Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

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 gas) in select basins around the globe. The Company’s revenue from sales of oil and 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 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 GOM as prescribed by ASC 810-10-45.

U.S. - In the United States, the Company primarily produces oil and gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico. Revenue is generally recognized when oil and 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 are primarily long-term floating commodity index priced, except for certain 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.

In the third quarter of 2019, the Company made an immaterial reclassification to correct its financial statements to report transportation, gathering, and processing costs as a separate line item (previously reported net in revenue) in the Consolidated Statements of Operations and revised all historical periods to reflect this presentation. There was no resultant change in net income attributable to Murphy.

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 and six-month periods ended June 30, 2020, the Company recognized $285.7 million and $886.3 million, respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas. For the three-month and six-month periods ended June 30, 2019, the Company recognized $680.4 million and $1,309.8 million respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas.


		Three Months Ended June 30,								Six Months Ended June 30,
(Thousands of dollars)		2020				2019		2020		2019
Net crude oil and condensate revenue
United States	Onshore	$	54,550			193,565		185,786		328,241
	Offshore	150,253				352,281		497,225		691,944
Canada	Onshore	11,527				28,031		34,910		56,972
	Offshore	11,077				42,355		35,691		87,279
Other		(58)				3,123		1,806		5,975
Total crude oil and condensate revenue				227,349			619,355		755,418		1,170,411

Net natural gas liquids revenue
United States	Onshore	3,876				8,719		9,379		16,940
	Offshore	3,464				4,478		8,490		9,770
Canada	Onshore	1,276				2,775		3,310		6,236
Total natural gas liquids revenue				8,616			15,972		21,179		32,946

Net natural gas revenue
United States	Onshore	4,090				7,340		9,648		14,914
	Offshore	10,665				9,219		25,660		13,696
Canada	Onshore	35,025				28,550		74,398		77,823
Total natural gas revenue				49,780			45,109		109,706		106,433
Total revenue from contracts with customers				285,745			680,436		886,303		1,309,790

(Loss) gain on crude contracts				(75,880)			57,916		324,792		57,916
Gain on sale of assets and other income				1,677			5,598		4,175		6,790
Total revenue and other income				$	211,542		743,950		1,215,270		1,374,496

Contract Balances and Asset Recognition

As of June 30, 2020, and December 31, 2019, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet from continuing operations, were $101.3 million and $186.8 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 (see Note B), the Company did 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 upstream oil and gas sale contracts that have financing components as at June 30, 2020.

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 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 June 30, 2020, 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:

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Current Long-Term Contracts Outstanding at June 30, 2020

Approximate Volumes

Location

Commodity

End Date

Description

U.S.

Oil

Q4 2021

Fixed quantity delivery in Eagle Ford

17,000 BOED

U.S.

Natural Gas and NGL

Q1 2023

Deliveries from dedicated acreage in Eagle Ford

As produced

Canada

Natural Gas

Q4 2020

Contracts to sell natural gas at Alberta AECO fixed prices

59 MMCFD

Canada

Natural Gas

Q4 2020