Discontinued Operations

12 Months Ended

Dec. 31, 2012

Discontinued Operations

Note C – Discontinued Operations

During the third quarter 2012, Murphy’s Board of Directors authorized management to sell the Company’s exploration and production (upstream) operations in the United Kingdom. Beginning in 2012, the Company has accounted for U.K. upstream operations as discontinued operations for all periods presented, including a reclassification of all prior years’ results for these operations to discontinued operations. The U.K. upstream operations were formerly reported as a separate segment within the Company’s exploration and production business. The Company currently expects to complete the sale of these U.K. operations in early 2013.

Assets and liabilities presented in the December 31, 2012 Consolidated Balance Sheet as held for sale related to the U.K. exploration and production operations were as follows:

(Thousands of dollars)
Current Assets:
Accounts receivable	$	10,143
Inventories and other		4,976
	$	15,119
Noncurrent Assets:
Property, plant and equipment – net	$	205,746
Other		2,422
	$	208,168
Current liabilities:
Accounts payable	$	27,578
Income taxes payable		19,893
	$	47,471
Noncurrent liabilities:
Deferred income taxes payable	$	87,893
Asset retirement obligation		53,284
	$	141,177

In July 2010, the Company announced that it planned to exit the U.S. refining business. On September 30, 2011, the Company sold the Superior, Wisconsin refinery and related assets for $214,000,000, plus certain capital expenditures between July 25, 2011, and the date of closing and the fair value of all associated hydrocarbon inventories at these locations. On October 1, 2011, the Company sold its Meraux, Louisiana refinery and related assets for $325,000,000, plus the fair value of associated hydrocarbon inventories. The Company has accounted for the results of the Superior, Wisconsin and Meraux, Louisiana refineries and associated marketing assets as discontinued operations. The after-tax gain in 2011 from disposal of the two refineries netted to $18,724,000, made up of a gain on the Superior refinery (including associated inventories) of $77,585,000 and a loss on the Meraux refinery (including associated inventories) of $58,861,000. The gain on disposal was based on refinery selling prices, plus the sales of all associated inventories at fair value, which was significantly above the last-in, first-out carrying value of the inventories sold. The net gain on sale of the refineries included an after-tax benefit of $179,152,000 from liquidation of inventories formerly carried primarily under the last-in, first-out cost method. The U.S. refineries sold were formerly reported in the U.S. manufacturing segment.

The results of operations associated with these discontinued operations are presented in the following table.

(Thousands of dollars)	2012		2011		2010
Revenues	$	150,304		3,808,217		3,308,921
Income from operations before income taxes	$	75,074		246,570		88,579
Gain on sale before income taxes		0		12,684		0
Total income from discontinued operations before taxes		75,074		259,254		88,579
Provision for income taxes		68,244		116,023		39,578
Income from discontinued operations	$	6,830		143,231		49,001

In July 2012, the United Kingdom enacted tax changes that limited tax relief on oil and gas decommissioning costs to 50%, a reduction from the 62% tax relief previously allowed for these costs. This tax rate change led to a net reduction of income from discontinued operations of $5,523,000 in 2012. In July 2011, the United Kingdom enacted a supplemental tax rate increase for oil and gas companies effective retroactive to March 2011. The total U.K. tax rate increased from 50% to 62% for oil and gas companies. The supplemental tax rate change reduced income from discontinued operations by $14,461,000 for 2011.