Acquisitions

3 Months Ended

Mar. 31, 2020

Acquisitions

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 $1,236.2 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.

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



(Thousands of dollars)	LLOG (Preliminary)
Cash consideration paid	$	1,236,165
Contingent consideration	89,444
Total purchase consideration	1,325,609
(Thousands of dollars)
Fair value of Property, plant and equipment	1,356,185
Other assets	6,697
Less: Asset retirement obligations	(37,273		)
Total net assets	$	1,325,609

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 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 2020. We expect to complete the purchase price allocations during the 12-month periods following the acquisition dates of 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 month period ended March 31, 2020, included additional revenues of $93.7 million and pre-tax loss of $406.3 million attributable to the acquired LLOG assets (including impairment expense of $413.2 million).