Acquisitions

12 Months Ended

Dec. 31, 2019

Acquisitions

PAI Transaction:

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 of 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 $780.7 million, after adjustments provided for in the sale and purchase agreement, 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 (see Note Q for the contingent consideration liability balance as of December 31, 2019 and 2018 for the remainder of the covered periods). The revenue threshold was not exceeded in 2019 and no contingent consideration is payable related to the 2019 period. Both companies contributed all of their then-currently 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 Transaction:

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 $1,238.4 million 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 (see Note Q for the contingent consideration liability balance as of December 31, 2019 and 2018 for the remainder of the covered periods). The revenue threshold was not exceeded in 2019 and no contingent consideration is payable related to the 2019 period.

The following table contains the purchase price allocations at fair value:



(Thousands of dollars)	PAI (Final)			LLOG (Preliminary)
Cash consideration paid	$	780,678		$	1,238,353
Fair value of net assets contributed	154,468			—
Contingent consideration	52,540			89,444
NCI in acquired assets	246,922			—
Total purchase consideration	$	1,234,608		$	1,327,797
(Thousands of dollars)
Fair value of Property, plant and equipment	1,617,371			1,358,372
Other assets	5,628			6,697
Less: Asset retirement obligations	(388,391		)	(37,272		)
Total net assets	$	1,234,608		$	1,327,797

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 and probable 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 LLOG purchase price allocation is not yet available, and includes, but is not limited to, analysis of the underlying tax basis of the assets acquired and liabilities assumed as well as the final purchase price adjustments to be settled in 2020. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, 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 year ended December 31, 2019, included additional revenues of $278.7 million and pre-tax income of $60.1 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, including depletion of LLOG fair-valued proved crude oil and natural gas properties. The pro forma condensed combined financial information was also adjusted to exclude acquisition-related costs of $6.2 million incurred by Murphy. 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 or LLOG 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.



	Years Ended December 31,
(Thousands of dollars, except per share amounts)	2019		2018
Revenues	$	3,061,575	3,290,104
Net Income Attributable to Murphy	1,209,380		758,639

Net Income Attributable to Murphy per Common Share
Basic	$	7.37	4.39
Diluted	7.34		4.35