MURPHY OIL CORP [MUR] Filings

10-Q 1 mur-20220930.htm 10-Q mur-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8590

MURPHY OIL CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		71-0361522
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
9805 Katy Fwy, Suite G-200		77024
Houston,	Texas	(Zip Code)
(Address of principal executive offices)
(281)		675-9000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1.00 Par Value	MUR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Number of shares of Common Stock, $1.00 par value, outstanding at October 31, 2022 was 155,455,283.

MURPHY OIL CORPORATION

TABLE OF CONTENTS


			Page
Part I – Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets			2
Consolidated Statements of Operations			3
Consolidated Statements of Comprehensive Income			4
Consolidated Statements of Cash Flows			5
Consolidated Statements of Stockholders’ Equity			6
Notes to Consolidated Financial Statements			7
Note A – Nature of Business and Interim Financial Statements			7
Note B – New Accounting Principles and Recent Accounting Pronouncements			7
Note C – Revenue from Contracts with Customers			8
Note D – Property, Plant and Equipment			10
Note E – Assets Held for Sale and Discontinued Operations			12
Note F – Financing Arrangements and Debt			12
Note G – Other Financial Information			13
Note H – Employee and Retiree Benefit Plans			14
Note I – Incentive Plans			14
Note J – Earnings Per Share			16
Note K – Income Taxes			16
Note L – Financial Instruments and Risk Management			17
Note M – Accumulated Other Comprehensive Loss			19
Note N – Environmental and Other Contingencies			19
Note O – Business Segments			20



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22




Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			35
Part II – Other Information			36
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36

Item 6. Exhibits			36
Signature			37

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS (unaudited)


(Thousands of dollars)	September 30, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	465,998	521,184
Accounts receivable, net	385,153		258,150
Inventories	53,265		54,198
Prepaid expenses	39,633		31,925
Assets held for sale	7,538		15,453
Total current assets	951,587		880,910
Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $12,220,651 in 2022 and $12,457,851 in 2021	8,249,387		8,127,852
Operating lease assets	798,119		881,389
Deferred income taxes	196,894		385,516
Deferred charges and other assets	33,227		29,273

Total assets	$	10,229,214	10,304,940
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt, finance lease	$	678	654
Accounts payable	539,576		623,129
Income taxes payable	38,701		19,951
Other taxes payable	30,898		20,306
Operating lease liabilities	166,908		139,427
Other accrued liabilities	435,740		360,859

Total current liabilities	1,212,501		1,164,326
Long-term debt, including finance lease obligation	2,022,976		2,465,414
Asset retirement obligations	848,607		839,776
Deferred credits and other liabilities	429,200		570,574
Non-current operating lease liabilities	648,286		761,162
Deferred income taxes	188,046		182,892

Total liabilities	5,349,616		5,984,144
Equity
Cumulative Preferred Stock, par $100, authorized 400,000 shares, none issued	—		—
Common Stock, par $1.00, authorized 450,000,000 shares, issued 195,100,628 shares in 2022 and 195,100,628 shares in 2021	195,101		195,101
Capital in excess of par value	887,730		926,698
Retained earnings	5,894,965		5,218,670
Accumulated other comprehensive loss	(653,828)		(527,711)
Treasury stock	(1,615,027)		(1,655,447)
Murphy Shareholders' Equity	4,708,941		4,157,311
Noncontrolling interest	170,657		163,485
Total equity	4,879,598		4,320,796
Total liabilities and equity	$	10,229,214	10,304,940

See Notes to Consolidated Financial Statements, page 7.

Table of Contents

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)


	Three Months Ended September 30,			Nine Months Ended September 30,
(Thousands of dollars, except per share amounts)	2022		2021	2022		2021
Revenues and other income
Revenue from production	$	1,120,909	687,549	$	3,101,736	2,038,905
Sales of purchased natural gas	45,500		—	132,285		—
Total revenue from sales to customers	1,166,409		687,549	3,234,021		2,038,905
Gain (Loss) on derivative instruments	115,191		(59,164)	(308,654)		(499,794)
Gain on sale of assets and other income	21,825		2,315	32,076		21,217
Total revenues and other income	1,303,425		630,700	2,957,443		1,560,328
Costs and expenses
Lease operating expenses	198,710		130,131	482,887		403,708
Severance and ad valorem taxes	15,140		11,670	47,340		32,215
Transportation, gathering and processing	55,348		44,588	152,219		137,196
Costs of purchased natural gas	43,622		—	125,258		—
Exploration expenses, including undeveloped lease amortization	9,491		24,517	72,208		49,840
Selling and general expenses	29,348		27,210	90,007		85,826

Depreciation, depletion and amortization	214,521		189,806	574,501		615,372
Accretion of asset retirement obligations	11,286		12,198	34,725		34,854
Impairment of assets	—		—	—		171,296
Other operating (income) expense	(27,129)		(32,791)	115,726		58,616
Total costs and expenses	550,337		407,329	1,694,871		1,588,923
Operating income (loss) from continuing operations	753,088		223,371	1,262,572		(28,595)
Other income (loss)
Other income (expense)	18,301		(1,593)	21,114		(11,459)
Interest expense, net	(37,440)		(46,925)	(116,102)		(178,399)
Total other loss	(19,139)		(48,518)	(94,988)		(189,858)
Income (loss) from continuing operations before income taxes	733,949		174,853	1,167,584		(218,453)
Income tax expense (benefit)	159,451		36,838	247,574		(62,498)
Income (loss) from continuing operations	574,498		138,015	920,010		(155,955)
Loss from discontinued operations, net of income taxes	(422)		(706)	(1,916)		(600)
Net income (loss) including noncontrolling interest	574,076		137,309	918,094		(156,555)
Less: Net income attributable to noncontrolling interest	45,648		28,853	152,445		85,509
NET INCOME (LOSS) ATTRIBUTABLE TO MURPHY	$	528,428	108,456	$	765,649	(242,064)
INCOME (LOSS) PER COMMON SHARE – BASIC
Continuing operations	$	3.40	0.70	$	4.94	(1.57)
Discontinued operations	—		—	(0.01)		—
Net income (loss)	$	3.40	0.70	$	4.93	(1.57)
INCOME (LOSS) PER COMMON SHARE – DILUTED
Continuing operations	$	3.36	0.70	$	4.87	(1.57)
Discontinued operations	—		—	(0.01)		—
Net income (loss)	$	3.36	0.70	$	4.86	(1.57)
Cash dividends per Common share	$	0.250	0.125	$	0.575	0.375

Average Common shares outstanding (thousands)
Basic	155,446		154,439	155,221		154,239
Diluted	157,336		155,932	157,407		154,239

See Notes to Consolidated Financial Statements, page 7.

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Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)


	Three Months Ended September 30,			Nine Months Ended September 30,
(Thousands of dollars)	2022		2021	2022		2021
Net income (loss) including noncontrolling interest	$	574,076	137,309	$	918,094	(156,555)
Other comprehensive (loss) income, net of tax
Net (loss) gain from foreign currency translation	(102,266)		(31,308)	(135,791)		6,534
Retirement and postretirement benefit plans	3,165		4,653	9,674		12,935
Deferred loss on interest rate hedges reclassified to interest expense	—		—	—		1,690

Other comprehensive (loss) income	(99,101)		(26,655)	(126,117)		21,159
Comprehensive income (loss) including noncontrolling interest	$	474,975	110,654	$	791,977	(135,396)
Less: Comprehensive income attributable to noncontrolling interest	45,648		28,853	152,445		85,509
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO MURPHY	$	429,327	81,801	$	639,532	(220,905)

See Notes to Consolidated Financial Statements, page 7.

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Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Nine Months Ended September 30,
(Thousands of dollars)	2022		2021
Operating Activities
Net income (loss) including noncontrolling interest	$	918,094	(156,555)
Adjustments to reconcile net income (loss) to net cash provided by continuing operations activities
Loss from discontinued operations	1,916		600
Depreciation, depletion and amortization	574,501		615,372
Unsuccessful exploration well costs and previously suspended exploration costs	35,224		17,899
Amortization of undeveloped leases	10,651		13,872
Accretion of asset retirement obligations	34,725		34,854
Deferred income tax (benefit) expense	207,105		(65,149)
Mark to market loss on contingent consideration	98,451		105,111
Mark to market loss (gain) on crude contracts	(138,707)		228,497
Long-term non-cash compensation	57,612		42,080
Impairment of assets	—		171,296

(Gain) from sale of assets	(18,871)		—
Net (increase) decrease in noncash working capital	(59,874)		117,330
Other operating activities, net	(42,101)		(33,924)

Net cash provided by continuing operations activities	1,678,726		1,091,283
Investing Activities
Property additions and dry hole costs 1	(800,868)		(541,324)
Acquisition of oil and gas properties 1	(125,602)		(22,906)
Proceeds from sales of property, plant and equipment	(2,129)		270,038
Property additions for King's Quay FPS	—		(17,734)
Net cash (required) by investing activities	(928,599)		(311,926)
Financing Activities
Borrowings on revolving credit facility	300,000		165,000
Repayment of revolving credit facility	(300,000)		(365,000)
Retirement of debt	(446,032)		(726,358)
Debt issuance, net of cost	—		541,913
Early redemption of debt cost	(5,419)		(36,756)
Distributions to noncontrolling interest	(145,273)		(100,880)
Contingent consideration payment	(81,742)		—
Cash dividends paid	(89,354)		(57,896)
Withholding tax on stock-based incentive awards	(17,338)		(4,973)
Capital lease obligation payments	(475)		(643)


Net cash (required) by financing activities	(785,633)		(585,593)
Cash Flows from Discontinued Operations
Operating activities	(14,500)		—


Net cash (required) by discontinued operations	(14,500)		—

Effect of exchange rate changes on cash and cash equivalents	(5,180)		697
Net (decrease) increase in cash and cash equivalents	(55,186)		194,461
Cash and cash equivalents at beginning of period	521,184		310,606
Cash and cash equivalents at end of period	$	465,998	505,067

1 Certain prior-period amounts have been reclassified to conform to the current period presentation.

See Notes to Consolidated Financial Statements, page 7.

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Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)


	Three Months Ended September 30,			Nine Months Ended September 30,
(Thousands of dollars)	2022		2021	2022		2021
Cumulative Preferred Stock – par $100, authorized 400,000 shares, none issued	$	—	—	$	—	—
Common Stock – par $1.00, authorized 450,000,000 shares, issued 195,100,628 shares at September 30, 2022 and 195,100,628 shares at September 30, 2021
Balance at beginning of period	195,101		195,101	195,101		195,101
Exercise of stock options	—		—	—		—
Balance at end of period	195,101		195,101	195,101		195,101
Capital in Excess of Par Value
Balance at beginning of period	883,368		915,181	926,698		941,692
Exercise of stock options, including income tax benefits	(1,956)		(35)	(12,591)		(661)
Restricted stock transactions and other	—		(402)	(45,169)		(38,749)
Share-based compensation	6,318		6,483	18,792		18,945

Balance at end of period	887,730		921,227	887,730		921,227
Retained Earnings
Balance at beginning of period	5,405,400		4,980,428	5,218,670		5,369,538
Net income (loss) attributable to Murphy	528,428		108,456	765,649		(242,064)


Cash dividends paid	(38,863)		(19,306)	(89,354)		(57,896)
Balance at end of period	5,894,965		5,069,578	5,894,965		5,069,578
Accumulated Other Comprehensive Loss
Balance at beginning of period	(554,727)		(553,519)	(527,711)		(601,333)
Foreign currency translation (loss) gain, net of income taxes	(102,266)		(31,308)	(135,791)		6,534
Retirement and postretirement benefit plans, net of income taxes	3,165		4,653	9,674		12,935
Deferred loss on interest rate hedges reclassified to interest expense, net of income taxes	—		—	—		1,690

Balance at end of period	(653,828)		(580,174)	(653,828)		(580,174)
Treasury Stock
Balance at beginning of period	(1,616,340)		(1,656,591)	(1,655,447)		(1,690,661)

Awarded restricted stock, net of forfeitures	—		343	32,297		33,888
Exercise of stock options	1,313		24	8,123		549
Balance at end of period – 39,645,345 shares of Common Stock in 2022 and 40,656,661 shares of Common Stock in 2021, at cost	(1,615,027)		(1,656,224)	(1,615,027)		(1,656,224)
Murphy Shareholders’ Equity	4,708,941		3,949,508	4,708,941		3,949,508
Noncontrolling Interest
Balance at beginning of period	175,428		161,228	163,485		179,810

Net income attributable to noncontrolling interest	45,648		28,853	152,445		85,509
Distributions to noncontrolling interest owners	(50,419)		(25,642)	(145,273)		(100,880)
Balance at end of period	170,657		164,439	170,657		164,439
Total Equity	$	4,879,598	4,113,947	$	4,879,598	4,113,947

See Notes to Consolidated Financial Statements, page 7.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These notes are an integral part of the financial statements of Murphy Oil Corporation and Consolidated Subsidiaries (the Company or Murphy) on pages 2 through 6 of this Form 10-Q report.

Note A – Nature of Business and Interim Financial Statements

NATURE OF BUSINESS – Murphy Oil Corporation is an international oil and natural gas exploration and production company that conducts its business through various operating subsidiaries. The Company primarily produces oil and natural gas in the United States and Canada and conducts oil and natural gas exploration activities worldwide.

In connection with the LLOG Exploration Offshore L.L.C. and LLOG Bluewater Holdings, L.L.C., (LLOG) acquisition, we hold a 0.5% interest in two variable interest entities (VIEs), Delta House Oil and Gas Lateral LLC and Delta House Floating Production System (FPS) LLC (collectively Delta House). These VIEs have not been consolidated as Murphy is not considered the primary beneficiary. These non-consolidated VIEs are not material to our financial position or results of operations. As of September 30, 2022, our maximum exposure to loss was $3.2 million (excluding operational impacts), which represents our net investment in Delta House. We have not provided any financial support to Delta House other than amounts previously required by our membership interest.

INTERIM FINANCIAL STATEMENTS – In the opinion of Murphy’s management, the unaudited financial statements presented herein include all accruals necessary to present fairly the Company’s financial position at September 30, 2022 and December 31, 2021, and the results of operations, cash flows and changes in stockholders’ equity for the interim periods ended September 30, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America (U.S.). In preparing the financial statements of the Company in conformity with accounting principles generally accepted in the U.S., 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.

Consolidated financial statements and notes to consolidated financial statements included in this Form 10-Q report should be read in conjunction with the Company’s 2021 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report. Financial results for the three-month and nine-month periods ended September 30, 2022, are not necessarily indicative of future results.

Note B – New Accounting Principles and Recent Accounting Pronouncements

Accounting Principles Adopted

Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Implementation on a prospective or retrospective basis varies by specific topics within the ASU. The Company adopted this guidance in the first quarter of 2021 and it did not have a material impact on its consolidated financial statements.

Recent Accounting Pronouncements

None affecting the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note C – Revenue from Contracts with Customers

Nature of Goods and Services

The Company explores for and produces crude oil, natural gas and natural gas liquids (collectively oil and natural gas) in select basins around the globe. The Company’s revenue from sales of oil and natural gas production activities are primarily subdivided into two key geographic segments: the U.S. and Canada. Additionally, revenue from sales to customers is generated from three primary revenue streams: crude oil and condensate, natural gas liquids, and natural gas.

For operated oil and natural gas production where the non-operated working interest owner does not take-in-kind its proportionate interest in the produced commodity, the Company acts as an agent for the working interest owner and recognizes revenue only for its own share of the commingled production. The exception to this is the reporting of the noncontrolling interest in MP Gulf of Mexico, LLC (MP GOM) as prescribed by ASC 810-10-45.

U.S. - In the United States, the Company primarily produces oil and natural gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico (GOM). Revenue is generally recognized when oil and natural gas are transferred to the customer at the delivery point. Revenue recognized is largely index based with price adjustments for floating market differentials.

Canada - In Canada, contracts include long-term floating commodity index priced and natural gas physical forward sales fixed-price contracts. For the offshore business in Canada, contracts are based on index prices and revenue is recognized at the time of vessel load, based on the volumes on the bill of lading and point of custody transfer. The Company also purchases natural gas in Canada to meet certain sales commitments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note C – Revenue from Contracts with Customers (Contd.)

Disaggregation of Revenue

The Company reviews performance based on two key geographical segments and between onshore and offshore sources of revenue within these geographies.

For the three-month periods ended September 30, 2022, and 2021, the Company recognized $1,166 million and $687.5 million, respectively, from total revenue from sales to customers, from sales of oil, natural gas liquids and natural gas.

For the nine-month periods ended September 30, 2022, and 2021, the Company recognized $3,234.0 million and $2,038.9 million, respectively, from total revenue from sales to customers, from sales of oil, natural gas liquids and natural gas.


		Three Months Ended September 30,			Nine Months Ended September 30,
(Thousands of dollars)		2022		2021	2022		2021
Net crude oil and condensate revenue
United States	Onshore	$	247,562	167,010	$	684,099	464,767
	Offshore	597,242		340,001	1,675,389		1,079,418
Canada	Onshore	29,445		29,110	106,559		89,708
	Offshore	30,030		20,499	97,216		70,333
Other		4,867		—	18,503		—
Total crude oil and condensate revenue		909,146		556,620	2,581,766		1,704,226

Net natural gas liquids revenue
United States	Onshore	18,288		16,356	53,035		33,480
	Offshore	16,079		11,046	48,151		31,866
Canada	Onshore	4,932		4,501	14,800		11,728
Total natural gas liquids revenue		39,299		31,903	115,986		77,074

Net natural gas revenue
United States	Onshore	21,009		11,127	51,412		24,442
	Offshore	52,143		17,444	121,911		56,855
Canada	Onshore	99,312		70,455	230,661		176,308
Total natural gas revenue		172,464		99,026	403,984		257,605

Revenue from production		1,120,909		687,549	3,101,736		2,038,905



Sales of purchased natural gas
United States	Offshore	—		—	181		—
Canada	Onshore	45,500		—	132,104		—
Total sales of purchased natural gas		45,500		—	132,285		—

Total revenue from sales to customers		1,166,409		687,549	3,234,021		2,038,905

Gain (Loss) on derivative instruments		115,191		(59,164)	(308,654)		(499,794)
Gain on sale of assets and other income		21,825		2,315	32,076		21,217
Total revenues and other income		$	1,303,425	630,700	$	2,957,443	1,560,328

In 2022, the Company included additional line items on the face of the Consolidated Statements of Operations to report Sales of purchased natural gas and Costs of purchased natural gas. Sales and purchases of natural gas are reported on a gross basis when Murphy takes control of the products and has risks and rewards of ownership.

Contract Balances and Asset Recognition

As of September 30, 2022, and December 31, 2021, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet from continuing operations, were $210.1 million and $169.8 million, respectively. Payment terms for the Company’s sales vary across contracts and geographical regions, with the majority of the cash receipts required within 30 days of billing. Based on a forward-looking expected loss model in accordance with ASU 2016-13, the Company did

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note C – Revenue from Contracts with Customers (Contd.)

not recognize any impairment losses on receivables or contract assets arising from customer contracts during the reporting periods.

The Company has not entered into any revenue contracts that have financing components as of September 30, 2022.

The Company does not employ sales incentive strategies such as commissions or bonuses for obtaining sales contracts. For the periods presented, the Company did not identify any assets to be recognized associated with the costs to obtain a contract with a customer.

Performance Obligations

The Company recognizes oil and natural gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer. Judgment is required to determine whether some customers simultaneously receive and consume the benefit of commodities. As a result of this assessment for the Company, each unit of measure of the specified commodity is considered to represent a distinct performance obligation that is satisfied at a point in time upon the transfer of control of the commodity.

For contracts with market or index-based pricing, which represent the majority of sales contracts, the Company has elected the allocation exception and allocates the variable consideration to each single performance obligation in the contract. As a result, there is no price allocation to unsatisfied remaining performance obligations for delivery of commodity product in subsequent periods.

The Company has entered into several long-term, fixed-price contracts in Canada. The underlying reason for entering a fixed price contract is generally unrelated to anticipated future prices or other observable data and serves a particular purpose in the Company’s long-term strategy.

As of September 30, 2022, the Company had the following sales contracts in place which are expected to generate revenue from sales to customers for a period of more than 12 months starting at the inception of the contract:

Current Long-Term Contracts Outstanding at September 30, 2022

Location

Commodity

End Date

Description

Approximate Volumes

U.S.

Natural Gas and NGL

Q2 2023

Deliveries from dedicated acreage in Eagle Ford

As produced

Canada

Natural Gas

Q4 2022

Contracts to sell natural gas at USD index pricing

8 MMCFD

Canada

Natural Gas

Q4 2022

Contracts to sell natural gas at CAD fixed prices

5 MMCFD

Canada

Natural Gas

Q4 2022

Contracts to sell natural gas at USD fixed pricing

20 MMCFD

Canada

Natural Gas

Q4 2023

Contracts to sell natural gas at USD index pricing

25 MMCFD

Canada

Natural Gas

Q4 2023

Contracts to sell natural gas at CAD fixed prices

38 MMCFD

Canada

Natural Gas

Q4 2024

Contracts to sell natural gas at USD index pricing

31 MMCFD

Canada

Natural Gas

Q4 2024

Contracts to sell natural gas at CAD fixed prices

100 MMCFD

Canada

Natural Gas

Q4 2024

Contracts to sell natural gas at CAD fixed prices

34 MMCFD

Canada

Natural Gas

Q4 2024

Contracts to sell natural gas at USD fixed pricing

15 MMCFD

Canada

Natural Gas

Q4 2026

Contracts to sell natural gas at USD index pricing

49 MMCFD

Canada

NGL

Q3 2023

Contracts to sell natural gas liquids at CAD pricing

952 BOED

Fixed price contracts are accounted for as normal sales and purchases for accounting purposes.

Note D – Property, Plant and Equipment

Exploratory Wells

Under FASB guidance 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.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Note D – Property, Plant and Equipment (Contd.)

As of September 30, 2022, the Company had total capitalized exploratory well costs for continuing operations pending the determination of proved reserves of $181.5 million. The following table reflects the net changes in capitalized exploratory well costs during the nine-month periods ended September 30, 2022 and 2021.


(Thousands of dollars)	2022		2021
Beginning balance at January 1	$	179,481	181,616
Additions pending the determination of proved reserves	22,275		5,007

Capitalized exploratory well costs charged to expense	(20,295)		—
Balance at September 30	$	181,461	186,623

The capitalized well costs charged to expense during 2022 represent expenditures related to the Cutthroat-1 exploration well in block SEAL-M-428 in the Sergipe-Alagoas Basin offshore Brazil. There were no hydrocarbons found in this well.

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.


	September 30,
	2022				2021

(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	$	8,851	2	2	3,297	2	2
One to two years	8,489		2	2	—	—	—
Two to three years	—		—	—	53,078	5	5
Three years or more	164,121		6	3	130,248	6	—
	$