other Comprehensive Income The components of Accumulated Other Comprehensive Income on the Consolidated Balance Sheets at March31, 2010 and December31, 2009 are presented in the following table. (Thousands of dollars) March31, 2010 Dec. 31, 2009 Foreign currency translation gains, net of tax $ 513,128 421,468 Retirement and postretirement benefit plan losses, net of tax (132,087 ) (134,281 ) Accumulated other comprehensive income $ 381,041 287,187

Environmental and Other Conting

Environmental and Other Contingencies
	3 Months Ended Mar. 31, 2010
Environmental and Other Contingencies	Note I Environmental and Other Contingencies The Companys operations and earnings have been and may be affected by various forms of governmental action both in the United States and throughout the world. Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax claims; royalty and revenue sharing increases; import and export controls; price controls; currency controls; allocation of supplies of crude oil and petroleum products and other goods; expropriation of property; restrictions and preferences affecting the issuance of oil and gas or mineral leases; restrictions on drilling and/or production; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Companys relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are often motivated by political considerations and may be taken without full consideration of their consequences, and may be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company. Murphy and other companies in the oil and gas industry are subject to numerous federal, state, local and foreign laws and regulations dealing with the environment. Violation of federal or state environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and construction bans or delays. A discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury and property damage that might result. The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. Although the Company has used operating and disposal practices that were standard in the industry at the time, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company or on or under other locations where these wastes have been taken for disposal. In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes were not under Murphys control. Under existing laws the Company could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial plugging operations to prevent future contamination. While some of these historical properties are in various stages of negotiation, investigation, and/or cleanup, the Company is investigating the extent of any such liability and the availability of applicable defenses and believes cost

Commitments

Commitments
	3 Months Ended Mar. 31, 2010
Commitments	Note J Commitments The Company has entered into forward sales contracts to mitigate the price risk for a portion of its 2010 and 2011 natural gas sales volumes at the Tupper field in Western Canada. The contracts call for natural gas deliveries of approximately 33million cubic feet per day during the remainder of 2010 at a price of Cdn$5.30 per thousand cubic feet and 34million cubic feet per day in 2011 at a price of Cdn$6.26, with both contracts calling for delivery at the AECO C sales point. These contracts have been accounted for as a normal sale for accounting purposes.

Terra Nova Working Interest Red

Terra Nova Working Interest Redetermination
	3 Months Ended Mar. 31, 2010
Terra Nova Working Interest Redetermination	Note K Terra Nova Working Interest Redetermination The joint agreement between the owners of the Terra Nova field, offshore Eastern Canada, requires a redetermination of working interests based on an analysis of reservoir quality among fault separated areas where varying ownership interests exist. The operator of Terra Nova completed the initial redetermination assessment in 2009 and the matter is the subject of arbitration before final interests are determined. The Company anticipates that its working interest at Terra Nova will be reduced from its current 12.0% to approximately 10.5%, subject to the results of the ongoing arbitration process between the operator and certain other owners. Upon completion of the arbitration process, which is anticipated to occur in late 2010, the Company will be required to make a cash settlement payment to the TerraNova partnership for the value of oil sold since about December 2004 related to the ultimate working interest reduction below 12.0%. The Company has recorded cumulative expense of $89.0 million through March 2010 based on the anticipated working interest reduction. The expense has been reflected as Redetermination of Terra Nova Working Interest in the respective Consolidated Statement of Income. The Company cannot predict the final outcome of the redetermination process, which is expected to be completed by the end of 2010.

Accounting Matters

Accounting Matters
	3 Months Ended Mar. 31, 2010
Accounting Matters	Note L Accounting Matters The Company adopted new guidance issued by the Financial Accounting Standards Board (FASB) regarding accounting for transfers of financial assets effective January1, 2010. This guidance makes the concept of a qualifying special-purpose entity as defined previously no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities must be reevaluated for consolidation by reporting entities in accordance with the applicable consolidation guidance. This adoption of this guidance did not have a significant effect on the Companys consolidated financial statements. The Company adopted, effective January1, 2010, new guidance issued by the FASB that requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity has both the power to direct the activities of the entity that most significantly impact the entitys economic performance and the obligation to absorb potentially significant losses of the entity or the right to receive potentially significant benefits from the entity. A company is required to make ongoing reassessments of whether it is the primary beneficiary of a variable interest entity. This guidance also amends previous guidance for determining whether an entity is considered a variable interest entity. The adoption of this guidance did not have a significant effect on the Companys consolidated financial statements. The Company adopted new accounting guidance issued by the FASB for noncontrolling interests in consolidated financial statements effective January1, 2009. This guidance was applied prospectively, except for presentation and disclosure requirements which are applied retrospectively. This guidance required noncontrolling interests to be reclassified as equity, and consolidated net income and comprehensive income shall include the respective results attributable to noncontrolling interests. The adoption of this guidance did not have a significant effect on the Companys consolidated financial statements. The Company adopted new accounting guidance covering business combinations effective January1, 2009. The new guidance established principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired business. It also established how to recognize and measure goodwill acquired in the business combination or a gain from a bargain purchase, if applicable. This guidance impacts the recognition and measurement of assets and liabilities in business combinations that occur beginning in 2009. Assets and liabilities that arose from business combinations that occurred prior to 2009 are not affected by this guidance. The adoption of this guidance did not have a significant effect on the Companys consolidated financial statements. The Company is unable to predict how the application of this guidance will affect its financial statements in future periods. The Company

Business Segments

Business Segments
	3 Months Ended Mar. 31, 2010
Business Segments	Note M Business Segments Total Assetsat March31, 2010 ThreeMos.EndedMarch31,2010 ThreeMos.EndedMarch31, 20091 (Millions of dollars) External Revenues Interseg. Revenues Income (Loss) External Revenues Interseg. Revenues Income (Loss) Exploration and production2 United States $ 1,527.7 175.0 18.7 71.0 (7.3 ) Canada 2,726.7 203.3 19.6 49.2 113.4 21.1 .6 Malaysia 3,228.6 503.9 173.5 337.4 117.5 United Kingdom 213.8 52.4 16.6 11.7 3.4 Republic of the Congo 571.9 28.3 2.5 .3 Other 41.8 2.3 (13.5 ) .5 (64.2 ) Total 8,310.5 965.2 19.6 247.0 534.0 21.1 50.3 Refining and marketing United States manufacturing 1,261.6 116.2 640.2 (23.6 ) 65.2 512.7 8.3 United States marketing 1,425.4 3,605.6 8.9 2,331.4 6.3 United Kingdom 914.4 542.4 (15.0 ) 485.9 (3.8 ) Total 3,601.4 4,264.2 640.2 (29.7 ) 2,882.5 512.7 10.8 Total operating segments 11,911.9 5,229.4 659.8 217.3 3,416.5 533.8 61.1 Corporate and other 1,257.9 (49.2 ) (68.4 ) 29.1 10.1 Revenue/income from continuing operations 13,169.8 5,180.2 659.8 148.9 3,445.6 533.8 71.2 Discontinued operations, net of tax 99.9 Total $ 13,169.8 5,180.2 659.8 148.9 3,445.6 533.8 171.1 1 Reclassified to conform to current presentation. 2 Additional details about results of oil and gas operations are presented in the tables on page 21. Due to a recent realignment of management responsibilities within the Companys domestic downstream business, U.S. refining and marketing operating results have now been presented as separate segments for U.S. manufacturing operations and U.S. marketing operations. The Company believes this presentation better reflects the core businesses of its U.S. downstream subsidiaries. United States Manufacturing operations include two refineries and an ethanol production facility. United States Marketing includes retail and wholesale fuel marketing operations. Prior year amounts have been reclassified to reflect the new segment presentation. Transactions between these two U.S. downstream segments are recorded at agreed transfer prices and eliminations have been made as necessary within the consolidated financial statements.

Subsequent Event

Subsequent Event
	3 Months Ended Mar. 31, 2010
Subsequent Event	Note N Subsequent Event The Company has been informed by PETRONAS that following the execution of the Exchange of Letters between Malaysia and the Sultanate of Brunei on March16, 2009, the offshore exploration areas designated as Block L and Block M are no longer a part of Malaysia. As a consequence, the production sharing contracts covering Blocks L andM, awarded in 2003 to PETRONAS Carigali Sdn Bhd and Murphy, were formally terminated by letter dated April7, 2010. Murphys potential participation in replacement production sharing contracts covering these areas is under discussion. The Companys remaining net investment in Block L of $12.2 million at March31, 2010 is included in Property, Plant and Equipment in the consolidated balance sheet pending resolution of its potential participation in replacement production sharing contracts.