XML 82 R18.htm IDEA: XBRL DOCUMENT v3.25.4
Incentive Plans
 12 Months Ended
Dec. 31, 2025
Share-Based Payment Arrangement [Abstract]  
Incentive Plans
Note I – Incentive Plans
Murphy utilizes cash-based and/or share-based incentive awards to supplement normal salaries as compensation for executive management and certain employees. For share-based awards that qualify for equity accounting, costs are recognized as an expense in the Consolidated Statements of Operations, using a grant date fair value-based measurement method, over the periods that the awards vest. For cash-settled equity awards that are required to be accounted for under liability accounting rules, costs are recognized as expense using a fair value-based measurement method over the vesting period, but expense is adjusted as necessary through the date the award value is finally determined. Total expense for liability awards is ultimately adjusted to the final intrinsic value for the award.
In May 2025, the Company’s shareholders approved the 2025 Long-Term Incentive Plan (the 2025 Long-Term Plan) to replace the 2020 Long-Term Incentive Plan (the 2020 Long-Term Plan). All awards granted on or after May 14, 2025, will be made under the 2025 Long-Term Plan. Additional information on the 2025 Long-Term Plan can be found in the Company’s Definitive Proxy Statement (Definitive 14A) dated March 28, 2025.
The Company currently has outstanding incentive awards issued to certain employees under the Annual Incentive Plan (AIP), the 2020 Long-Term Plan, and the 2025 Long-Term Plan.
The AIP authorizes the Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and certain other employees. Cash awards under the AIP are determined based on the Company’s actual financial and operating results as measured against the performance goals established by the Committee.
The 2025 Long-Term Plan authorizes the Committee to make grants of the Company’s common stock to employees. These grants may be in the form of stock options (nonqualified or incentive), Stock Appreciation Rights (SARs), restricted stock, RSUs, performance units, performance shares, dividend equivalents and other stock-based incentives. The 2025 Long-Term Plan will expire in 2035 and authorizes the issuance of up to 3.885 million shares of common stock over its term. Shares issued pursuant to awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market. Share awards that have been canceled, expired, forfeited or otherwise not issued under an award shall not count as shares issued under this Plan. Based on awards made to date, 3.872 million shares are available for grant under the 2025 Long-Term Plan at December 31, 2025.
The Company also has a stock plan that permits the issuance of RSUs, stock options, or a combination thereof, to non-employee directors (NEDs). The Company currently has outstanding incentive awards issued to directors under the 2021 Stock Plan for NEDs (2021 NED Plan) and the 2018 Stock Plan for NEDs. All awards on or after May 12, 2021, were made under the 2021 NED Plan.
The Company generally expects to issue treasury shares to satisfy the vesting of restricted stock and RSUs.
Amounts recognized in the financial statements with respect to share-based plans for each of the three years presented are shown in the following table.
(Thousands of dollars)
202520242023
Compensation charged against income before income tax benefit$50,107 $40,831 $58,760 
Related income tax benefit recognized in income6,438 5,513 9,330 
As of December 31, 2025, there were $46.5 million in compensation costs, to be expensed over approximately the next two years, related to unvested share-based compensation arrangements granted by the Company. Employees receive net shares, after applicable withholding obligations, upon each RSU vest. 
Equity-Settled Awards
PERFORMANCE-BASED RESTRICTED STOCK UNITS – PSUs to be settled in common shares were granted in 2022, 2023, 2024 and February 2025 under the 2020 Long-Term Plan, and in August 2025 under the 2025 Long-Term Plan. Each grant will vest if the Company achieves specific performance objectives at the end of the designated performance period. Additional shares may be awarded if performance objectives are exceeded. If performance goals are not met, PSUs will not vest, but the recognized compensation cost associated with the stock award would not be reversed. The performance conditions for the PSUs are weighted 80% on the Company’s total shareholder return (TSR) relative to an industry peer group and 20% on the return on average capital employed (ROACE), measured over the applicable performance period. ROACE is calculated by dividing the Company’s EBITDA by the average of the opening and closing Capital Employed (the sum of total equity and short-term and long-term debt). During the performance period, PSUs are subject to transfer restrictions and are subject to forfeiture if a grantee terminates for reasons other than retirement, disability or death. Termination for these three reasons will lead to a pro rata award of amounts earned. No dividends are paid, nor do voting rights exist on awards of PSUs prior to their settlement.
The fair value of the PSUs based on the Company’s TSR was estimated on the date of grant using a Monte Carlo valuation model. Expected volatility was based on daily historical volatility of the Company’s stock price compared to a peer group average over a three-year performance measurement period. The risk-free interest
rate is based on the yield curve of three-year U.S. Treasury bonds, and the stock beta was calculated using three years of historical averages of daily stock data for Murphy and the peer group. The assumptions used in the valuation of the performance awards granted in 2025, 2024 and 2023 are presented in the following table.
202520242023
Fair value per share at grant date
$19.65 - $22.11
$41.95$60.46
Assumptions
Expected volatility40.00%50.00%81.00%
Risk-free interest rate4.25%4.14%3.90%
Stock beta0.9801.0621.034
Expected life3.0 years3.0 years3.0 years
The fair value of the PSUs based on ROACE was estimated based on the average high/low price of the Company’s stock on the grant date.
Changes in PSUs outstanding for each of the last three years are presented in the following table.
(Number of stock units)
202520242023
Outstanding at beginning of year1,392,421 1,818,188 2,148,467 
Granted657,730 536,900 409,160 
Vested and issued(481,670)(938,599)(408,135)
Forfeited(104,966)(24,068)(331,304)
Outstanding at end of year1,463,515 1,392,421 1,818,188 
TIME-BASED RESTRICTED STOCK UNITS – Time-based RSUs have been granted to the Company’s non-employee directors under the 2021 NED Plan, and to certain employees under the 2020 Long-Term Plan and 2025 Long-Term Plan.
The fair value of the time-based RSUs awarded for each of the last three years is presented in the following table.
Type of PlanValuation Methodology202520242023
Non-Employee Directors 1
Closing Stock Price at Grant Date
$22.50 - $31.25
$30.26 - $45.70
$43.27
Long-Term Incentive Plan 2
Average High/Low Stock Price at Grant Date
$23.09 - $25.98
$37.78 - $45.98
$42.20
1 Under the 2021 NED Plan, RSUs granted in 2025 are scheduled to vest in February 2026.
2 The RSUs granted under the 2020 Long-Term Plan and the 2025 Long-Term Plan generally vest on the third anniversary of the date of grant.
Changes in RSUs outstanding for each of the last three years are presented in the following table.
(Number of share units)
202520242023
Outstanding at beginning of year1,558,600 1,219,584 1,227,792 
Granted559,284 741,228 556,100 
Vested and issued(360,281)(330,444)(517,047)
Forfeited(95,951)(71,768)(47,261)
Outstanding at end of year1,661,652 1,558,600 1,219,584 
STOCK OPTIONS – In 2017, the Company ceased the inclusion of stock options and SARs as a part of the long-term incentive compensation mix. As of December 31, 2024, there were no outstanding SARs or stock options.
During 2023, 11,000 stock options were exercised, and 2,000 stock options were forfeited, both at an exercise price of $28.51 per share, leaving zero options outstanding as of December 31, 2023.
Cash-Settled Awards
The Company has granted phantom stock-based incentive awards to be settled in cash to certain employees in the form of CRSUs.
CRSUs generally settle on the third anniversary of the date of grant. Each award granted is settled, net of applicable income tax withholdings, in cash rather than with common shares. Total pretax expense recorded in the Consolidated Statements of Operations for all cash-settled stock-based awards was $7.5 million in 2025, $1.7 million in 2024 and $29.4 million in 2023.
The Committee also administers the Company’s incentive compensation plans, which provide for annual or periodic cash awards to officers, directors and certain other employees. These cash awards are generally determinable based on the Company achieving specific financial and/or operational objectives. Compensation expense of $37.8 million, $37.1 million and $30.9 million was recorded in 2025, 2024 and 2023, respectively, for these plans.