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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
OR
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification Number)
200 PEACH STREET
P. O. BOX 7000, EL DORADO, ARKANSAS 71731-7000
(Address of principal executive offices) (Zip Code)
(870) 862-6411
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
Number of shares of Common Stock, $1.00 par value, outstanding at June 30,
1997 was 44,877,167.
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<PAGE>
PART I - FINANCIAL INFORMATION
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1997 1996
--------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 29,237 109,707
Accounts receivable, less allowance for
doubtful accounts of $15,312 in 1997 and
$15,267 in 1996 244,009 319,661
Inventories
Crude oil and raw materials 40,989 42,811
Finished products 56,312 44,310
Materials and supplies 41,392 44,234
Prepaid expenses 28,290 29,820
Deferred income taxes 17,427 19,626
--------- ---------
Total current assets 457,656 610,169
Property, plant, and equipment, at cost less
accumulated depreciation, depletion, and
amortization of $2,648,700 in 1997 and
$2,573,606 in 1996 1,626,815 1,556,830
Deferred charges and other assets 71,089 76,787
--------- ---------
$2,155,560 2,243,786
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations $ 15,663 13,635
Accounts payable and accrued liabilities 366,881 503,013
Income taxes 33,577 37,393
--------- ---------
Total current liabilities 416,121 554,041
Notes payable and capitalized lease obligations 49,231 20,871
Nonrecourse debt of a subsidiary 180,319 180,957
Deferred income taxes 141,468 127,319
Reserve for dismantlement costs 154,575 152,528
Reserve for major repairs 30,877 29,776
Deferred credits and other liabilities 133,725 150,816
Stockholders' equity
Capital stock
Cumulative Preferred Stock, par $100, authorized
400,000 shares, none issued - -
Common Stock, par $1.00, authorized 80,000,000
shares, issued 48,775,314 shares 48,775 48,775
Capital in excess of par value 509,085 509,008
Retained earnings 579,712 550,699
Currency translation adjustments 14,679 22,573
Unamortized restricted stock awards (1,115) (1,298)
Treasury stock, 3,898,147 shares of
Common Stock in 1997, 3,912,971 shares
in 1996, at cost (101,892) (102,279)
--------- ---------
Total stockholders' equity 1,049,244 1,027,478
--------- ---------
$2,155,560 2,243,786
========= =========
</TABLE>
See Notes to Consolidated Financial Statements, page 4.
The Exhibit Index is on page 13.
1
<PAGE>
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1997 1996* 1997 1996*
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 494,118 482,606 987,607 886,444
Other operating revenues 12,255 14,504 25,938 26,069
Interest, income from equity
companies, and other nonoperating
revenues 1,351 1,435 2,495 2,974
------- ------- --------- -------
Total revenues 507,724 498,545 1,016,040 915,487
------- ------- --------- -------
COSTS AND EXPENSES
Crude oil, products, and related
operating expenses 376,197 384,640 739,467 689,397
Exploration expenses, including
undeveloped lease amortization 23,224 13,190 51,774 24,861
Selling and general expenses 14,726 15,037 29,031 29,531
Depreciation, depletion, and
amortization 50,783 44,471 99,508 92,022
Interest expense 3,030 3,132 5,944 6,317
Interest capitalized (3,003) (2,379) (5,899) (4,546)
------- ------- --------- -------
Total costs and expenses 464,957 458,091 919,825 837,582
------- ------- --------- -------
Income from continuing operations
before income taxes 42,767 40,454 96,215 77,905
Federal and state income taxes 10,369 6,477 21,340 15,164
Foreign income taxes 4,842 9,215 16,703 17,653
------- ------- --------- -------
Income from continuing
operations 27,556 24,762 58,172 45,088
DISCONTINUED FARM, TIMBER, AND
REAL ESTATE OPERATIONS
Income from discontinued operations - 3,310 - 6,998
------- ------- --------- -------
NET INCOME $ 27,556 28,072 58,172 52,086
======= ======= ========= =======
Average Common shares
outstanding 44,960,634 44,922,887 44,960,606 44,912,798
Income per Common share
Continuing operations $ .61 .55 1.29 1.00
Discontinued operations - .07 - .16
------- ------- --------- -------
Net income $ .61 .62 1.29 1.16
======= ======= ========= =======
Cash dividends per Common share $ .325 .325 .65 .65
======= ======= ========= =======
</TABLE>
*Restated for discontinued operations.
See Notes to Consolidated Financial Statements, page 4.
2
<PAGE>
Murphy Oil Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1997 1996*
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations $ 58,172 45,088
Adjustments to reconcile above income to net cash
provided by operating activities
Depreciation, depletion, and amortization 99,508 92,022
Provision for major repairs 11,303 12,588
Expenditures for major repairs and dismantlement costs (10,977) (7,391)
Exploratory expenditures charged against income 46,626 20,040
Amortization of undeveloped leases 5,148 4,821
Deferred and noncurrent income taxes 11,574 7,258
Pretax gains from disposition of assets (3,225) (1,292)
Other - net 2,690 322
------- -------
220,819 173,456
Net (increase) decrease in operating working
capital other than cash and cash equivalents (67,905) 10,630
Other adjustments related to continuing operations (9,192) 6,137
------- -------
Net cash provided by continuing operations 143,722 190,223
Net cash provided by discontinued operations - 8,558
------- -------
Net cash provided by operating activities 143,722 198,781
------- -------
INVESTING ACTIVITIES
Capital expenditures requiring cash (228,807) (176,698)
Proceeds from sale of property, plant, and equipment 5,553 5,475
Other continuing operations - net 191 748
Investing activities of discontinued operations - (5,999)
------- -------
Net cash required by investing activities (223,063) (176,474)
------- -------
FINANCING ACTIVITIES
Increase (decrease) in notes payable and capitalized
lease obligations 28,360 (2)
Increase in nonrecourse debt of a subsidiary 1,390 4,433
Cash dividends paid (29,159) (29,143)
------- -------
Net cash provided (required) by financing
activities 591 (24,712)
------- -------
Effect of exchange rate changes on cash and
cash equivalents (1,720) 114
------- -------
Net decrease in cash and cash equivalents (80,470) (2,291)
Decrease applicable to discontinued operations - 901
------- -------
Net decrease in cash and cash equivalents of
continuing operations (80,470) (1,390)
Cash and cash equivalents of continuing
operations at January 1 109,707 60,853
------- -------
Cash and cash equivalents of continuing
operations at June 30 $ 29,237 59,463
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Cash income taxes paid, net of refunds $ 37,639 16,148
Interest paid, net of amounts capitalized (1,621) 621
*Restated for discontinued operations.
</TABLE>
See Notes to Consolidated Financial Statements, page 4.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These notes are an integral part of the financial statements of Murphy Oil
Corporation and Consolidated Subsidiaries (Murphy/the Company) on pages 1
through 3 of this report on Form 10-Q.
NOTE A - INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of the Company presented herein have not
been audited by independent auditors, except for the Consolidated Balance
Sheet at December 31, 1996. In the opinion of the Company's management, the
unaudited financial statements presented herein include all adjustments
(consisting only of normal, recurring accruals) necessary to present fairly
the Company's financial position at June 30, 1997, and the results of
operations and cash flows for the three-month and six-month periods ended June
30, 1997 and 1996, in conformity with generally accepted accounting
principles.
Financial statements and notes to consolidated financial statements included
in this report on Form 10-Q should be read in conjunction with the Company's
1996 Annual Report on Form 10-K, as certain notes and other pertinent
information have been abbreviated in or omitted from this report. Financial
results for the six months ended June 30, 1997 are not necessarily indicative
of future results.
NOTE B - DISCONTINUED OPERATIONS
On December 31, 1996, Murphy completed a tax-free spin-off to its stockholders
of all common stock of its wholly owned farm, timber, and real estate
subsidiary Deltic Farm & Timber Co., Inc. (reincorporated as "Deltic Timber
Corporation"). The spin-off resulted in a net charge of $172.6 million to
"Retained Earnings" in 1996. As a result of the transaction, activities of
the farm, timber, and real estate segment have been accounted for as
discontinued operations, with prior periods restated. Selected operating
results for these activities, presented as net amounts in the Consolidated
Statements of Income for the three-month and six-month periods ended June 30,
1996 were as follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Periods Ended June 30, 1996
----------------------------------------------------------------------
Three Six
(Millions of dollars, except per share amounts) Months Months
----------------------------------------------------------------------
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . $19.8 40.1
Income tax provisions . . . . . . . . . . . . . . 2.1 4.5
Income from discontinued operations . . . . . . . 3.3 7.0
Income from discontinued operations per share . . .07 .16
</TABLE>
NOTE C - ENVIRONMENTAL CONTINGENCIES
The Company's worldwide operations are subject to numerous laws and
regulations intended to protect the environment and/or impose remedial
obligations. In addition, the Company is involved in personal injury and
property damage claims, allegedly caused by exposure to or by the release or
disposal of materials manufactured or used in the Company's operations. The
Company operates or has previously operated certain sites or facilities,
including refineries, oil and gas fields, service stations, and terminals, for
which known or potential obligations for environmental remediation exist.
Under the Company's accounting policies, liabilities for environmental
obligations are recorded when such obligations are probable and the cost can
be reasonably estimated. If there is a range of reasonably estimated costs,
the most likely amount will be recorded, or if no amount is most likely, the
minimum of the range. Recorded liabilities are reviewed quarterly and
adjusted as needed. Actual cash expenditures often occur a number of years
following recognition of the liabilities.
The Company's reserve for remedial obligations, which is included in "Deferred
Credits and Other Liabilities" in the Consolidated Balance Sheets, contains
certain amounts that are based on anticipated regulatory approval for proposed
remediation of former refinery waste sites. If regulatory authorities require
more costly alternatives than the proposed processes, future expenditures
could exceed the amount reserved by up to an estimated $3 million.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE C - ENVIRONMENTAL CONTINGENCIES (CONTD.)
The Company is currently identified by the U.S. Environmental Protection
Agency as a Potentially Responsible Party (PRP) at four Superfund sites and
has been assigned responsibility by defendants at another Superfund site. The
potential total cost to all parties to perform necessary remedial work at
these sites is substantial; however, current information indicates that the
Company is a "de minimus" party, with assigned or potentially assigned
responsibility of less than two percent at all but one of the sites. At that
site, the Company has not determined either its potentially assigned
responsibility percentage or its potential total remedial cost. Based on
currently available information on one site and the minor percentages involved
on the other sites, the Company does not expect that its related remedial
costs will be material to its financial condition or its results of
operations. Additional information may become known in the future that would
alter this assessment, including any requirement to bear a pro rata share of
costs attributable to nonparticipating PRPs or indications of additional
responsibility by the Company.
Although the Company is not aware of any environmental matters that might have
a material effect on its financial condition, there is the possibility that
expenditures could be required at currently unidentified sites, and new or
revised regulatory requirements could necessitate additional expenditures at
known sites. Such expenditures could materially affect the results of
operations in a future period.
The Company believes that certain environmentally related liabilities and
prior environmental expenditures are either covered by insurance or will be
recovered from other sources. The outcome of potential insurance recoveries
is the subject of ongoing litigation, including the appeal of a judgment
awarded the Company in 1995. Since no assurance can be given that the
judgment will be upheld upon appeal or that recoveries from other sources will
occur, the Company has not recognized a benefit for these potential recoveries
at June 30, 1997.
NOTE D - OTHER CONTINGENCIES
The Company's operations and earnings have been and may be affected by various
other forms of governmental action both in the U.S. and throughout the world.
Examples of such governmental action include, but are by no means limited to:
tax increases and retroactive tax claims; restrictions on production; import
and export controls; price controls; currency controls; allocation of supplies
of crude oil and petroleum products and other goods; expropriation of
property; restrictions and preferences affecting issuance of oil and gas or
mineral leases; laws and regulations intended for the promotion of safety; and
laws and regulations affecting the Company's relationships with employees,
suppliers, customers, stockholders, and others. Because governmental actions
are often motivated by political considerations, may be taken without full
consideration of their consequences, and may be taken in response to actions
of other governments, it is not practical to attempt to predict the likelihood
of such actions, the form the actions may take, or the effect such actions may
have on the Company.
In the normal course of its business activities, the Company is required
under certain contracts with various governmental authorities and others
to provide letters of credit that may be drawn upon if the Company fails to
perform under those contracts. At June 30, 1997, the Company had contingent
liabilities of $11.8 million on outstanding letters of credit and $16 million
under certain financial guarantees.
NOTE E - ACCOUNTING POLICIES FOR CERTAIN DERIVATIVE INSTRUMENTS
Derivative instruments are used by the Company on a limited basis to manage
well-defined risks related to commodity prices, foreign currency exchange
rates, and interest rates. The Company accounts for these instruments as
hedges. To qualify as hedges, the instruments must reduce the exposure to
price, currency, or interest rate risks of assets, liabilities, or anticipated
transactions. The Company does not hold any derivatives for trading purposes.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE E - ACCOUNTING POLICIES FOR CERTAIN DERIVATIVE INSTRUMENTS (CONTD.)
The Company has a crude oil swap agreement, which matures in the third quarter
of 1997, to purchase 500,000 barrels of West Texas Intermediate crude oil at a
specified price per barrel and sell the same commodity at the average market
price during the maturity period. The agreement, to be settled on a net cash
basis, fixes the cost for a portion of the anticipated crude oil feedstock
requirements for the Company's U.S. refining operations. The Company records
a liability related to a swap agreement if the estimated cost of the
anticipated crude oil purchase, including settlement cost of the swap
agreement, exceeds the estimated net realizable value of the related finished
products. Any such liability would be included in "Deferred Credits and Other
Liabilities" in the Consolidated Balance Sheet. The Company records the
operating results associated with a swap agreement in "Crude Oil, Products,
and Related Operating Expenses" in the Consolidated Statement of Income.
The Company also has forward foreign exchange contracts to buy Cdn $56
million, fixing the U.S. dollar costs for certain Canadian dollar denominated
nonrecourse debt. The unrealized difference between the contract exchange
rates and the actual exchange rate at June 30, 1997 is recognized on the
Consolidated Balance Sheet as an adjustment to "Nonrecourse Debt of a
Subsidiary" with an offset to "Cumulative Translation Adjustments." When
these contracts are settled, any adjustment to the difference previously
recorded will be included in the same accounts.
At June 30, 1997, the Company had several five-year interest rate swap
agreements to pay interest at fixed rates on a total principal of US $70
million and to receive interest at a quarterly U.S. dollar LIBOR rate. These
contracts reduce the interest rate risk on certain U.S. dollar denominated
nonrecourse debt of a subsidiary. Cash received or paid at the time of each
quarterly settlement is accounted for as an adjustment of "Interest Expense"
in the Consolidated Statement of Income.
NOTE F - NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," effective for periods ending after December 15, 1997. After the
effective date, any prior period earnings per share (EPS) data in subsequent
reports must be restated to conform to the new standard. For the three-month
and six-month periods ended June 30, 1997 and 1996, pro forma diluted EPS as
computed under the provisions of SFAS No. 128 would be the same as the EPS
reported on the Consolidated Statements of Income for these periods. Pro
forma basic EPS would also be the same for the 1996 periods but would be $.01
a share higher than reported for the 1997 periods.
The FASB issued SFAS No. 130, "Reporting Comprehensive Income," in June 1997.
This statement will require the Company to disclose comprehensive income for
all periods reported beginning with the quarter ended March 31, 1998. For the
three-month and six-month periods ended June 30, 1997 and 1996, the Company's
only item of other comprehensive income as defined by SFAS No. 130 relates to
foreign currency translation adjustments. The following table shows the
Company's pro forma comprehensive income for these periods.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
- ----------------------------------------------------------------------------
(Millions of dollars) 1997 1996 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income................................. $27.6 28.1 58.2 52.1
Other comprehensive income - net gain
(loss) from foreign currency
translation, net of taxes................. 5.0 2.5 (7.9) (.1)
- ----------------------------------------------------------------------------
Pro forma comprehensive income $32.6 30.6 50.3 52.0
============================================================================
</TABLE>
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE G - BUSINESS SEGMENTS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996*
- ----------------------------------------------------------------------------
(Millions of dollars) Revenues Income Revenues Income
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exploration and production**
United States ...................... $ 62.3 8.8 58.5 14.5
Canada ............................. 34.0 1.9 40.2 8.4
United Kingdom ..................... 26.2 2.2 28.5 1.3
Ecuador ............................ 7.8 2.7 8.8 3.1
Other international ................ .8 (4.2) 2.2 (.3)
- ----------------------------------------------------------------------------
131.1 11.4 138.2 27.0
- ----------------------------------------------------------------------------
Refining, marketing, and transportation
United States ...................... 328.5 13.0 334.2 (.6)
United Kingdom ..................... 61.9 1.7 70.6 (.6)
Canada ............................. 5.8 1.3 5.8 1.4
- ----------------------------------------------------------------------------
396.2 16.0 410.6 .2
- ----------------------------------------------------------------------------
527.3 27.4 548.8 27.2
Intrasegment transfers elimination ... (21.0) - (51.7) -
- ----------------------------------------------------------------------------
506.3 27.4 497.1 27.2
Corporate ............................ 1.4 .2 1.5 (2.4)
- ----------------------------------------------------------------------------
Revenues/income from continuing
operations .......................... 507.7 27.6 498.6 24.8
Income from discontinued operations .. - - - 3.3
- ----------------------------------------------------------------------------
$ 507.7 27.6 498.6 28.1
============================================================================
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996*
- ----------------------------------------------------------------------------
(Millions of dollars) Revenues Income Revenues Income
- ----------------------------------------------------------------------------
Exploration and production**
United States ...................... $ 130.6 20.9 122.2 28.3
Canada ............................. 78.5 9.1 75.6 12.7
United Kingdom ..................... 60.2 8.3 61.6 7.3
Ecuador ............................ 16.8 5.3 15.4 4.8
Other international ................ 1.1 (7.2) 5.3 (1.7)
- ----------------------------------------------------------------------------
287.2 36.4 280.1 51.4
- ----------------------------------------------------------------------------
Refining, marketing, and transportation
United States ...................... 646.8 18.7 581.2 (3.3)
United Kingdom ..................... 119.1 2.1 141.6 (.8)
Canada ............................. 12.5 3.0 11.0 2.4
- ----------------------------------------------------------------------------
778.4 23.8 733.8 (1.7)
- ----------------------------------------------------------------------------
1,065.6 60.2 1,013.9 49.7
Intrasegment transfers elimination ... (52.1) - (101.4) -
- ----------------------------------------------------------------------------
1,013.5 60.2 912.5 49.7
Corporate ............................ 2.5 (2.0) 3.0 (4.6)
- ----------------------------------------------------------------------------
Revenues/income from continuing
operations .......................... 1,016.0 58.2 915.5 45.1
Income from discontinued operations .. - - - 7.0
- ----------------------------------------------------------------------------
$1,016.0 58.2 915.5 52.1
============================================================================
*Restated for discontinued operations.
**Additional details are presented in the tables on page 11.
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Net income for the second quarter of 1997 was $27.6 million, $.61 a share, and
was up 11 percent compared to income from continuing operations in the second
quarter a year ago of $24.8 million, $.55 a share. Net income for the second
quarter of 1996, including the now independent Deltic Timber Corporation,
totaled $28.1 million, $.62 a share. Net cash provided by continuing
operations, excluding changes in noncash working capital items, totaled $107.3
million in the second quarter of 1997, up 18 percent from a year ago.
The Company's worldwide downstream operations earned $16 million in the
current quarter compared to $.2 million a year ago, with U.S. downstream
operations producing the best quarterly results since the second quarter of
1990. Earnings from exploration and production operations were $11.4 million,
down from $27 million in the second quarter of 1996, as lower crude oil sales
prices worldwide, a decline in U.S. natural gas sales prices, and an increase
in exploration expenses more than offset a 40-percent increase in U.S. natural
gas sales volumes.
Exploration and production operations in the U.S. earned $8.8 million compared
to $14.5 million in the second quarter of 1996. Operations in Canada earned
$1.9 million, down from $8.4 million a year ago, U.K. operations earned $2.2
million compared to $1.3 million, and operations in Ecuador earned $2.7
million compared to $3.1 million in the second quarter of 1996. Other
international operations reported a loss of $4.2 million compared to a $.3
million loss a year earlier. The Company's crude oil and condensate sales
prices averaged $18.67 a barrel in the U.S. and $18.29 in the U.K., decreases
of four percent and nine percent, respectively. In Canada, sales prices
averaged $16.99 a barrel for light oil, down 13 percent, and $10.29 for heavy
oil, a decrease of 31 percent. The average sales price for Canadian synthetic
oil was $19.25 a barrel, down seven percent from a year ago. In Ecuador,
sales prices averaged $11.60 a barrel, down 22 percent. Total crude oil and
gas liquids production averaged 54,271 barrels a day compared to 54,925 in the
second quarter of 1996. U.S. production declined seven percent, with the
reduction due to the sale of onshore producing properties in the third quarter
of 1996. In Canada, heavy oil production increased eight percent, while light
oil production was down 17 percent. The Company's net production of synthetic
oil in Canada was essentially unchanged. Production in the U.K. declined
seven percent, while production in Ecuador increased 18 percent. Murphy's
average natural gas sales price in the U.S. was $2.08 a thousand cubic feet
(MCF) in the current quarter compared to $2.36 a year ago. The average
natural gas sales price in Canada increased from $1.01 an MCF to $1.12. Sales
prices averaged $2.50 an MCF in the U.K. compared to $2.57 a year ago. Total
natural gas sales averaged 275 million cubic feet a day compared to 216
million a year ago. Sales of natural gas in the U.S. averaged 221 million
cubic feet a day, up from 158 million in the second quarter of 1996.
Exploration expenses totaled $23.2 million compared to $13.2 million in 1996
and included $2.5 million for a well in Bohai Bay, China. The tables on page
11 provide additional details of the results of exploration and production
operations for the second quarter of each year.
Refining, marketing, and transportation operations in the U.S. earned $13
million compared to a loss of $.6 million a year ago, which included a $2.3
million after-tax benefit related to crude oil swap agreements. Refined
product sales in the U.S. set a quarterly record at 151,791 barrels a day in
the current quarter. Operations in the U.K. earned $1.7 million compared to a
$.6 million loss in the second quarter of 1996. Earnings from purchasing,
transporting, and reselling crude oil in Canada were $1.3 million in the
current quarter compared to $1.4 million in the second quarter of 1996.
Refinery crude runs worldwide were 162,727 barrels a day compared to 164,905
in the second quarter of 1996. Worldwide refined product sales were 179,181
barrels a day, up from 178,251 a year ago.
Corporate functions reflected earnings of $.2 million in the current quarter
compared to a loss of $2.4 million in the second quarter of 1996. In
addition, the Company's net income for the 1996 quarter included earnings of
$3.3 million, $.07 a share, from the discontinued farm, timber, and real
estate operations of Deltic Timber Corporation.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
For the first six months of 1997, net income totaled $58.2 million, $1.29 a
share, which compares to income from continuing operations of $45.1 million,
$1.00 a share, for the first half of 1996. Net income for the six months
ended June 30, 1996 totaled $52.1 million, $1.16 a share, including income
from the operations of Deltic Timber Corporation.
The 29-percent increase in income from continuing operations was primarily due
to the Company's worldwide downstream operations, which earned $23.8 million
in the first six months of 1997 compared to a loss of $1.7 million in the same
period last year. Earnings from exploration and production operations
decreased $15 million mainly because the effects of higher exploration
expenses, lower U.S. natural gas sales prices, and lower crude oil production
more than offset higher U.S. natural gas sales volumes.
Earnings from exploration and production for the six months ended June 30,
1997 were $36.4 million, down from $51.4 million in 1996. Operations in the
U.S. earned $20.9 million for the first half of 1997 compared to $28.3 million
in the prior period, and Canadian operations earned $9.1 million compared
to $12.7 million in 1996. Increased earnings from the prior year occurred in
the U.K., up $1 million to $8.3 million, and in Ecuador, up $.5 million to
$5.3 million. Other international operations recorded losses of $7.2 million
in the first six months of 1997 and $1.7 million in the 1996 period; the
unfavorable results were primarily due to higher exploration expenses. The
Company's crude oil and condensate sales prices averaged $20.09 a barrel in
the U.S., up seven percent, and $19.43 in the U.K., down two percent. In
Canada, sales prices averaged $18.52 a barrel for light oil, essentially
unchanged from last year; $11.75 for heavy oil, down 11 percent; and $20.68
for synthetic oil, up six percent. The average crude oil sales price in
Ecuador was $12.57 a barrel, down 14 percent. Crude oil and gas liquids
production for the first half of 1997 averaged 54,672 barrels a day compared
to 54,917 during the same period of 1996. Ecuadoran crude oil production was
up 30 percent to 7,490 barrels a day, and Canadian heavy oil production
increased 15 percent to 10,443. U.S. crude oil and gas liquids production of
11,248 barrels a day was down 15 percent primarily due to the sale of onshore
producing properties. In other areas, crude oil and gas liquids production
averaged 4,037 barrels a day for Canadian light oil, down 17 percent; 8,247
for Canadian synthetic crude, unchanged from last year; and 13,207 in the
U.K., down four percent. Natural gas sales prices for the first six months of
1997 averaged $2.39 an MCF in the U.S., down eight percent; $1.45 in Canada,
up 39 percent; and $2.73 in the U.K., up five percent. Total natural gas
sales averaged 260 million cubic feet a day in 1997 compared to 232 million in
1996. Sales of natural gas in the U.S. averaged 201 million cubic feet a day,
up 24 percent. In other areas, average natural gas sales volumes decreased
slightly in Canada and were down six percent in the U.K. Natural gas
production in Spain ceased at the end of 1996. Exploration expenses totaled
$51.8 million for the six months ended June 30, 1997 compared to $24.9 million
a year ago. Exploration expenses were down in the U.K., but were up in the
U.S., Canada, and other international areas. The tables on page 11 provide
additional details of the results of exploration and production operations for
the first half of each year.
Refining, marketing, and transportation operations in the U.S. benefited from
improved margins and earned $18.7 million in the first six months of 1997
compared to a loss of $3.3 million for the same period last year. The U.S.
results included after-tax benefits of $4.1 million in 1997 and $2.3 million
in 1996 related to crude oil swap agreements. Operations in the U.K. earned
$2.1 million in the first half of 1997 compared to a loss of $.8 million in
the prior year. Earnings from purchasing, transporting, and reselling crude
oil in Canada were $3 million in the current year compared to $2.4 million a
year ago. Refinery crude runs worldwide were 157,199 barrels a day compared
to 152,311 a year ago. Worldwide petroleum product sales were 169,478 barrels
a day, up from 163,293 in 1996.
Financial results from corporate functions reflected a loss of $2 million in
the first half of 1997 compared to a loss of $4.6 million a year ago. In
addition, the Company's net income for the six months ended June 30, 1996
included earnings of $7 million, $.16 a share, from the discontinued farm,
timber, and real estate segment.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTD.)
FINANCIAL CONDITION
Cash provided by continuing operations was $143.7 million for the first six
months of 1997 compared to $190.2 million for the same period in 1996.
Changes in operating working capital other than cash and cash equivalents
required cash of $67.9 million for the first six months of 1997 but provided
cash of $10.6 million for the 1996 period. Cash provided by operating
activities was reduced by expenditures for refinery turnarounds and
abandonment of oil and gas properties totaling $11 million in the current year
and $7.4 million in 1996. Predominant uses of cash in both years were for
capital expenditures (which, including amounts expensed, are summarized in the
following table) and payment of dividends.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Six Months Ended June 30,
-----------------------------------------------------------------------
(Millions of dollars) 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Exploration and production.......................... $213.9 159.5
Refining, marketing, and transportation............. 14.4 16.7
Corporate........................................... .5 .5
-----------------------------------------------------------------------
$228.8 176.7
=======================================================================
</TABLE>
Working capital at June 30, 1997 was $41.5 million, down $14.6 million from
December 31, 1996. This level of working capital does not fully reflect the
Company's liquidity position, because the lower historical costs assigned to
inventories under LIFO accounting were $90.8 million below current costs
at June 30, 1997.
At June 30, 1997, long-term nonrecourse debt of a subsidiary was $180.3
million, down slightly from December 31, 1996 due to changes in foreign
currency exchange rates. Notes payable and capitalized lease obligations of
$49.2 million were up $28.3 million due to additional borrowing for certain
oil and gas development projects. A summary of capital employed at June 30,
1997 and December 31, 1996 follows.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
June 30, 1997 December 31, 1996
--------------------------------------------------------------------------
(Millions of dollars) Amount % Amount %
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes payable and capitalized lease
obligations......................... $ 49.2 4 20.9 2
Nonrecourse debt of a subsidiary..... 180.3 14 180.9 15
Stockholders' equity................. 1,049.2 82 1,027.5 83
--------------------------------------------------------------------------
$ 1,278.7 100 1,229.3 100
==========================================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
United Synthetic
United King- Ecua- Oil -
(Millions of dollars) States Canada dom dor Other Canada Total
- ----------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Oil and gas sales and
operating revenues $ 62.3 20.2 26.2 7.8 .8 13.8 131.1
Production costs 11.4 9.6 9.4 2.1 - 8.3 40.8
Depreciation, depletion,
and amortization 20.2 7.2 10.4 2.7 - 1.4 41.9
Exploration expenses
Dry hole costs 8.8 .3 .6 - 2.5 - 12.2
Geological and geophysical
costs 2.9 2.5 .1 - .9 - 6.4
Other costs .6 .1 .5 - .9 - 2.1
- ----------------------------------------------------------------------------
12.3 2.9 1.2 - 4.3 - 20.7
Undeveloped lease
amortization 1.6 .9 - - - - 2.5
- ----------------------------------------------------------------------------
Total exploration
expenses 13.9 3.8 1.2 - 4.3 - 23.2
- ----------------------------------------------------------------------------
Selling and general expenses 3.5 1.3 .3 .1 .5 - 5.7
Income tax provisions
(benefits) 4.5 (.9) 2.7 .2 .2 1.4 8.1
- ----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 8.8 (.8) 2.2 2.7 (4.2) 2.7 11.4
============================================================================
THREE MONTHS ENDED
JUNE 30, 1996
Oil and gas sales and
operating revenues $ 58.5 25.4 28.5 8.8 2.2 14.8 138.2
Production costs 12.4 7.0 7.9 3.0 .4 9.1 39.8
Depreciation, depletion, and
amortization 15.2 6.0 9.8 2.4 1.2 1.3 35.9
Exploration expenses
Dry hole costs 3.2 .1 3.7 - - - 7.0
Geological and geophysical
costs .9 .3 .9 - (.2) - 1.9
Other costs .7 .2 .5 - .6 - 2.0
- ----------------------------------------------------------------------------
4.8 .6 5.1 - .4 - 10.9
Undeveloped lease
amortization 1.6 .7 - - - - 2.3
- ----------------------------------------------------------------------------
Total exploration
expenses 6.4 1.3 5.1 - .4 - 13.2
- ----------------------------------------------------------------------------
Selling and general expenses 3.4 1.3 .7 - .4 - 5.8
Income tax provisions 6.6 4.2 3.7 .3 .1 1.6 16.5
- ----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 14.5 5.6 1.3 3.1 (.3) 2.8 27.0
============================================================================
SIX MONTHS ENDED
JUNE 30, 1997
Oil and gas sales and
operating revenues $130.6 47.7 60.2 16.8 1.1 30.8 287.2
Production costs 21.7 18.2 18.1 5.6 - 18.1 81.7
Depreciation, depletion,
and amortization 37.2 14.5 21.6 5.4 - 3.0 81.7
Exploration expenses
Dry hole costs 23.6 2.5 .6 - 2.5 - 29.2
Geological and geophysical
costs 5.5 4.6 .2 - 2.8 - 13.1
Other costs 1.1 .3 1.1 - 1.9 - 4.4
- ----------------------------------------------------------------------------
30.2 7.4 1.9 - 7.2 - 46.7
Undeveloped lease
amortization 3.4 1.7 - - - - 5.1
- ----------------------------------------------------------------------------
Total exploration
expenses 33.6 9.1 1.9 - 7.2 - 51.8
- ----------------------------------------------------------------------------
Selling and general expenses 6.6 2.6 1.1 .2 .9 - 11.4
Income tax provisions 10.6 .3 9.2 .3 .2 3.6 24.2
- ----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 20.9 3.0 8.3 5.3 (7.2) 6.1 36.4
============================================================================
SIX MONTHS ENDED
JUNE 30, 1996
Oil and gas sales and
operating revenues $122.2 46.3 61.6 15.4 5.3 29.3 280.1
Production costs 25.8 14.1 16.6 5.7 .6 19.1 81.9
Depreciation, depletion,
and amortization 32.0 12.0 21.0 4.3 3.1 2.7 75.1
Exploration expenses
Dry hole costs 5.2 .7 3.7 - - - 9.6
Geological and geophysical
costs 3.4 1.3 1.1 - .6 - 6.4
Other costs 1.4 .3 .8 - 1.6 - 4.1
- ----------------------------------------------------------------------------
10.0 2.3 5.6 - 2.2 - 20.1
Undeveloped lease
amortization 3.4 1.4 - - - - 4.8
- ----------------------------------------------------------------------------
Total exploration
expenses 13.4 3.7 5.6 - 2.2 - 24.9
- ----------------------------------------------------------------------------
Selling and general expenses 6.6 2.6 1.5 .1 .6 - 11.4
Income tax provisions 16.1 5.9 9.6 .5 .5 2.8 35.4
- ----------------------------------------------------------------------------
Results of operations
(excluding corporate
overhead and interest) $ 28.3 8.0 7.3 4.8 (1.7) 4.7 51.4
============================================================================
</TABLE>
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are engaged in a number of other legal
proceedings, all of which the Company considers routine and incidental to
its business and none of which is material as defined by the rules and
regulations of the U.S. Securities and Exchange Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of security holders on May 14, 1997, the directors
proposed by management were elected with a tabulation of shares as shown
below.
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
B. R. R. Butler 41,476,564 124,724
George S. Dembroski 41,475,532 125,756
Claiborne P. Deming 41,477,061 124,227
H. Rodes Hart 41,476,895 124,393
Vester T. Hughes Jr. 41,476,064 125,224
C. H. Murphy Jr. 41,474,474 126,814
Michael W. Murphy 41,477,061 124,227
R. Madison Murphy 41,477,061 124,227
William C. Nolan Jr. 41,476,806 124,482
Caroline G. Theus 41,477,041 124,247
Lorne C. Webster 41,476,461 124,827
</TABLE>
In other matters, the security holders approved amendments to the 1992
Stock Incentive Plan as described in the Proxy Statement by a vote of
40,826,700 shares in favor, 337,396 shares against, and 437,192 shares
not voted and approved the Employee Stock Purchase Plan as described in
the Proxy Statement by a vote of 41,249,182 shares in favor, 259,950
shares against, and 92,156 shares not voted. In addition, the earlier
appointment of KPMG Peat Marwick LLP by the Board of Directors as
independent auditors for 1997 was ratified with 41,230,525 shares voted
in favor, 66,013 shares voted in opposition, and 304,750 shares not
voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Exhibit Index on page 13 of this Form 10-Q report lists the
exhibits that are hereby filed or incorporated by reference.
(b) No reports on Form 8-K have been filed for the quarter covered by
this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MURPHY OIL CORPORATION
(Registrant)
By /s/ Ronald W. Herman
--------------------
Ronald W. Herman, Controller
(Chief Accounting Officer and Duly
Authorized Officer)
August 8, 1997
(Date)
12
<PAGE>
EXHIBIT INDEX
Exhibit Page Number or
No. Incorporation by Reference to
- ------- -----------------------------
3.1 Certificate of Incorporation of Exhibit 3.1, Page Ex. 3.1-1,
Murphy Oil Corporation as of of Murphy's Annual Report on
September 25, 1986 Form 10-K for the year ended
December 31, 1996
3.2 Bylaws of Murphy Oil Corporation Exhibit 3.3, Page Ex. 3.3-1,
at October 4, 1995 of Murphy's Annual Report on
Form 10-K for the year ended
December 31, 1995
4 Instruments Defining the Rights of
Security Holders. Murphy is party to
several long-term debt instruments,
none of which authorizes securities
that exceed 10 percent of the total
assets of Murphy and its subsidiaries
on a consolidated basis. Pursuant to
Regulation S-K, item 601(b), paragraph
4(iii)(A), Murphy agrees to furnish
a copy of each such instrument to the
Securities and Exchange Commission
upon request.
4.1 Rights Agreement dated as of December Exhibit 4.1, Page Ex. 4.1-0,
6, 1989 between Murphy Oil Corporation of Murphy's Annual Report on
and Harris Trust Company of New York, Form 10-K for the year ended
as Rights Agent December 31, 1994
10.1 1987 Management Incentive Plan (adopted Exhibit 10.2, Page Ex. 10.2-0,
May 13, 1987, amended February 7, 1990 of Murphy's Annual Report on
retroactive to February 3, 1988) Form 10-K for the year ended
December 31, 1994
10.2 1992 Stock Incentive Plan amended Exhibit 10.2 filed herewith
May 14, 1997
10.3 Employee Stock Purchase Plan Exhibit 99.01 of Murphy's Form
S-8 Registration Statement
under the Securities Act of
1933 dated May 19, 1997
27 Financial Data Schedule for the six Included only in electronic
months ended June 30, 1997 filing
Exhibits other than those listed above have been omitted since they either are
not required or are not applicable.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997, AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED OF MURPHY OIL
CORPORATION AND CONSOLIDATED SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,237
<SECURITIES> 0
<RECEIVABLES> 259,321
<ALLOWANCES> 15,312
<INVENTORY> 138,693
<CURRENT-ASSETS> 457,656
<PP&E> 4,275,515
<DEPRECIATION> 2,648,700
<TOTAL-ASSETS> 2,155,560
<CURRENT-LIABILITIES> 416,121
<BONDS> 229,550
<COMMON> 48,775
0
0
<OTHER-SE> 1,000,469
<TOTAL-LIABILITY-AND-EQUITY> 2,155,560
<SALES> 987,607
<TOTAL-REVENUES> 1,016,040
<CGS> 838,975
<TOTAL-COSTS> 838,975
<OTHER-EXPENSES> 51,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 96,215
<INCOME-TAX> 38,043
<INCOME-CONTINUING> 58,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,172
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
</TABLE>
EXHIBIT 10.2
MURPHY OIL CORPORATION
1992 STOCK INCENTIVE PLAN
(As Amended May 14, 1997)
SECTION 1. PURPOSE
The purpose of the Murphy Oil Corporation 1992 Stock Incentive Plan is to
foster and promote the long-term financial success of the Company and
materially increase shareholder value by (a) motivating superior performance
by means of performance-related incentives, (b) encouraging and providing for
the acquisition of an ownership interest in the Company by Employees, and (c)
enabling the Company to attract and retain the services of an outstanding
management team upon whose judgment, interest, and special effort the
successful conduct of its operations is largely dependent.
SECTION 2. DEFINITIONS
Unless the context otherwise indicates, the following definitions shall be
applicable for the purpose of the 1992 Stock Incentive Plan:
"Agreement" shall mean a written agreement setting forth the terms of an
Award.
"Award" shall mean any Option (which may be designated as a Nonqualified or
Incentive Stock Option), a Stock Appreciation Right, or a Restricted Stock
Award, in each case granted under this Plan.
"Beneficiary" shall mean the person, persons, trust, or trusts designated
by an Employee or if no designation has been made, the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
the benefits specified under this Plan in the event of an Employee's death.
"Board" shall mean the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Executive Compensation Committee of the Board,
as from time to time constituted, or any successor committee of the Board with
similar functions. The Committee shall be constituted to comply with the
requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or such rule or any
successor rule thereto which is in effect from time to time.
"Common Stock" shall mean the Common Stock of the Company, $1.00 par value,
subject to adjustment pursuant to Section 11.
"Company" shall mean Murphy Oil Corporation, a Delaware corporation.
"Employee" shall mean any person employed by the Company on a full-time
salaried basis or by a Subsidiary that does not have in effect for its
personnel any plan similar to the Plan, including officers and employee
directors thereof.
"Incentive Stock Option" or "ISO" shall mean an Option that is intended by
the Committee to meet the requirements of Section 422 of the Code or any
successor provision.
"Nonqualified Stock Option" or "NQSO" shall mean an Option granted pursuant
to this Plan which does not qualify as an Incentive Stock Option.
"Normal Termination" shall mean a termination of employment (i) at normal
retirement time, (ii) for permanent and total disability, or (iii) with
Company approval, and without being terminated for cause.
"Option" shall mean the right to purchase Common Stock at a price to be
specified and upon terms to be designated by the Committee pursuant to this
Plan. An Option shall be designated by the Committee as a Nonqualified Stock
Option or an Incentive Stock Option at the time of grant.
"Opportunity Shares" shall mean additional shares of Common Stock which may
be earned by an Employee pursuant to Section 8.
"Option Holder" or "Holder" shall mean an Employee to whom an option has
been granted.
"Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of an Employee, shall have acquired on behalf of
the Employee by legal proceeding or otherwise the right to receive the
benefits specified in this Plan.
"Plan" shall mean this 1992 Stock Incentive Plan.
"Restricted Period" shall mean the period designated by the Committee
during which Restricted Stock may not be sold, assigned, transferred, pledged,
or otherwise encumbered and during which such stock is subject to forfeiture.
"Restricted Stock" shall mean those shares of Common Stock issued pursuant
to a Restricted Stock Award which are subject to the restrictions, terms, and
conditions specified by the Committee pursuant to Section 8.
"Restricted Stock Award" shall mean an award of Restricted Stock pursuant
to Section 8 hereof.
"Stock Appreciation Right" or "SAR" shall mean the right of the holder to
receive, upon exercise thereof, payment of an amount determined by
multiplying: (a) any increase in the Fair Market Value of a share of Common
Stock at the date of exercise over the price fixed by the Committee at the
date of grant, by (b) the number of shares with respect to which the SAR is
exercised; provided, however, that at the time of grant, the Committee may
establish, in its sole discretion, a maximum amount per share which will be
payable upon exercise of a SAR. The amount payable upon exercise may be paid
in cash or other property, including without limitation, shares of Common
Stock, or any combination thereof as determined by the Committee.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. In addition to any
implied powers and duties that may be needed to carry out the provisions of
the Plan, the Committee shall have all of the powers vested in it by the terms
of the Plan, including exclusive authority to select the Employees to be
granted Awards under the Plan, to determine the type, size and terms of the
Awards to be made to each Employee selected, to determine the time when Awards
will be granted, and to prescribe the form of the Agreements embodying Awards
made under the Plan. No member of the Committee, while he serves on the
Committee, may be granted Awards under the Plan. The Committee shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan,
to make any other determinations which it believes necessary or advisable for
the administration of the Plan, and to correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Award in the
manner and to the extent the Committee deems desirable to carry it into
effect. Any decision of the Committee in the administration of the Plan,
as described herein, shall be final and conclusive.
The Board may from time to time remove members from the Committee or add
members thereto, and vacancies in the Committee, however caused, shall be
filled by action of the Board. The Committee shall select one of its members
as chairman and shall hold its meetings at such time and places as it may
determine. The Committee may act only by a majority of its members. The
members of the Committee may receive such compensation for their services as
the Board may determine. Any determination of the Committee may be made,
without notice, by the written consent of the majority of the members of the
Committee. In addition, the Committee may authorize any one or more of their
number or any officer of the Company to execute and deliver documents on
behalf of the Committee.
SECTION 4. STOCK SUBJECT TO THE PLAN
The maximum number of shares available for Awards under the Plan in each
calendar year during any part of which the Plan shall be in effect shall be
one-half of one percent (0.5%) of the total issued and outstanding shares as
of December 31 of the immediately preceding year, subject to Section 11 of the
Plan. Any and all such shares may be issued in respect of any of the types of
Awards; provided, however, no more than fifty percent (50%) of the shares
available shall be subject to Incentive Stock Options granted under the Plan
and that no more than fifty percent (50%) of the shares available for Awards
under the Plan shall be issued in respect of Restricted Stock. Unless
otherwise determined by the Committee, all shares available in any year that
are not granted under the Plan will not be available for grant for subsequent
years. "Maximum Grants." Notwithstanding any provision contained in this
Plan to the contrary, the maximum number of shares of Common Stock for which
Incentive Stock Options, Nonqualified Stock Options, and Stock Appreciation
Rights may be granted under the Plan to any one Employee for any calendar year
is 100,000.
If any shares of Common Stock subject to an Award hereunder are forfeited
or any such Award otherwise terminates without the issuance of shares of
Common Stock or other consideration to an Employee, such shares shall not
increase the number of shares available for grant in such year.
SECTION 5. ELIGIBILITY
Any Employee who is a director or an officer or who serves in any other key
administration, professional or technical capacity shall be eligible to
participate in the Plan. In addition the Committee may in any year include
any other Employee who the Committee has determined has made some unusual
contribution which would not be expected of such Employee in the ordinary
course of his work.
SECTION 6. STOCK OPTIONS
A. Grant of Options and Price
(a) Any Option granted under the Plan may be granted as an Incentive
Stock Option or as a Nonqualified Stock Option as shall be designated by the
Committee at the time of the grant of such Option. Each Option shall be
evidenced by an Agreement between the recipient and the Company, which
Agreement shall specify the designation of the Option as an ISO or a NQSO, as
the case may be, and shall contain such terms and conditions not inconsistent
with the Plan as the Committee, in its sole discretion, may determine in
accordance with the Plan.
(b) The exercise price for the purchase of Common stock to be issued
pursuant to each Option shall be fixed by the Committee at the time of the
granting of the Option provided, however, that such exercise price shall in no
event be less than the fair market value of the Common Stock on the date such
Option is granted.
B. Exercise
The period during which an Option may be exercised shall be determined
by the Committee; provided, that such period will not be longer than ten years
from the date on which the Option is granted. The date or dates on which
portions of an Option may be exercised during the term of an Option shall be
determined by the Committee. In no case may an Option be exercised at any
time for fewer than 50 shares (or the total remaining shares covered by the
Option if fewer than 50 shares) during the term of the Option. An Option
which is granted in tandem with a SAR may only be exercised upon the surrender
of the right to exercise such SAR for an equivalent number of shares.
C. Payment of Shares
The exercise price for the Common Stock shall be paid in full when the
Option is exercised. Subject to such rules as the Committee may impose, the
exercise price may be paid in whole or in part in (i) cash, (ii) whole shares
of Common Stock evidenced by negotiable certificates, valued at their fair
market value on the date of exercise, (iii) by a combination of such methods
of payment, or (iv) such other consideration as shall be approved by the
Committee.
SECTION 7. STOCK APPRECIATION RIGHTS
Stock Appreciation Rights may be granted to participants at such time or
times as shall be determined by the Committee and shall be subject to such
terms and conditions as the Committee may impose. A grant of a SAR shall be
made pursuant to a written agreement containing such provisions not
inconsistent with the Plan as the Committee shall approve.
SARs may be exercised at such times or subject to such conditions as the
Committee shall impose, either at or after the time of grant. SARs which are
granted in tandem with an Option may only be exercised upon the surrender of
the right to exercise such Option for an equivalent number of shares and may
be exercised only with respect to the shares of Stock for which the related
Option is then exercisable. Option shares with respect to which a tandem SAR
shall have been exercised for cash shall not again be available for an Award
under this Plan. Notwithstanding any other provision of the Plan, the
Committee may impose such conditions on the exercise of a SAR (including,
without limitation, the right of the Committee to limit the time of exercise
to specified periods) as may be required to satisfy the applicable provisions
of Rule 16b-3 as promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
SECTION 8. RESTRICTED STOCK AWARDS
The Committee may make an award of Restricted Stock to selected Employees,
evidenced by an Agreement which shall contain such terms and conditions,
including without limitation, forfeiture provisions, as the Committee, in its
sole discretion, may determine. The amount of each Restricted Stock Award and
the respective terms and conditions of each Award (which terms and conditions
need not be the same in each case) shall be determined by the Committee in its
sole discretion.
The Committee shall establish performance measures for each Restricted
Period on the basis of such criteria and to accomplish such objectives as the
Committee may from time to time, in its sole discretion, determine. Such
measures may include, but shall not be limited to, total shareholder return,
growth in cash flow per share, growth in earnings per share, return on assets,
or return on stockholder equity. The Committee may from time to time
establish different performance objectives for certain operating subsidiaries
or sectors of the business. The maximum number of shares of restricted stock
which can be granted pursuant to the Plan will be 50,000 shares per year to
any one Employee. Currently, the performance criteria for the determination
of the performance-based restricted shares is the 5-year total shareholder
return for Murphy Oil Corporation as compared to a peer group of six
companies. The Committee may from time to time establish a different
performance criteria.
Shares of Restricted Stock will be subject to forfeiture and may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until such time or until the satisfaction of such conditions or the occurrence
of such events as shall be determined by the Committee either at or after the
time of grant. Unless otherwise determined by the Committee at the time of
grant, participants holding shares of Restricted Stock granted hereunder may
exercise full voting rights with respect to those shares during the Restricted
Period.
Unless otherwise determined by the Committee at the time of grant,
participants holding shares of Restricted Stock shall be entitled to receive
all dividends and other distributions paid with respect to those shares,
provided that if any such dividends or distributions are paid in shares of
Stock or other securities, such shares or securities shall be subject to the
same forfeiture restrictions and restrictions on transferability as apply to
the Restricted Stock with respect to which they were paid.
Each Employee who has received shares of Common Stock pursuant to a
Restricted Stock Award with respect to which all of the restrictions set forth
in Section 8 shall have lapsed or pursuant to an award of Opportunity Shares
related to such Restricted Stock Award shall also receive from the Company a
cash payment in the year following the close of the Restricted Period in an
amount determined by the Committee, which amount is intended to allow such
Employee to pay such Employee's tax liability (assuming the highest rates of
tax applicable to any individual taxpayer in the year in which such payment is
made) with respect to (i) such shares and (ii) such cash payment. Provided,
however, unless otherwise determined by the Committee, the cash payment shall
in no event exceed 50% of the fair market value of such shares as of the date
that all of the restrictions set forth in Section 8 shall have lapsed or as to
an award of Opportunity Shares as of the date of grant thereof.
SECTION 9. TERMINATION OF EMPLOYMENT
Unless otherwise determined by the Committee at the time of grant, in the
event a participant's employment terminates by reason of Normal Termination,
any Options granted to such participant which are then outstanding may be
exercised at the earlier of any time prior to the expiration of the term of
the Options or within two (2) years after termination and any shares of
Restricted Stock then outstanding shall be prorated for all restricted periods
then in effect based on the number of months of actual participation.
Unless otherwise determined by the Committee at the time of grant, in the
event a participant's employment is terminated by reason of death, any Options
granted to such participant which are then outstanding may be exercised by the
participant's beneficiary or the participant's legal representative at any
time prior to the expiration date of the term of the Options or within two (2)
years following the participant's termination of employment, whichever period
is shorter, and any shares of Restricted Stock then outstanding shall be
prorated for all restricted periods then in effect based on the number of
months of actual participation.
Unless otherwise determined by the Committee at the time of grant, in the
event the employment of the participant shall terminate for any reason other
than the ones described in this Section, any Options granted to such
participant which are then outstanding shall be canceled and any shares of
Restricted Stock then outstanding as to which the Restricted Period has not
lapsed shall be forfeited.
A change in employment from the Company or one Subsidiary to another
Subsidiary of the Company shall not be considered a termination.
SECTION 10. CHANGE IN CONTROL
Unless the Committee shall otherwise determine, notwithstanding any other
provision of this Plan or an Agreement to the contrary, upon a Change in
Control, as defined below, all outstanding Awards shall vest, become
immediately exercisable or payable or have all restrictions lifted as may
apply to the type of Award.
A "Change in Control" shall be deemed to have occurred if (i) any "person",
including a "group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act, but excluding the Company, any of its subsidiaries or any
employee benefit plan of the Company or any of its subsidiaries or Charles H.
Murphy, Jr. and affiliates of Charles H. Murphy, Jr.) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company's then outstanding securities; or
(ii) the stockholders of the Company shall approve a definitive agreement (1)
for the merger or other business combination of the Company with or into
another corporation a majority of the directors of which were not directors of
the Company immediately prior to the merger and in which the stockholders of
the Company immediately prior to the effective date of such merger own less
than 50% of the voting power in such corporation or (2) for the sale or other
disposition of all or substantially all of the assets of the Company.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the Common Stock by reason of any stock
split, stock dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange of shares, split-up, spin-off, share
purchase, liquidation or other similar change in capitalization affecting or
involving the Common Stock, or any distribution to common stockholders other
than regular cash dividends, the Committee shall make such substitution or
adjustment, if any, as it deems equitable, as to the number or kind of shares
that may be issued under the Plan pursuant to Section 4 and the number or kind
of shares subject to, or the price per share under or terms of any outstanding
Award. The amount and form of the substitution or adjustment shall be
determined by the Committee and any such substitution or adjustment shall be
conclusive and binding on all parties for all purposes of the Plan.
SECTION 12. MISCELLANEOUS PROVISIONS
(a) No Employee or other person shall have any claim or right to be
granted an Award under the Plan and no Award shall confer any right to
continued employment.
(b) An Employee's rights and interest under the Plan or any Award may not
be assigned or transferred in whole or in part, either directly or by
operation of law or otherwise (except in the event of an Employee's death, to
the Employee's Beneficiaries or by will or the laws of descent and
distribution), including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, and no
such right or interest of any Employee in the Plan or in any Award shall be
subject to any obligation or liability of such individual. An Award shall be
exercisable, during an Employee's lifetime, only by him or her or his or her
Personal Representative. Except as specified in the applicable Award
agreement, the holder of an Award shall have none of the rights of a
shareholder until the shares subject thereto shall have been registered on the
transfer books of the Company.
(c) Any provision of the Plan or any Agreement to the contrary
notwithstanding, no Common Stock shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable Federal, state, or other securities laws.
(d) The Company shall have the power to withhold, or require a participant
to remit to the Company, an amount sufficient to satisfy Federal, state, and
local withholding tax requirements in respect of any Award, or any exercise or
vesting thereof under the Plan, and the Company may defer payment of cash or
issuance of Stock until such requirements are satisfied. The Committee may,
in its discretion, permit an Employee to elect, subject to such conditions as
the Committee shall impose, (i) to have shares of Stock otherwise issuable
under the Plan withheld by the Company or (ii) to deliver to the Company
previously acquired shares of Stock, in either case having a fair market value
sufficient to satisfy all or part of the participant's estimated total
Federal, state, and local tax obligation associated with the transaction.
(e) The expense of the Plan shall be borne by the Company, except as set
forth above in subsection (d) of this Section.
(f) Awards granted under the Plan shall be binding upon the Company, its
successors and assigns.
(g) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval of any such additional arrangement is
required.
SECTION 13. AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board may from time to time amend the Plan or any provision thereof
without the consent of the stockholders except in the case of any amendments
that require stockholder approval in order to comply with the applicable
provisions of Rule 16b-3.
The Board may terminate the Plan in whole or in part at any time provided
that no such termination shall impair the terms of Awards then outstanding
under which the obligations of the Company have not been fully discharged.
SECTION 14. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Delaware.
