Financial Instruments and Risk Management

12 Months Ended

Dec. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments and Risk Management

Note K – Financial Instruments and Risk Management

DERIVATIVE INSTRUMENTS – Murphy uses derivative instruments, such as swaps and zero-cost commodity price collar contracts, to manage certain risks related to commodity prices, foreign currency exchange rates and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features. Derivative instruments are traded with creditworthy major financial institutions or over national exchanges, such as the NYMEX. The Company has a risk management control system to monitor commodity price risks and any derivatives obtained to manage a portion of such risks. For accounting purposes, the Company has not designated commodity and foreign currency derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Operations.

Commodity Price Risks

The Company is subject to commodity price risk related to products it produces and sells. During 2025 and 2024 the Company entered into natural gas swap contracts. Under the swap contracts, which mature monthly, the Company pays the average monthly price in effect and receives the fixed contract price on a notional amount of sales volume, thereby fixing the price for the commodity sold.

During 2025, the Company entered into natural gas swap contracts that matured by December 31, 2025. The Company did not have any outstanding natural gas derivative contracts at year end. Volumes per day and the weighted average prices for these contracts were as follows:

NYMEX Henry Hub	Area	Commodity	Volumes MMCF/d	Price/MCF		Start Date	End Date
Fixed price derivative swap	United States	Natural gas	40	$	3.58	2/1/2025	6/30/2025
Fixed price derivative swap	United States	Natural gas	60	$	3.65	7/1/2025	9/30/2025
Fixed price derivative swap	United States	Natural gas	60	$	3.74	10/1/2025	12/31/2025

During 2024, the Company entered into natural gas swap contracts that were effective in 2025. At December 31, 2024, volumes per day associated with outstanding natural gas derivative contracts and the weighted average prices for these contracts were as follows:

NYMEX Henry Hub	Area	Commodity	Volumes MMCF/d	Price/MCF		Start Date	End Date
Fixed price derivative swap	United States	Natural gas	20	$	3.20	1/1/2025	1/31/2025

Foreign Currency Exchange Risks

The Company is subject to foreign currency exchange risk associated with operations in countries outside the U.S. The Company had no foreign currency exchange short-term derivative instruments outstanding as of December 31, 2025 and 2024. 

At December 31, 2025 and 2024, the fair value of derivative instruments not designated as hedging instruments are presented in the following table. See also Note O.

(Thousands of dollars)	Asset (Liability) Derivatives Fair Value at December 31,
Type of Derivative Contract	Balance Sheets Location	2025		2024
Commodity swaps	Accounts payable	$	—	(1,707)

The gains and losses recognized in the Consolidated Statements of Operations for derivative instruments not designated as hedging instruments for each of the three years presented are shown in the following table.

		Gain (Loss)
(Thousands of dollars)		Year Ended December 31,
Type of Derivative Contract	Statements of Operations Locations	2025		2024		2023
Commodity swaps	Gain (loss) on derivative instruments	$	5,927	$	(1,707)	$	—

Credit Risks

The Company is subject to credit risks primarily associated with trade accounts receivable, cash equivalents and derivative instruments. Trade receivables arise mainly from sales of oil and natural gas in the U.S. and Canada and cost sharing amounts, of operating and capital costs billed to partners, for properties operated by Murphy. The credit history and financial condition of potential customers are reviewed before credit is extended. Security is obtained when deemed appropriate based on a potential customer’s financial condition, and routine follow-up evaluations are made. The combination of these evaluations and the large number of customers tends to limit the risk associated with any one customer. Cash balances and cash equivalents are held with several major financial institutions, which limit the Company’s exposure to credit risk for its cash assets. The Company controls credit risk on derivatives through credit approvals and monitoring procedures and believes that such risks are minimal, because counterparties to the majority of transactions are major financial institutions.