On issues of global warming and climate change, Murphy shares the concerns of our shareholders, employees and community. As a company, we recognize that our planet has experienced periods of global warming as well as global cooling.

The first 10 years of the 21st century (2001—2010) have been among the warmest since modern records began in 1861, according to NASA’s Goddard Institute.

While there is no disputing this warming trend, it is important to consider the facts. The complexity of our planet’s climate system makes it difficult to understand past and future consequences of greenhouse gas increases. Certain limits in climate knowledge are well known—for example describing behavior of clouds, hydrology, sea ice and ocean circulation—and continued research is necessary. In addition, climate observations display significant natural variability that cannot be explained with existing models and knowledge. However, computer models that simulate the climate system can only reproduce the warming trends observed during the last half of the 20th century by including the human contribution to greenhouse gases and aerosols. In recent and ancient geological past, for example, climate has been both warmer and cooler than today for reasons that are not yet understood. The need to advance our knowledge notwithstanding, it is incumbent upon all of us to do what is possible to mitigate the potential impact of greenhouse gases (GHG) on our environment, as well as prepare to adapt to unavoidable changes in the climate system.

As of 2005, nine of the previous 10 years have been the warmest since modern records began in 1861. The year 2005 was the warmest year on record, according to NASA’s Goddard Institute, and while the data is incomplete, the year 2006 appears to have sustained this trend.

Policy makers, the public, the international community , shareholders and corporations continue to consider the best ways to address the challenges posed by global climate change. Over the last decade, the world has learned much more about the magnitude, scope, and complexities surrounding the dynamics related to the changing climate. Murphy, in consultation with some of the foremost climate experts and scientists in the world that have been studying the issue for nearly a decade and developed in 2008, a corporate set of "Guiding Principles for Climate Change" to assist Murphy in communicating to our employees, the public and policy makers our position as climate change events unfold throughout the world.

With this in mind, Murphy has initiated a series of actions designed to produce a measured and verifiable inventory of greenhouse gas emissions. We began in 2001 and have continued annually sice, a program of conducting and establishing verifiable, third party measurement of our greenhouse gas emissions. Prior to 2009 our worldwide emission calculations were based on the internationally approved Sangea protocol. Passage of the EPA’s Mandatory Reporting Rule (MRR) for Greenhouse Gas emissions in 2009, allowed us to use the EPA’s MRR protocol for USA assets, while continuing with the Sangea protocol for international emission calculations. Refinement of our emission surveys have continued through the years. A three year (2009-2011) emission trend and review of Murphy climate change initiatives can be viewed by clicking on the highlighted link to the slide show. Murphy continues to evaluate a number of cost-effective initiatives designed to reduce our greenhouse gas emissions. As these initiatives are implemented, we will monitor our progress through annual emission surveys, once again using verifiable third party estimates.

While our program is clearly nascent, we believe with the advent of new technologies and programs such as carbon sequestration, various offsets and trading mechanisms, and reduced flaring, it may be possible for Murphy to reach its ultimate goal of reducing greenhouse gas emissions on an absolute basi despite growth in both our upstream and downstream operations. This will benefit not just our shareholders, but our community and world at large.