MURPHY OIL CORP /DE | 2013 | FY |

Note P – Assets and Liabilities Measured at Fair Value

The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheet. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants.

The fair value measurements for these assets and liabilities at December 31, 2013 and 2012 are presented in the following table.

 

						Fair Value Measurements at Reporting Date Using
(Thousands of dollars)		Fair Value at December 31, 2013				Quoted Prices in Active Markets for Identical Assets (Liabilities) (Level 1)				Significant Other  Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets
Commodity derivative contracts		$	1,970				0				1,970				0
Liabilities
Nonqualified employee savings plan		$	(13,267	)			(13,267	)			0				0
Foreign currency exchange derivative contracts			(1,038	)			0				(1,038	)			0
Total		$	(14,305	)			(13,267	)			(1,038	)			0

 

						Fair Value Measurements at Reporting Date Using
(Thousands of dollars)		Fair Value at December 31, 2012				Quoted Prices in Active Markets for Identical Assets (Liabilities) (Level 1)				Significant Other  Observable Input (Level 2)				Significant Unobservable Inputs (Level 3)
Assets
Commodity derivative contracts		$	3,043				0				3,043				0
Liabilities
Nonqualified employee savings plan		$	(10,293	)			(10,293	)			0				0
Foreign currency exchange derivative contracts			(1,031	)			0				(1,031	)			0
Commodity derivative contracts			(102	)			0				(102	)			0
Total		$	(11,426	)			(10,293	)			(1,133	)			0

The fair value of West Texas Intermediate (WTI) crude oil contracts was based on active market quotes for WTI crude oil. The fair value of foreign exchange derivative contracts was based on market quotes for similar contracts at the balance sheet date. The fair value of commodity derivative contracts for corn and wet and dried distillers grain in 2012 was determined based on market quotes for No. 2 yellow corn. The income effect of changes in fair value of crude oil derivative contracts is recorded in Sales and Other Operating Revenues in the Consolidated Statements of Income, while the effects of changes in fair value of foreign exchange derivative contracts is recorded in Interest and Other Income and changes in fair value of corn and distillers grain is recorded in Income from Discontinued Operations. The nonqualified employee savings plan is an unfunded savings plan through which participants seek a return via phantom investments in equity securities and/or mutual funds. The fair value of this liability was based on quoted prices for these equity securities and mutual funds. The income effect of changes in the fair value of the nonqualified employee savings plan is recorded in Selling and General Expenses.

The Company offsets certain assets and liabilities related to derivative contracts when the legal right of offset exists. There were no offsetting positions recorded at December 31, 2013. At December 31, 2012 derivative assets and liabilities which had offsetting positions are presented in the following tables.

 

(Thousands of dollars)		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts of Assets Presented in the Consolidated Balance  Sheet
At December 31, 2012
Commodity derivatives		$	3,111				(2,169	)			942
(Thousands of dollars)		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts of Liabilities Presented in the Consolidated Balance  Sheet
At December 31, 2012
Commodity derivatives		$	2,271				(2,169	)			102

All commodity derivatives noted in the above table at December 31, 2012 were corn-based contracts associated with the Company’s two former U.S. ethanol plants. Net derivative assets in the table above are included in Accounts Receivable on the Consolidated Balance Sheet at December 31, 2012; likewise, net derivative liabilities in the above table are included in Accounts Payable and Accrued Liabilities on the 2012 Consolidated Balance Sheet. Separate derivative agreements existed for each of the ethanol plants. These contracts permitted net settlement and the Company generally availed itself of this right to settle net.

The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at December 31, 2013 and 2012. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The table excludes cash and cash equivalents, trade accounts receivable, trade accounts payable and accrued expenses, all of which had fair values approximating carrying amounts. The carrying value of Canadian government securities is determined based on cost plus earned interest. The fair value of current and long-term debt was estimated based on rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet exposures relating to certain letters of credit. The fair value of these, which represents fees associated with obtaining the instruments, was nominal.

 

		At December 31,
		2013								2012
(Thousands of dollars)		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Financial assets (liabilities):
Canadian government securities with maturities greater than 90 days at the date of acquisition		$	374,842				375,623				115,603				115,802
Current and long-term debt			(2,962,812	)			(2,822,827	)			(2,245,247	)			(2,357,972	)