Subsequent Event

9 Months Ended

Sep. 30, 2018

Subsequent Event [Abstract]

Subsequent Event

Note Q – Subsequent Event

On October 10, 2018, the Company announced that its wholly owned subsidiary, Murphy Exploration & Production Company – USA, had entered into a definitive agreement to form a new joint venture company with Petrobras America Inc. (PAI), a subsidiary of Petrobras. The joint venture company will be comprised of Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations. The transaction will have an effective date of October 1, 2018 and is expected to close by year-end 2018.

Both companies will contribute all their current producing Gulf of Mexico assets to the joint venture, which will be owned 80 percent by Murphy and 20 percent by PAI. The transaction excludes exploration blocks from both companies, with the exception of PAI’s blocks that hold deep exploration rights. Murphy will pay cash consideration of $900 million to PAI, subject to normal closing adjustments. Additionally, PAI will earn an additional contingent consideration up to $150 million if certain price and production thresholds are exceeded beginning in 2019 through 2025. Also, Murphy will carry $50 million of PAI costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken. Upon closing, Murphy expects to fund the transaction through a combination of cash-on-hand and the Company’s 2016 facility (See Note F). 

In conjunction with the joint venture, on October 10, 2018, the company entered into an amendment of its existing Credit Agreement. The amendment, once effective will provide selected covenant relief and add financial flexibility. The amended credit facility will be effective upon the closing of the joint venture transaction. The key terms of the amendment include eliminating the “collateral trigger event” clause (springing collateral, and “minimum domestic liquidity requirements” as defined in the Credit Agreement) and allows Company to execute the transaction, including contributing assets to the joint venture company.