MURPHY OIL CORPORATION In the first half of 2020 the continued spread of coronavirus disease 2019 (COVID-19) has led to disruption in the global economy and a weakness in demand for crude oil. Additionally, certain major global suppliers of crude oil announced supply increases in the first quarter of 2020 which resulted in a contribution to the lower global commodity prices in the first quarter and early second quarter. Subsequent to the supply increases the OPEC+ group of oil producing countries agreed to supply restrictions which helped support the oil price in the latter part of the second quarter. The reduction in commodity prices compared to 2019 will reduce the Company's profits and operating cash-flows; this is discussed in more detail in the Outlook section on page 36. Low oil demand continues. For the three months endedJune 30, 2020 , West Texas Intermediate (WTI) crude oil prices averaged approximately$28 per barrel (compared to$46 in the first quarter of 2020 and$60 in the second quarter of 2019). The closing price for WTI at the end of the second quarter of 2020 was approximately$38 per barrel, reflecting a 36% reduction from the price at the end of 2019. The average price inJuly 2020 was$40.77 per barrel. As ofAugust 4, 2020 closing, the NYMEX WTI forward curve price for September throughDecember 2020 was$42.07 per barrel. For the three months endedJune 30, 2020 , the Company produced 180 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$179.6 million in capital expenditures (on a value of work done basis) in the second quarter of 2020, which included$32.7 million to fund the development of the King's Quay Floating Production System (FPS). The Company reported net loss from continuing operations of$323.1 million (which includes loss attributable to noncontrolling interest of$7.2 million ) for the second quarter of 2020. For the six months endedJune 30, 2020 , the Company produced 189 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$557.6 million in capital expenditures (on a value of work done basis) in the six months endedJune 30, 2020 , which included$61.4 million to fund the development of the King's Quay FPS. The Company reported net loss from continuing operations of$827.0 million (which includes post tax impairment charges of$708.3 million and loss attributable to noncontrolling interest of$99.8 million ) for the six months endedJune 30, 2020 . For the three months endedJune 30, 2019 , the Company produced 171 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$1.6 billion in capital expenditures (on a value of work done basis) in the second quarter of 2019, which included the LLOG acquisition of$1.2 billion . The Company reported net income from continuing operations of$98.8 million (which includes income attributable to noncontrolling interest of$31.0 million ) for the three months endedJune 30, 2019 . For the six months endedJune 30, 2019 , the Company produced 166 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations which excludesMalaysia as it is held for sale. The Company invested$2.0 billion in capital expenditures (on a value of work done basis) in the first half of 2019, which included the LLOG acquisition of$1.2 billion . The Company reported net income from continuing operations of$121.7 million (which includes income attributable to noncontrolling interest of$63.6 million ) for the six months endedJune 30, 2019 . During the three-month and six-month periods endedJune 30, 2020 , crude oil and condensate volumes from continuing operations were higher than the prior year period as a result of the LLOG acquisition in the second quarter of 2019. The additional income from higher volumes was offset by lower average oil prices that were below average comparable benchmark prices during 2019. The results are explained in more detail below. Results of Operations Murphy's income (loss) by type of business is presented below.? Income (Loss) Six Months Ended Three Months Ended June 30, June 30, (Millions of dollars) 2020 2019 2020 2019 Exploration and production$ (171.6) 123.7 (926.8) 219.1 Corporate and other (151.6) (24.9) 99.8 (97.4) (Loss) income from continuing operations (323.2) 98.8 (827.0) 121.7 Discontinued operations ¹ (1.2) 24.4 (6.1) 74.3
Net (loss) income including noncontrolling interest
123.2 (833.1) 196.0
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
1 The Company has presented its Malaysia E&P operations and former U.K. and U.S.
refining and marketing operations as discontinued operations in its consolidated
financial statements.
Exploration and Production
Results of E&P continuing operations are presented by geographic segment below.
Income (Loss)
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 2020 2019 2020 2019
Exploration and production
United States $ (143.1) 133.0 (839.1) 249.2
Canada (19.5) (5.9) (26.4) 1.6
Other (9.0) (3.4) (61.3) (31.7)
Total $ (171.6) 123.7 (926.8) 219.1
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
Other key performance metrics The Company uses other operational performance and income metrics to review operational performance. The table below presents Earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Management uses EBITDA and adjusted EBITDA internally to evaluate the Company's operational performance and trends between periods and relative to its industry competitors. EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for Net (loss) income or Cash provided by operating activities as determined in accordance with accounting principles generally accepted inthe United States of America . Also presented below is adjusted EBITDA per barrel of oil equivalent sold, a non-GAAP financial metric. Management uses EBITDA per barrel of oil equivalent sold to evaluate the Company's profitability of one barrel of oil equivalent sold in the period. Three Months Ended Six Months Ended June 30, June 30, (Millions of dollars, except per barrel of oil equivalents sold) 2020 2019 2020 2019 Net (loss) income attributable to Murphy (GAAP)$ (317.1) 92.3 (733.2) 132.5 Income tax (benefit) expense (94.8) 9.1 (186.3) 19.9 Interest expense, net 38.6 54.1 79.7 100.2 Depreciation, depletion and amortization expense ¹ 219.1 246.0 505.3 458.1 EBITDA attributable to Murphy (Non-GAAP) (154.2) 401.5 (334.5) 710.7 Impairment of assets ¹ 19.6 - 886.0 - Mark-to-market (gain) loss on crude oil derivative contracts 184.5 (50.8) (173.8) (50.8) Mark-to-market (gain) loss on contingent consideration 15.7 15.4 (43.5) 28.9 Restructuring expenses 41.4 - 41.4 - Accretion of asset retirement obligations 10.5 9.9 20.4 19.2 Discontinued operations loss (income) 1.2 (24.4) 6.1 (74.3) Inventory loss - - 4.8 - Foreign exchange (gains) losses 1.4 3.0 (3.3) 5.6 Unutilized rig charges 4.5 - 8.0 - Business development transaction costs - 7.8 - 20.3 Write-off of previously suspended exploration wells - - - 13.2 Adjusted EBITDA attributable to Murphy (Non-GAAP)$ 124.6 362.4 411.6 672.8 Total barrels of oil equivalents sold from continuing operations attributable to Murphy (thousands of barrels) 15,242 14,269 32,312 27,766 Adjusted EBITDA per barrel of oil equivalents sold 8.17 25.40 12.74 24.23
1 Depreciation, depletion, and amortization expense used in the computation of EBITDA excludes the portion attributable to the non-controlling interest.
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OIL AND GAS OPERATING RESULTS - THREE MONTHS ENDED
United
(Millions of dollars) States 1 Canada Other Total
Three Months Ended June 30, 2020
Oil and gas sales and other operating revenues $ 228.3 59.2 - 287.5
Lease operating expenses 116.8 27.4 0.5 144.7
Severance and ad valorem taxes 6.1 0.4 - 6.5
Transportation, gathering and processing 31.5 9.6 - 41.1
Depreciation, depletion and amortization 175.8 49.7 0.5 226.0
Impairments of assets 19.6 - - 19.6
Accretion of asset retirement obligations 9.1 1.3 - 10.4
Exploration expenses
Dry holes and previously suspended exploration costs 7.6 - - 7.6
Geological and geophysical 8.0 0.1 0.5 8.6
Other exploration 2.9 0.1 3.0 6.0
18.5 0.2 3.5 22.2
Undeveloped lease amortization 4.8 - 2.4 7.2
Total exploration expenses 23.3 0.2 5.9 29.4
Selling and general expenses 7.6 5.4 2.3 15.3
Other 24.2 (1.2) 0.1 23.1
Results of operations before taxes (185.7) (33.6) (9.3) (228.6)
Income tax provisions (benefits) (42.6) (14.1) (0.3) (57.0)
Results of operations (excluding Corporate segment) $ (143.1) (19.5) (9.0) (171.6)
Three Months Ended June 30, 2019
Oil and gas sales and other operating revenues $ 576.7 102.0 3.1 681.8
Lease operating expenses 99.7 36.9 0.6 137.2
Severance and ad valorem taxes 12.8 0.3 - 13.1
Transportation, gathering and processing 27.7 7.2 - 34.9
Depreciation, depletion and amortization 201.2 56.8 1.3 259.3
Accretion of asset retirement obligations 8.4 1.5 - 9.9
Exploration expenses
Dry holes and previously suspended exploration costs (0.2) - - (0.2)
Geological and geophysical 15.4 - 2.4 17.8
Other exploration 2.8 0.1 3.1 6.0
18.0 0.1 5.5 23.6
Undeveloped lease amortization 5.9 0.4 0.9 7.2
Total exploration expenses 23.9 0.5 6.4 30.8
Selling and general expenses 12.9 6.1 6.1 25.1
Other 27.9 0.2 0.1 28.2
Results of operations before taxes 162.2 (7.5) (11.4) 143.3
Income tax provisions (benefits) 29.2 (1.6) (8.0) 19.6
Results of operations (excluding Corporate segment) $ 133.0 (5.9) (3.4) 123.7
1 Includes results attributable to a noncontrolling interest in MP GOM.
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
OIL AND GAS OPERATING RESULTS - SIX MONTHS ENDED
United States 1 Canada Other Total
Six Months Ended June 30, 2020
Oil and gas sales and other operating revenues $ 739.8 148.9 1.8 890.5
Lease operating expenses 295.0 58.0 0.8 353.8
Severance and ad valorem taxes 15.2 0.7 - 15.9
Transportation, gathering and processing 66.1 19.4 - 85.5
Depreciation, depletion and amortization 423.3 101.7 1.0 526.0
Impairment of assets 947.4 - 39.7 987.1
Accretion of asset retirement obligations 17.7 2.7 - 20.4
Exploration expenses
Dry holes and previously suspended exploration
costs 7.7 - - 7.7
Geological and geophysical 9.3 0.1 4.2 13.6
Other exploration 3.7 0.3 9.5 13.5
20.7 0.4 13.7 34.8
Undeveloped lease amortization 9.9 0.2 4.6 14.7
Total exploration expenses 30.6 0.6 18.3 49.5
Selling and general expenses 11.3 9.8 3.9 25.0
Other (21.5) (1.0) (1.1) (23.6)
Results of operations before taxes (1,045.3) (43.0) (60.8) (1,149.1)
Income tax provisions (benefits) (206.2) (16.6) 0.5 (222.3)
Results of operations (excluding Corporate segment)
(26.4) (61.3) (926.8) Six months endedJune 30, 2019 Oil and gas sales and other operating revenues$ 1,077.5 228.9 6.0 1,312.4 Lease operating expenses 192.1 75.9 0.9 268.9 Severance and ad valorem taxes 22.6 0.6 - 23.2 Transportation, gathering and processing 59.3 15.2 - 74.5 Depreciation, depletion and amortization 365.1 116.3 2.3 483.7 Accretion of asset retirement obligations 16.2 3.0 - 19.2 Exploration expenses Dry holes and previously suspended exploration costs (0.1) - 13.1 13.0 Geological and geophysical 15.9 - 7.9 23.8 Other exploration 4.0 0.2 7.1 11.3 19.8 0.2 28.1 48.1 Undeveloped lease amortization 12.8 0.7 1.7 15.2 Total exploration expenses 32.6 0.9 29.8 63.3 Selling and general expenses 30.2 13.7 11.7 55.6 Other 58.5 0.4 0.4 59.3 Results of operations before taxes 300.9 2.9 (39.1) 264.7 Income tax provisions (benefits) 51.7 1.3 (7.4) 45.6
Results of operations (excluding Corporate segment)
1.6 (31.7) 219.1
1 Includes results attributable to a noncontrolling interest in MP GOM.
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
Exploration and Production Second quarter 2020 vs. 2019 All amounts include amount attributable to a noncontrolling interest in MP GOM, unless otherwise noted. United States E&P operations reported a loss of$143.1 million in the second quarter of 2020 compared to income of$133.0 million in the second quarter of 2019. Results were$276.1 million unfavorable in the 2020 quarter compared to the 2019 period due to lower revenues ($348.4 million ), impairment charge ($19.6 million ), higher lease operating expenses ($17.1 million ) and transportation, gathering, and processing expenses ($3.8 million ), partially offset by lower income tax expense ($71.8 million ), depreciation, depletion and amortization ($25.4 million ), general and administrative (G&A:$5.3 million ), and other operating expense ($3.7 million ). Lower revenues were primarily due to lower commodity prices and lowerEagle Ford Shale volumes (due to lower capital expenditures), partially offset by higher volumes in theU.S. Gulf of Mexico (as a result of the LLOG acquisition in the second quarter of 2019 and partially offset by shut-in GOM production inMay 2020 due to the low price). The impairment charge relates to a US Offshore project for which the lease expired inJune 2020 . Higher lease operating expense was primarily attributable to well workovers at Dalmatian ($20.5 million ) and Cascade 4 ($4.6 million ), offset by certain cost-savings initiatives taken in the US Onshore business. Lower depreciation expense was primarily due to lower depreciation rates following the impairment charges incurred in the first quarter of 2020. Canadian E&P operations reported a loss of$19.5 million in the second quarter 2020 compared to a loss of$5.9 million in the 2019 quarter. Results were unfavorable$13.6 million compared to the 2019 period primarily due to lower revenue ($42.8 million ), partially offset by a higher tax benefit ($12.5 million ), lower lease operating expenses ($9.5 million ) and lower depreciation and amortization ($7.1 million ). Lower revenue was principally due to lower commodity prices and lowerTerra Nova volumes, partially offset by higher volumes at Kaybob andHibernia . Lower lease operating expenses and depreciation were a result of a shut-in atTerra Nova (starting inDecember 2019 ).Terra Nova is expected to be shut-in for the remainder of 2020 for Asset Integrity work. Other international E&P operations reported a loss from continuing operations of$9.0 million in the second quarter of 2020 compared to a net a loss of$3.4 million in the prior year quarter. The result was$5.6 million unfavorable in the 2020 period versus 2019 primarily due higherBrunei prior period revenue. Six months 2020 vs. 2019 All amounts include amount attributable to a noncontrolling interest in MP GOM, unless otherwise noted. United States E&P operations reported a loss of$839.1 million in the first six months of 2020 compared to income of$249.2 million in the first six months of 2019. Results were$1,088.3 million unfavorable in the 2020 quarter compared to the 2019 period primarily due to an impairment charge ($947.4 million ), lower revenues ($337.7 million ), higher lease operating expenses ($102.9 million ), depreciation, depletion and amortization (DD&A:$58.2 million ), and transportation, gathering, and processing charges ($6.8 million ); partially offset by lower income tax expense ($257.9 million ), other operating expense ($80.0 million ), and G&A ($18.9 million ). The impairment charge is a result of lower forecast future prices at the end of the first quarter 2020, as a result of decreased oil demand and increased oil supply (as discussed above). Based on an evaluation of expected future cash flows from properties as ofJune 30, 2020 , the Company did not have any other significant properties with carrying values that were impaired at that date. If quoted prices decline in future periods, the lower level of projected cash flows for properties could lead to future impairment charges being recorded. The Company cannot predict the amount or timing of impairment expenses that may be recorded in the future. Higher lease operating expenses and depreciation expense were due primarily to higher volumes from the LLOG acquisition in the second quarter of 2019 ($21.9 million ) and well workovers at Cascade ($49.3 million ) and Dalmatian ($20.5 million ). Lower income tax expense is a result of pre-tax losses driven by the impairment charge and lower commodity prices. Lower other operating expense is primarily due to a favorable mark to market revaluation on contingent consideration from priorGulf of Mexico (GOM) acquisitions ($43.5 million ). Lower G&A is due to lower long-term incentive charges. Lower revenues were primarily due to lower commodity prices partially offset by higher volumes in theU.S. Gulf of Mexico (as a result of the LLOG acquisition in the second quarter of 2019). Canadian E&P operations reported a loss of$26.4 million in the first six months of 2020 compared to income of$1.6 million in the first six months quarter of 2019. Results were unfavorable$28 million compared to the 2019 period primarily due to lower revenue ($80.0 million ), partially offset by lower lease operating expense ($17.9 million ), lower DD&A ($14.6 million ), and lower income tax charges ($17.9 million ). Lower revenues were due to lower oil and condensate prices versus the prior year and a shut-in atTerra Nova for Asset Integrity work (starting inDecember 2019 and expected to continue through 2020 full year). Lower lease operating expenses and lower DD&A were a result of lower sales. 29
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
Other international E&P operations reported a loss from continuing operations of$61.3 million in the first six months of 2020 compared to a net loss of$31.7 million in the prior year. The 2020 results include an impairment charge of$39.7 million related to theBrunei asset.
Corporate
Second quarter 2020 vs. 2019 OnMay 6, 2020 , the Company announced that it was closing its headquarter office inEl Dorado, Arkansas , its office inCalgary, Alberta , and consolidating all worldwide staff activities to its existing office location inHouston, Texas . As a result of this decision, certain directly attributable costs and charges have been recognized and reported as Restructuring charges as part of net income in the second quarter 2020. These costs include severance, relocation, IT costs, pension curtailment, termination charges and a write-off of the right of use asset lease associated with theCanada office. Further, the office building inEl Dorado and two airplanes are classified as held for sale. Corporate activities, which include interest expense and income, foreign exchange effects, realized and unrealized gains/losses on crude oil contracts and corporate overhead not allocated to Exploration and Production, reported a net loss of$151.6 million in the second quarter 2020 compared to net loss of$24.9 million in the 2019 quarter. The$126.7 million unfavorable variance is principally due to 2020 mark to market losses on forward swap commodity contracts ($184.5 million ) compared to gains on forward contracts ($50.8 million ) in the second quarter of 2019, restructuring charges ($41.4 million ) related to the closure of theEl Dorado andCalgary offices, offset by higher realized gains on forward commodity contracts ($101.5 million ), higher tax credit ($27.4 million ), lower interest expense ($15.6 million ) and G&A expenses ($8.6 million ). Losses in forward swap commodity contracts are due to an increase in market pricing in future periods whereby the contract provides the Company with a fixed price. Higher realized gains on forward commodity contracts are due to lower prices versus the fixed contract price. Lower interest expense is due to higher borrowings in the second quarter 2019 due to temporary borrowings on the Company's revolving credit facility (RCF) to fund the LLOG acquisition (the revolver borrowings were repaid in the third quarter 2019 following the divestment of theMalaysia business). Six months 2020 vs. 2019 Corporate activities, which include interest expense and income, foreign exchange effects, realized and unrealized gains/losses on crude oil contracts and corporate overhead not allocated to Exploration and Production, reported earnings of$99.8 million in the first six months of 2020 compared to a loss of$97.4 million in the first six months of 2019. The$197.2 million favorable variance is primarily due to higher mark to market gains on forward swap commodity contracts ($123.0 million ), higher realized gains on forward swap commodity contracts ($143.9 million ), lower interest charges ($24.1 million ), lower G&A ($14.4 million ), and partially offset by higher tax charges ($61.7 million ) and restructuring charges ($41.4 million ). As ofJune 30, 2020 , the average forward NYMEX WTI price for the remainder of 2020 was$39.47 and for 2021 was$40.31 (versus fixed hedge prices of$56.42 and$42.93 ; see below). 30
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
Production Volumes and Prices Second quarter 2020 vs. 2019 Total hydrocarbon production from continuing operations averaged 179,506 barrels of oil equivalent per day in the second quarter of 2020, which represented a 5% increase from the 170,885 barrels per day produced in second quarter 2019. The increase was principally due to the acquisition of producingGulf of Mexico assets as part of the LLOG acquisition in the second quarter of 2019, partially offset by GOM shut-in production inMay 2020 (32.4 MBOED) for low commodity prices and lowerEagle Ford Shale production. Average crude oil and condensate production from continuing operations was 108,712 barrels per day in the second quarter of 2020 compared to 107,283 barrels per day in the second quarter of 2019. The increase of 1,429 barrels per day was principally due to higher volumes in theGulf of Mexico (5,940 barrels per day) due to the acquisition of assets as part of the LLOG acquisition and offset by GOM shut-in production inMay 2020 (20 MBOED) for low commodity prices and lowerEagle Ford Shale production. On a worldwide basis, the Company's crude oil and condensate prices averaged$23.03 per barrel in the second quarter 2020 compared to$64.74 per barrel in the 2019 period, a decrease of 64% quarter to quarter. Total production of natural gas liquids (NGL) from continuing operations was 11,540 barrels per day in the second quarter 2020 compared to 10,168 barrels per day in the 2019 period. The average sales price forU.S. NGL was$7.67 per barrel in the 2020 quarter compared to$15.95 per barrel in 2019. The average sales price for NGL inCanada was$13.78 per barrel in the 2020 quarter compared to$28.41 per barrel in 2019. NGL prices are higher inCanada due to the higher value of product produced at the Kaybob and Placid assets. Natural gas sales volumes from continuing operations averaged 356 million cubic feet per day (MMCFD) in the second quarter 2020 compared to 321 MMCFD in 2019. The increase of 35 MMCFD was a result of higher volumes in theGulf of Mexico (30 MMCFD) and higher volumes inCanada (10 MMCFD). Higher volumes in theGulf of Mexico are due to the acquisition of assets related to the MP GOM transaction and the LLOG acquisition. Natural gas prices for the total Company averaged$1.54 per thousand cubic feet (MCF) in the 2020 quarter, versus$1.55 per MCF average in the same quarter of 2019. Average natural gas prices in the US andCanada in the quarter were$1.68 and$1.49 respectively. Six months 2020 vs. 2019 Total hydrocarbon production from all E&P continuing operations averaged 189,350 barrels of oil equivalent per day in the first six months of 2020, which represented a 14% increase from the 166,269 barrels per day produced in the first six months of 2019. The increase is principally due to the acquisition of producingGulf of Mexico assets as part of the LLOG acquisition in the second quarter of 2019. Average crude oil and condensate production from continuing operations was 115,396 barrels per day in the first six months of 2020 compared to 104,567 barrels per day in the first six months of 2019. The increase of 10,829 barrels per day was principally due to higher volumes in theGulf of Mexico (11,811 barrels per day) due to the acquisition of assets as part of the LLOG acquisition. On a worldwide basis, the Company's crude oil and condensate prices averaged$35.65 per barrel in the first six months of 2020 compared to$61.83 per barrel in the 2019 period, a decrease of 42% year over year. Total production of natural gas liquids (NGL) from continuing operations was 12,597 barrels per day in the first six months of 2020 compared to 9,664 barrels per day in the 2019 period. The average sales price forU.S. NGL was$8.62 per barrel in 2020 compared to$17.20 per barrel in 2019. The average sales price for NGL inCanada was$15.04 per barrel in 2020 compared to$31.81 per barrel in 2019. NGL prices are higher inCanada due to the higher value of product produced at the Kaybob and Placid assets. Natural gas sales volumes from continuing operations averaged 368 million cubic feet per day (MMCFD) in the first six months of 2020 compared to 312 MMCFD in 2019. The increase of 56 MMCFD was a primarily the result of higher volumes in theGulf of Mexico (46 MMCFD) and the Canadian Tupper asset (20 MMCFD). Higher volumes in theGulf of Mexico are due to the acquisition of assets related to the LLOG transaction. Higher volumes at theTupper asset are due to higher number of wells operating and improved type curves. Natural gas prices for the total Company averaged$1.64 per thousand cubic feet (MCF) in the first six months of 2020, versus$1.88 per MCF average in the same period of 2019. Average natural gas prices in the US andCanada in the quarter were$1.84 and$1.55 , respectively. Additional details about results of oil and gas operations are presented in the tables on pages 27 and 28. 31
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The following table contains hydrocarbons produced during the three-month and
six-month periods ended
Three Months Ended Six Months Ended
June 30, June 30,
Barrels per day unless otherwise noted 2020 2019 2020 2019
Continuing operations
Net crude oil and condensate
United States Onshore 27,986 33,145 29,510 29,532
Gulf of Mexico 1 67,002 61,062 72,866 61,055
Canada Onshore 7,872 5,943 7,353 6,199
Offshore 5,852 6,685 5,495 7,304
Other - 448 172 477
Total net crude oil and condensate - continuing operations 108,712 107,283 115,396 104,567
Net natural gas liquids
United States Onshore 5,303 5,977 5,444 5,641
Gulf of Mexico 1 5,219 3,118 5,944 2,940
Canada Onshore 1,018 1,073 1,209 1,083
Total net natural gas liquids - continuing operations 11,540 10,168 12,597 9,664
Net natural gas - thousands of cubic feet per day
United States Onshore 27,697 32,209 29,830 30,752
Gulf of Mexico 1 68,717 39,029 75,333 29,356
Canada Onshore 259,108 249,367 262,978 252,120
Total net natural gas - continuing operations 355,522 320,605 368,141 312,228
Total net hydrocarbons - continuing operations including NCI 2,3 179,506 170,885 189,350 166,269
Noncontrolling interest
Net crude oil and condensate - barrels per day (10,719) (11,160) (11,370) (11,669)
Net natural gas liquids - barrels per day (443) (458) (501) (506)
Net natural gas - thousands of cubic feet per day (4,059) (4,507) (4,575) (4,203)
Total noncontrolling interest (11,839) (12,369) (12,634) (12,876)
Total net hydrocarbons - continuing operations excluding NCI 2,3 167,667 158,516 176,716 153,394
Discontinued operations
Net crude oil and condensate - barrels per day - 21,556 - 23,744
Net natural gas liquids - barrels per day - 529 - 636
Net natural gas - thousands of cubic feet per day 2 - 93,382 - 97,465
Total discontinued operations - 37,649 - 40,624
Total net hydrocarbons produced excluding NCI 2,3 167,667 196,165 176,716 194,018
1 Includes net volumes attributable to a noncontrolling interest in MP Gulf of
Mexico , LLC (MP GOM).
2 Natural gas converted on an energy equivalent basis of 6:1
3 NCI - noncontrolling interest in MP GOM.
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The following table contains hydrocarbons sold during the three-month and
six-month periods ended
Three Months Ended Six Months Ended
June 30, June 30,
Barrels per day unless otherwise noted 2020 2019 2020 2019
Continuing operations
Net crude oil and condensate
United States Onshore 27,986 33,145 29,510 29,532
Gulf of Mexico 1 66,669 58,842 73,836 61,053
Canada Onshore 7,872 5,943 7,353 6,199
Offshore 5,943 6,723 5,559 7,324
Other - 470 156 468
Total net crude oil and condensate - continuing operations 108,470 105,123 116,414 104,576
Net natural gas liquids
United States Onshore 5,303 5,977 5,444 5,641
Gulf of Mexico 1 5,219 3,118 5,944 2,940
Canada Onshore 1,018 1,073 1,209 1,083
Total net natural gas liquids - continuing operations 11,540 10,168 12,597 9,664
Net natural gas - thousands of cubic feet per day
United States Onshore 27,697 32,209 29,830 30,752
Gulf of Mexico 1 68,717 39,029 75,333 29,356
Canada Onshore 259,108 249,367 262,978 252,120
Total net natural gas - continuing operations 355,522 320,605 368,141 312,228
Total net hydrocarbons - continuing operations including NCI 2,3 179,264 168,725 190,368 166,278
Noncontrolling interest
Net crude oil and condensate - barrels per day (10,653) (10,715) (11,564) (11,669)
Net natural gas liquids - barrels per day (443) (458) (501) (506)
Net natural gas - thousands of cubic feet per day 2 (4,059) (4,507) (4,575) (4,203)
Total noncontrolling interest (11,773) (11,924) (12,828) (12,876)
Total net hydrocarbons - continuing operations excluding NCI 2,3 167,491 156,801 177,540 153,403
Discontinued operations
Net crude oil and condensate - barrels per day - 21,121 - 23,676
Net natural gas liquids - barrels per day - 498 - 580
Net natural gas - thousands of cubic feet per day 2 - 93,382 - 97,465
Total discontinued operations - 37,183 - 40,500
Total net hydrocarbons sold excluding NCI 2,3 167,491 193,984 177,540 193,903
1 Includes net volumes attributable to a noncontrolling interest in MP GOM. 2 Natural gas converted on an energy equivalent basis of 6:1 3 NCI - noncontrolling interest in MP GOM.
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
The following table contains the weighted average sales prices excluding transportation cost deduction for the three-month and six-month periods endedJune 30, 2020 and 2019.? Comparative periods are conformed to current presentation. Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Weighted average Exploration and Production sales prices Continuing operations Crude oil and condensate - dollars per barrel United States Onshore 21.42 64.17 34.59 61.41 Gulf of Mexico 1 24.77 65.79 37.00 62.62 Canada 2 Onshore 16.09 51.83 26.09 50.78 Offshore 20.48 69.23 35.28 65.84 Other - 73.05 63.51 70.50 Natural gas liquids - dollars per barrel United States Onshore 8.03 15.98 9.45 16.55 Gulf of Mexico 1 7.29 15.78 7.85 18.36 Canada 2 Onshore 13.78 28.41 15.04 31.81 Natural gas - dollars per thousand cubic feet United States Onshore 1.62 2.50 1.74 2.68 Gulf of Mexico 1 1.71 2.60 1.87 2.58 Canada 2 Onshore 1.49 1.26 1.55 1.71 Discontinued operations Crude oil and condensate - dollars per barrel Malaysia 3 Sarawak - 78.25 - 70.32 Block K - 65.79 - 65.56 Natural gas liquids - dollars per barrel Malaysia 3 Sarawak - 41.45 - 48.07 Natural gas - dollars per thousand cubic feet Malaysia 3 Sarawak - 2.57 - 3.60 Block K - 0.24 - 0.24
1 Prices include the effect of noncontrolling interest share for MP GOM.
Financial Condition Cash Provided by Operating Activities Net cash provided by continuing operating activities was$369.4 million for the first six months of 2020 compared to$655.4 million during the same period in 2019. The decreased cash from operating activities is primarily attributable to lower sales ($423.5 million ) and higher lease operating expenses ($85.0 million ), partially offset by higher cash payments received on forward swap commodity contracts ($143.9 million ), lower general and administrative expenses ($45.0 million ). See above for explanation of underlying business reasons. Cash Used in Investing Activities Cash used for property additions and dry holes, which includes amounts expensed, were$589.2 million and$645.2 million in the six-month periods endedJune 30, 2020 and 2019, respectively. In 2020, this includes$51.6 million used to fund the development of the King's Quay FPS which is expected to be refunded on the closing of a transaction to sell this asset to a third party. Lower property additions are a result of reducing the capital spending budget in response to the current commodity price environment. 34
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (contd.) Financial Condition (contd.)
As a result of the lower commodity prices, the Company has made significant
reductions to its planned 2020 capital spending for the remainder of 2020. See
Outlook section on page 36 for further details.
Total accrual basis capital expenditures were as follows:
Six Months Ended
June 30,
(Millions of dollars) 2020 2019
Capital Expenditures
Exploration and production
7.4 5.6
Total capital expenditures
A reconciliation of property additions and dry hole costs in the Consolidated Statements of Cash Flows to total capital expenditures for continuing operations follows.
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