MURPHY OIL CORPORATION In 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. In the first quarter of 2020, certain major global suppliers of crude oil announced supply increases which resulted in a contribution to the lower global commodity prices in the first quarter and early second quarter. In early second quarter of 2020, 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 and during the third quarter. Nevertheless, oil prices during the third quarter 2020 remained below average 2019 prices. 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 35. For the three months endedSeptember 30, 2020 , West Texas Intermediate (WTI) crude oil prices averaged approximately$41 per barrel (compared to$28 in the second quarter of 2020 and$56 in the third quarter of 2019). The closing price for WTI at the end of the third quarter of 2020 was approximately$40 per barrel, reflecting a 34% reduction from the price at the end of 2019. The average price inOctober 2020 was$39.55 per barrel. As of close onNovember 4, 2020 , the NYMEX WTI forward curve prices for the remainder of 2020 and 2021 were$39.15 and$41.06 per barrel, respectively. For the three months endedSeptember 30, 2020 , the Company produced 163 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$122.7 million in capital expenditures (on a value of work done basis) in the third quarter of 2020, which included$19.3 million to fund the development of the King's Quay Floating Production System (FPS). The Company reported net loss from continuing operations of$265.8 million (which includes a loss attributable to noncontrolling interest of$23.1 million ) for the third quarter of 2020. For the nine months endedSeptember 30, 2020 , the Company produced 180 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$680.3 million in capital expenditures (on a value of work done basis) for the nine months endedSeptember 30, 2020 , which included$80.7 million to fund the development of the King's Quay FPS. The Company reported net loss from continuing operations of$1,092.8 million (which includes impairment charges of$854.2 million , net of tax, and a loss attributable to noncontrolling interest of$122.9 million ) for the nine months endedSeptember 30, 2020 . For the three months endedSeptember 30, 2019 , the Company produced 203 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$356.6 million in capital expenditures (on a value of work done basis) in the third quarter of 2019. The Company reported net income from continuing operations of$158.3 million (which includes income attributable to noncontrolling interest of$22.7 million ) for the three months endedSeptember 30, 2019 . For the nine months endedSeptember 30, 2019 , the Company produced 179 thousand barrels of oil equivalent per day (including noncontrolling interest) from continuing operations. The Company invested$2.3 billion in capital expenditures (on a value of work done basis) for the nine months endedSeptember 30, 2019 , which included the LLOG acquisition of$1.2 billion . The Company reported net income from continuing operations of$280.1 million (which includes income attributable to noncontrolling interest of$86.3 million ) for the nine months endedSeptember 30, 2019 . During the three-month and nine-month periods endedSeptember 30, 2020 , crude oil and condensate volumes from continuing operations were lower than the prior year period as a result of lowerEagle Ford Shale volumes (due to lower capital expenditures) and higher hurricane and storm downtime in theGulf of Mexico . Revenue, compared to 2019, was also impacted by the lower average oil prices. The results are explained in more detail below. 23 -------------------------------------------------------------------------------- Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations Murphy's income (loss) by type of business is presented below. Income (Loss) Three Months Ended September 30, Nine Months Ended September 30, (Millions of dollars) 2020 2019 2020 2019 Exploration and production$ (192.9) 158.0 (1,119.7) 377.1 Corporate and other (72.9) 0.3 26.9 (97.0) (Loss) income from continuing operations (265.8) 158.3 (1,092.8) 280.1 Discontinued operations ¹ (0.8) 953.4 (6.9) 1,027.6
Net (loss) income including noncontrolling interest
1,111.7 (1,099.7) 1,307.7 1 The Company has presented its Malaysia E&P operations and formerU.K. andU.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 September 30, Nine Months Ended September 30, (Millions of dollars) 2020 2019 2020 2019 Exploration and production United States$ (172.6) 170.8 (1,011.7) 420.0 Canada (8.6) (9.1) (35.0) (7.5) Other (11.7) (3.7) (73.0) (35.4) Total$ (192.9) 158.0 (1,119.7) 377.1 24
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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 Nine Months Ended September 30, September 30, (Millions of dollars, except per barrel of oil equivalents sold) 2020 2019 2020 2019 Net (loss) income attributable to Murphy (GAAP)$ (243.6) 1,089.0 (976.8) 1,221.5 Income tax (benefit) expense (62.6) 18.8 (248.9) 38.7 Interest expense, net 45.2 44.9 124.9 145.1 Depreciation, depletion and amortization expense ¹ 219.7 308.3 725.1 766.4 EBITDA attributable to Murphy (Non-GAAP) (41.3) 1,461.0 (375.7) 2,171.7 Impairment of assets ¹ 186.5 - 1,072.5 - Mark-to-market loss (gain) on crude oil derivative contracts 69.3 (49.2) (104.5) (100.1) Mark-to-market loss (gain) on contingent consideration 14.0 (28.4) (29.5) 0.5 Restructuring expenses 5.0 - 46.4 - Accretion of asset retirement obligations 10.8 10.6 31.2 29.8 Unutilized rig charges 5.2 - 13.2 - Discontinued operations loss (income) 0.8 (953.4) 6.9 (1,027.6) Inventory loss - - 4.8 - Foreign exchange losses (gains) 0.8 0.8 (2.5) 6.4 Business development transaction costs - 4.1 - 24.4 Write-off of previously suspended exploration wells - - - 13.2 Seal insurance proceeds (1.7) (8.0) (1.7) (8.0) Adjusted EBITDA attributable to Murphy (Non-GAAP)$ 249.4 437.5 661.1 1,110.3 Total barrels of oil equivalents sold from continuing operations attributable to Murphy (thousands of barrels) 14,166 17,745 46,478 45,511 Adjusted EBITDA per barrel of oil equivalents sold$ 17.61 24.65 14.22 24.40
1 Depreciation, depletion, and amortization expense used in the computation of EBITDA and impairment of assets used in the computation of Adjusted EBITDA exclude the portion attributable to the non-controlling interest.
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
OIL AND GAS OPERATING RESULTS - THREE MONTHS ENDED
United
(Millions of dollars) States 1 Canada Other Total
Three Months Ended September 30, 2020
Oil and gas sales and other operating revenues $ 330.8 96.3 - 427.1
Lease operating expenses 91.5 32.6 0.4 124.5
Severance and ad valorem taxes 6.4 0.3 - 6.7
Transportation, gathering and processing 29.3 12.0 - 41.3
Depreciation, depletion and amortization 166.2 59.6 0.5 226.3
Impairments of assets 205.1 - - 205.1
Accretion of asset retirement obligations 9.4 1.4 - 10.8
Exploration expenses
Dry holes and previously suspended exploration
costs 0.6 - - 0.6
Geological and geophysical 0.1 - (0.1) -
Other exploration 0.6 0.1 3.6 4.3
1.3 0.1 3.5 4.9
Undeveloped lease amortization 4.9 0.1 2.3 7.3
Total exploration expenses 6.2 0.2 5.8 12.2
Selling and general expenses 5.3 3.4 1.6 10.3
Other 22.5 (1.5) 2.5 23.5
Results of operations before taxes (211.1) (11.7) (10.8) (233.6)
Income tax provisions (benefits) (38.5) (3.1) 0.9 (40.7)
Results of operations (excluding Corporate
segment) $ (172.6) (8.6) (11.7) (192.9)
Three Months Ended September 30, 2019
Oil and gas sales and other operating revenues $ 656.8 95.0 1.9 753.7
Lease operating expenses 116.2 31.2 0.2 147.6
Severance and ad valorem taxes 13.4 0.4 - 13.8
Transportation, gathering and processing 44.1 10.2 - 54.3
Depreciation, depletion and amortization 253.5 65.3 0.6 319.4
Accretion of asset retirement obligations 9.0 1.6 - 10.6
Exploration expenses
Dry holes and previously suspended exploration
costs (0.1) - - (0.1)
Geological and geophysical 0.2 - 0.2 0.4
Other exploration 1.5 0.1 3.8 5.4
1.6 0.1 4.0 5.7
Undeveloped lease amortization 5.2 0.3 1.0 6.5
Total exploration expenses 6.8 0.4 5.0 12.2
Selling and general expenses 22.7 7.6 5.6 35.9
Other (21.0) (7.3) 0.5 (27.8)
Results of operations before taxes 212.1 (14.4) (10.0) 187.7
Income tax provisions (benefits) 41.3 (5.3) (6.3) 29.7
Results of operations (excluding Corporate
segment) $ 170.8 (9.1) (3.7) 158.0
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 - NINE MONTHS ENDED
United
(Millions of dollars) States 1 Canada Other Total
Nine Months Ended September 30, 2020
Oil and gas sales and other operating revenues $ 1,070.6 245.2 1.8 1,317.6
Lease operating expenses 386.5 90.6 1.2 478.3
Severance and ad valorem taxes 21.6 1.0 - 22.6
Transportation, gathering and processing 95.4 31.4 - 126.8
Depreciation, depletion and amortization 589.5 161.3 1.5 752.3
Impairment of assets 1,152.5 - 39.7 1,192.2
Accretion of asset retirement obligations 27.1 4.1 - 31.2
Exploration expenses
Dry holes and previously suspended exploration
costs 8.3 - - 8.3
Geological and geophysical 9.4 0.1 4.1 13.6
Other exploration 4.3 0.4 13.1 17.8
22.0 0.5 17.2 39.7
Undeveloped lease amortization 14.8 0.3 6.9 22.0
Total exploration expenses 36.8 0.8 24.1 61.7
Selling and general expenses 16.6 13.2 5.5 35.3
Other 1.0 (2.5) 1.4 (0.1)
Results of operations before taxes (1,256.4) (54.7) (71.6) (1,382.7)
Income tax provisions (benefits) (244.7) (19.7) 1.4 (263.0)
Results of operations (excluding Corporate
segment) $ (1,011.7) (35.0) (73.0) (1,119.7)
Nine months ended September 30, 2019
Oil and gas sales and other operating revenues $ 1,734.3 323.8 7.9 2,066.0
Lease operating expenses 308.3 107.1 1.1 416.5
Severance and ad valorem taxes 36.0 1.0 - 37.0
Transportation, gathering and processing 103.4 25.3 - 128.7
Depreciation, depletion and amortization 618.6 181.6 2.9 803.1
Accretion of asset retirement obligations 25.2 4.6 - 29.8
Exploration expenses
Dry holes and previously suspended exploration
costs (0.2) - 13.1 12.9
Geological and geophysical 16.1 - 8.1 24.2
Other exploration 5.5 0.3 10.9 16.7
21.4 0.3 32.1 53.8
Undeveloped lease amortization 18.0 1.0 2.7 21.7
Total exploration expenses 39.4 1.3 34.8 75.5
Selling and general expenses 52.9 21.3 17.3 91.5
Other 37.5 (6.9) 0.9 31.5
Results of operations before taxes 513.0 (11.5) (49.1) 452.4
Income tax provisions (benefits) 93.0 (4.0) (13.7) 75.3
Results of operations (excluding Corporate
segment) $ 420.0 (7.5) (35.4) 377.1
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 Third 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$172.6 million in the third quarter of 2020 compared to income of$170.8 million in the third quarter of 2019. Results were$343.4 million unfavorable in the 2020 quarter compared to the 2019 period due to lower revenues ($326.0 million ) and higher impairment charges ($205.1 million ), partially offset by lower depreciation, depletion and amortization ($87.3 million ), income tax expense ($79.8 million ), lease operating expenses ($24.7 million ), general and administrative (G&A:$17.4 million ), and transportation, gathering, and processing expenses ($14.8 million ). Lower revenues were primarily due to lower commodity prices, lowerEagle Ford Shale volumes (due to lower capital expenditures), and lower volumes in theU.S. Gulf of Mexico (as a result of shut-ins due to hurricane activity in the 2020 quarter). The impairment charge in the quarter relates to the Gulf of Mexico Cascade & Chinook field which, primarily as a result of lower commodity prices and lower capital expenditure plans, was written down to its expected future value. Lower depreciation expense was primarily due to lower depreciation rates following the impairment charges incurred in the first quarter of 2020 and lower sales volume. Lower lease operating expense was primarily attributable to wells being shut-in in theGulf of Mexico and certain cost-savings initiatives taken across all businesses. Lower G&A is due to cost reductions and lower headcount as a result of restructuring (primarily closing theEl Dorado andCalgary offices). Canadian E&P operations reported a loss of$8.6 million in the third quarter 2020 compared to a loss of$9.1 million in the 2019 quarter. Results were favorable$0.5 million compared to the 2019 period primarily due to higher revenue ($1.3 million ), lower depreciation and amortization ($5.7 million ), higher tax benefit ($2.2 million ), partially offset by lower other operating income ($5.8 million ), higher transportation, gathering, and processing expenses ($1.8 million ), and higher lease operating expenses ($1.4 million ). Higher revenue is primarily attributable to higher gas prices atTupper , Kaybob, and Placid (higher AECO prices in the quarter). Lower depreciation expense is due to lower production volumes atTupper andTerra-Nova (shut-in 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$11.7 million in the third quarter of 2020 compared to a net a loss of$3.7 million in the prior year quarter. The result was$8.0 million unfavorable in the 2020 period versus 2019 primarily due higher prior period revenue inBrunei and a prior year income tax credit related toVietnam exploration spend. Nine 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$1,011.7 million in the first nine months of 2020 compared to income of$420 million in the first nine months of 2019. Results were$1,431.7 million unfavorable in the 2020 period compared to the 2019 period primarily due to an impairment charge ($1,152.5 million ), lower revenues ($663.7 million ), higher lease operating expenses ($78.2 million ), partially offset by lower income tax expense ($337.7 million ), other operating expense ($36.5 million ), G&A ($36.3 million ), depreciation, depletion and amortization (DD&A:$29.1 million ), and transportation, gathering, and processing charges ($8.0 million ). The impairment charge is primarily the result of lower forecast future prices, 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 ofSeptember 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. Lower revenues were primarily due to lower commodity prices year over year and lower volumes in theU.S. Gulf of Mexico (as a result of shut-ins related to hurricanes and storms). Higher lease operating expenses were due primarily to well workovers at Cascade ($51.3 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 (as a result of lower commodity prices) from priorGulf of Mexico (GOM) acquisitions ($29.5 million ). Lower G&A is due to cost reductions and lower headcount as a result of restructuring (primarily closing theEl Dorado andCalgary offices). Canadian E&P operations reported a loss of$35.0 million in the first nine months of 2020 compared to a loss of$7.5 million in the first nine months of 2019. Results were unfavorable$27.5 million compared to the 2019 period primarily due to lower revenue ($78.6 million ), partially offset by lower lease operating expense ($16.5 million ), lower DD&A ($20.3 million ), and lower income tax charges ($15.7 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. 28
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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$73 million in the first nine months of 2020 compared to a net loss of$35.4 million in the prior year. The 2020 results include an impairment charge of$39.7 million related to theBrunei asset.
Corporate
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. 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 as ofSeptember 30, 2020 . Subsequent to period end, one of the planes has been sold. Third quarter 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 a net loss of$72.9 million in the third quarter 2020 compared to net income of$0.3 million in the 2019 quarter. The$73.2 million unfavorable variance is principally due to 2020 mark to market losses on forward swap commodity contracts ($69.4 million ) compared to gains on forward contracts ($49.2 million ) in the third quarter of 2019, impairment of theEl Dorado office building ($14.1 million ), and restructuring charges ($5.0 million ), partially offset by higher realized gains on forward commodity contracts ($50.1 million ) and a higher tax credit ($10.9 million ). Losses on 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. Nine 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$26.9 million in the first nine months of 2020 compared to a loss of$97.0 million in the first nine months of 2019. The$123.9 million favorable variance is primarily due to higher realized gains on forward swap commodity contracts ($194.0 million ), lower interest charges ($20.6 million ), lower G&A ($15.7 million ), and partially offset by higher tax charges ($50.7 million ) and restructuring charges ($46.4 million ) related to the closure of theEl Dorado andCalgary offices. Higher realized gains on forward swap commodity contracts are due to lower market pricing whereby the contract provides the Company with a fixed price. Interest charges are lower primarily due to 2019 temporary borrowings on the Company's revolving credit facility (RCF) to fund the LLOG acquisition (the RCF borrowings were repaid in the third quarter 2019 following the divestment of theMalaysia business) and gains from the buy-back of debt in the second quarter 2020. As ofSeptember 30, 2020 , the average forward NYMEX WTI price for the remainder of 2020 was$40.35 and for 2021 was$42.21 (versus fixed hedge prices of$56.42 and$43.31 ; see below). 29
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
Production Volumes and Prices Third quarter 2020 vs. 2019 Total hydrocarbon production from continuing operations averaged 162,824 barrels of oil equivalent per day in the third quarter of 2020, which represented a 20% decrease from the 203,035 barrels per day produced in third quarter 2019. The decrease was principally due to GOM shut-in production due to hurricanes (14.2 MBOED) and lowerEagle Ford Shale production (16.2 MBOED, as a result of lower capex spend at this property). Average crude oil and condensate production from continuing operations was 95,391 barrels per day in the third quarter of 2020 compared to 122,950 barrels per day in the third quarter of 2019. The decrease of 27,559 barrels per day was principally due to lowerEagle Ford Shale production due to lower capital expenditures (15,731 barrels per day) and lower volumes in theGulf of Mexico (14,066 barrels per day) due to GOM shut-in production due to hurricanes (11.1 MBOED). On a worldwide basis, the Company's crude oil and condensate prices averaged$39.79 per barrel in the third quarter 2020 compared to$59.47 per barrel in the 2019 period, a decrease of 33% quarter over quarter. Total production of natural gas liquids (NGL) from continuing operations was 10,523 barrels per day in the third quarter 2020 compared to 13,601 barrels per day in the 2019 period. The average sales price forU.S. NGL was$14.78 per barrel in the 2020 quarter compared to$13.26 per barrel in 2019. The average sales price for NGL inCanada was$19.97 per barrel in the 2020 quarter compared to$21.03 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 341 million cubic feet per day (MMCFD) in the third quarter 2020 compared to 399 MMCFD in 2019. The decrease of 57 MMCFD was a result of lower volumes in theGulf of Mexico (20 MMCFD) and lower volumes inCanada (36 MMCFD). Lower volumes in theGulf of Mexico are due to GOM shut-in production due to hurricanes. Lower volumes inCanada are due to normal well decline and no additional wells in third quarter of 2020. Natural gas prices for the total Company averaged$1.78 per thousand cubic feet (MCF) in the 2020 quarter, versus$1.46 per MCF average in the same quarter of 2019. Average natural gas prices in the US andCanada in the quarter were$1.94 and$1.74 respectively. Nine months 2020 vs. 2019 Total hydrocarbon production from all E&P continuing operations averaged 180,443 barrels of oil equivalent per day in the first nine months of 2020, which represented a 1% increase from the 178,658 barrels per day produced in the first nine 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 108,678 barrels per day in the first nine months of 2020 compared to 110,762 barrels per day in the first nine months of 2019. The decrease of 2,084 barrels per day was principally due to lowerEagle Ford Shale production (5,311 barrels per day), offset by higher volumes in theGulf of Mexico (3,111 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$36.88 per barrel in the first nine months of 2020 compared to$60.94 per barrel in the 2019 period, a decrease of 39% year over year. Total production of natural gas liquids (NGL) from continuing operations was 11,901 barrels per day in the first nine months of 2020 compared to 10,990 barrels per day in the 2019 period. The average sales price forU.S. NGL was$10.13 per barrel in 2020 compared to$15.22 per barrel in 2019. The average sales price for NGL inCanada was$16.95 per barrel in 2020 compared to$27.50 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 359 million cubic feet per day (MMCFD) in the first nine months of 2020 compared to 341 MMCFD in 2019. The increase of 18 MMCFD was a primarily the result of higher volumes in theGulf of Mexico (24 MMCFD). Higher volumes in theGulf of Mexico are due to the acquisition of assets related to the LLOG transaction. Natural gas prices for the total Company averaged$1.68 per thousand cubic feet (MCF) in the first nine months of 2020, versus$1.72 per MCF average in the same period of 2019. Average natural gas prices in the US andCanada in the quarter were$1.87 and$1.62 , respectively. Additional details about results of oil and gas operations are presented in the tables on pages 26 and 27. 30
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
The following table contains hydrocarbons produced during the three-month and
nine-month periods ended
Three Months Ended Nine Months Ended
September 30, September 30,
Barrels per day unless otherwise noted 2020 2019 2020 2019
Continuing operations
Net crude oil and condensate
United States Onshore 24,851 40,582 27,945 33,256
Gulf of Mexico 1 56,517 70,583 67,377 64,266
Canada Onshore 9,595 7,101 8,106 6,503
Offshore 4,428 4,333 5,136 6,302
Other - 351 114 435Total net crude oil and condensate - continuing operations 95,391
122,950 108,678 110,762
Net natural gas liquids
United States Onshore 5,489 5,582 5,459 5,621
Gulf of Mexico 1 3,521 6,597 5,131 4,172
Canada Onshore 1,513 1,422 1,311 1,197
Total net natural gas liquids - continuing operations 10,523 13,601 11,901 10,990
Net natural gas - thousands of cubic feet per day
United States Onshore 27,520 29,122 29,054 30,203
Gulf of Mexico 1 53,046 72,897 67,850 44,029
Canada Onshore 260,895 296,883 262,279 267,205
Total net natural gas - continuing operations 341,461 398,902 359,183 341,437
Total net hydrocarbons - continuing operations including NCI 2,3
162,824 203,035 180,443 178,658
Noncontrolling interest
Net crude oil and condensate - barrels per day (9,298) (10,322) (10,674) (11,215)
Net natural gas liquids - barrels per day (327) (478) (443) (496)
Net natural gas - thousands of cubic feet per day (3,269) (3,403) (4,137) (3,933)
Total noncontrolling interest (10,170) (11,367) (11,807) (12,367)
Total net hydrocarbons - continuing operations excluding NCI 2,3
152,654 191,668 168,636 166,292
Discontinued operations
Net crude oil and condensate - barrels per day - 1,748 - 16,331
Net natural gas liquids - barrels per day - 37 - 434
Net natural gas - thousands of cubic feet per day 2 - 9,624 - 67,863
Total discontinued operations - 3,389 - 28,076
Total net hydrocarbons produced excluding NCI 2,3 152,654 195,057 168,636 194,367
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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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Contd.) Results of Operations (contd.)
The following table contains hydrocarbons sold during the three-month and
nine-month periods ended
Three Months Ended Nine Months Ended
September 30, September 30,
Barrels per day unless otherwise noted 2020 2019 2020 2019
Continuing operations
Net crude oil and condensate
United States Onshore 24,851 40,582 27,945 33,256
Gulf of Mexico 1 57,756 71,380 68,436 64,532
Canada Onshore 9,595 7,101 8,106 6,503
Offshore 4,757 4,945 5,290 6,523
Other - 309 104 415Total net crude oil and condensate - continuing operations 96,959
124,317 109,881 111,229
Net natural gas liquids
United States Onshore 5,489 5,582 5,459 5,622
Gulf of Mexico 1 3,521 6,597 5,131 4,172
Canada Onshore 1,513 1,422 1,311 1,197
Total net natural gas liquids - continuing operations 10,523 13,601 11,901 10,991
Net natural gas - thousands of cubic feet per day
United States Onshore 27,520 29,122 29,054 30,203
Gulf of Mexico 1 53,046 72,897 67,850 44,029
Canada Onshore 260,895 296,882 262,279 267,205
Total net natural gas - continuing operations 341,461 398,901 359,183 341,437
Total net hydrocarbons - continuing operations including NCI 2,3
164,392 204,402 181,646 179,126
Noncontrolling interest
Net crude oil and condensate - barrels per day (9,545) (10,481) (10,886) (11,269)
Net natural gas liquids - barrels per day (327) (478) (443) (496)
Net natural gas - thousands of cubic feet per day 2 (3,269) (3,403) (4,137) (3,933)
Total noncontrolling interest (10,417) (11,526) (12,019) (12,421)
Total net hydrocarbons - continuing operations excluding NCI 2,3
153,975 192,875 169,627 166,706
Discontinued operations
Net crude oil and condensate - barrels per day - 1,424 - 16,177
Net natural gas liquids - barrels per day - 32 - 395
Net natural gas - thousands of cubic feet per day 2 - 9,624 - 67,863
Total discontinued operations - 3,060 - 27,883
Total net hydrocarbons sold excluding NCI 2,3 153,975 195,935 169,627 194,588
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 nine-month periods endedSeptember 30, 2020 and 2019.? Comparative periods are conformed to current presentation. Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Weighted average Exploration and Production sales prices Continuing operations Crude oil and condensate - dollars per barrel United States Onshore$ 37.83 58.80 35.56 60.33 Gulf of Mexico 1 40.82 60.69 38.08 61.90 Canada 2 Onshore 36.65 48.61 30.29 49.98 Offshore 43.81 62.44 37.85 64.97 Other - 67.96 63.51 69.86 Natural gas liquids - dollars per barrel United States Onshore 13.39 10.82 10.78 14.66 Gulf of Mexico 1 14.71 13.86 9.43 15.96 Canada 2 Onshore 19.97 21.03 16.95 27.50 Natural gas - dollars per thousand cubic feet United States Onshore 1.78 2.18 1.76 2.51 Gulf of Mexico 1 2.01 2.37 1.91 2.46 Canada 2 Onshore 1.74 1.16 1.62 1.50 Discontinued operations Crude oil and condensate - dollars per barrel Malaysia 3 Sarawak - - - 70.39 Block K - 69.24 - 65.75 Natural gas liquids - dollars per barrel Malaysia 3 Sarawak - 54.11 - 48.23 Natural gas - dollars per thousand cubic feet Malaysia 3 Sarawak - 3.69 - 3.60 Block K - 0.23 - 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$578.0 million for the first nine months of 2020 compared to$1,153.2 million during the same period in 2019. The decreased cash from operating activities is primarily attributable to lower revenue from sales to customers ($748.5 million ) and higher lease operating expenses ($61.8 million ), partially offset by higher cash payments received on forward swap commodity contracts ($194.0 million ) and lower general and administrative expenses ($71.9 million ). See above for explanation of underlying business reasons. Cash Required by Investing Activities Cash required by property additions and dry holes, which includes amounts expensed, were$723.7 million and$2,203.0 million in the nine-month periods endedSeptember 30, 2020 and 2019, respectively. In 2020, property additions include$74.9 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. In 2019, property additions included the LLOG acquisition. Lower property additions in 2020 are a result of 33
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Table of Contents ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (contd.) Financial Condition (contd.)
reducing the 2020 capital spending budget in response to the current commodity price environment. See Outlook section on page 35 for further details. Total accrual basis capital expenditures were as follows:
Nine Months Ended
September 30,
(Millions of dollars) 2020 2019
Capital Expenditures
Exploration and production $ 671.0 2,320.6
Corporate 9.3 8.5
Total capital expenditures $ 680.3 2,329.1
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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