Acquisition

6 Months Ended

Jun. 30, 2019

PAI Acquisition:

In December 2018, the Company announced the completion of a transaction with Petrobras Americas Inc. (PAI) which was effective October 1, 2018. Through this transaction, Murphy acquired all PAI’s producing Gulf of Mexico assets along with certain blocks that hold deep exploration rights. This transaction added approximately 97 MMBOE (including noncontrolling interest, NCI) of proven reserves at December 31, 2018.

Under the terms of the transaction, Murphy paid cash consideration of $788.7 million and transferred a 20% interest in MP Gulf of Mexico, LLC (MP GOM), a subsidiary of Murphy, to PAI. Murphy also has an obligation to pay additional contingent consideration up to $150 million if certain sales thresholds are exceeded beginning in 2019 through 2025. Both companies contributed all of their current producing Gulf of Mexico assets into MP GOM. MP GOM is owned 80% by Murphy and 20% by PAI, with Murphy overseeing the operations.

LLOG Acquisition:

In June 2019, the Company announced the completion of a transaction with LLOG Exploration Offshore L.L.C. and LLOG Bluewater Holdings, L.L.C., (LLOG) which was effective January 1, 2019. Through this transaction, Murphy acquired strategic deepwater Gulf of Mexico assets which added approximately 67 MMBOE of proven reserves at May 31, 2019.

Under the terms of the transaction, Murphy paid cash consideration of $1.2 billion and has an obligation to pay additional contingent consideration of up to $200 million in the event that certain revenue thresholds are exceeded between 2019 and 2022; and $50 million following first oil from certain development projects.

The following table contains the preliminary purchase price allocation at fair value:



(Thousands of dollars)	PAI			LLOG
Cash consideration paid	$	788,724		1,226,261
Fair value of net assets contributed	154,469			—
Contingent consideration	52,540			89,444
NCI in acquired assets	248,933			—
Total purchase consideration	$	1,244,666		1,315,705
(Thousands of dollars)
Fair value of Property, plant and equipment	$	1,627,429		1,340,206
Other assets	5,628			12,771
Less: Asset retirement obligations	(388,391		)	(37,272	)
Total net assets	$	1,244,666		1,315,705

The fair value measurements of crude oil and natural gas properties and asset retirement obligations are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert expected future cash flows to a single discounted amount. Significant inputs to the valuation of crude oil and natural gas properties included estimates of: (i) proved, probable, and possible reserves; (ii) production rates and related development timing; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average discount rate. These inputs require significant judgments and estimates by management at the time of the valuation, are sensitive, and may be subject to change.

Certain data necessary to complete the purchase price allocations are not yet available, and includes, but is not limited to, analysis of the underlying tax basis of the acquired assets and assumed liabilities as well as the final purchase price adjustments to be settled in 2019. We expect to complete the purchase price allocations during the 12-month periods following the acquisition dates of November 30, 2018 and May 31, 2019, during which time the value of the assets and liabilities may be revised as appropriate.

Results of Operations

Murphy’s Consolidated Statement of Operations for the three months ended June 30, 2019 included additional revenues of $388.9 million and pre-tax income of $136.8 million attributable to the acquired PAI assets. For the six months ended June 30, 2019, additional revenues of $622.9 million and pre-tax income of $284.5 million attributable to the acquired PAI assets were included in the Consolidated Statement of Operations.

Murphy’s Consolidated Statement of Operations for the three-month and six-month periods ended June 30, 2019 included additional revenues of $43.6 million and pre-tax income of $8.0 million attributable to the acquired LLOG assets.

Pro Forma Financial Information

The following pro forma condensed combined financial information was derived from historical financial statements of Murphy PAI and LLOG and gives effect to the transaction as if it had occurred on January 1, 2018. The information below reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable. The pro forma results of operations do not include any cost savings or other synergies that we expect to realize from the transaction or any estimated costs that have been or will be incurred by us to integrate the PAI assets. The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2018; furthermore, the financial information is not intended to be a projection of future results.



(Thousands of dollars, except per share amounts)	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Revenues	$	874,631	1,453,711
Net Income Attributable to Murphy	246,889		458,386

Net Income Attributable to Murphy per Common Share
Basic	$	1.43	2.65
Diluted	1.42		2.62