ConocoPhillips (COP) Q2 2012 Earnings Report, Transcript and Summary

Welcome to the Q2 2012 ConocoPhilips Earnings Conference Call. My name is Kim, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Ms. Ellen DeSanctis, Vice President, Investor Relations and Communications. Ms. DeSanctis, you may begin.

Thank you, Kim, and good morning to everybody. Again, thank you for joining us on this ConocoPhilips second quarter earnings call. I'm in the room today with Ryan Lance, our Chairman and CEO; and Jeff Sheets, our EVP and Chief Financial Officer. And before I turn the conference over to those 2 gentlemen, let me make a few administrative comments. First of all, we -- you'll notice, we've provided a lot of new information with today's disclosure. And of course, that's to help you understand the business better. We've provided segment data on each of our regions in addition to some data on our Corporate statements, and I just want to let people know, Vladimir and I will be available after the call to help you sort through those details as needed. In addition, I want to remind you that our presentation materials for the call today can be found on our website and a transcript to this call will be posted again to our website, hopefully by no later than tomorrow morning. And then finally, if you'll advance to Slide 2, you'll note our cautionary statement. We will make some forward-looking statements during today's webcast and actual results could differ materially from the expectations we shared today. The factors that could cause these results to differ are listed in this cautionary statement, as well as in our periodic filings with the SEC. And now, it is my pleasure to turn the call over to Ryan Lance.

Thank you, Ellen, and thank you all for joining the call today. So I reflect back and in mid-April, we laid out our plans for the newly independent ConocoPhilips and today represents our first quarterly call to update you on those plans. I'm looking forward to your questions at the end as well. So I'll begin my comments on Slide 3 and cover some of our key second quarter highlights. Strategically, the second quarter was certainly an eventful one. Less than 100 days ago, we completed the spinoff of our Phillips 66 company. And while we were prepared for the event, it's really hard to know until that event actually shows up how things go. But I'm pleased to say that I think we hit the ground running, and I certainly couldn't be prouder of our employees. They certainly stepped up in a pretty big way. So in addition to completing the Phillip 66 spinoff, we continue to make progress on our divestiture program. This is a strategic program that's important for completing the repositioning of the ConocoPhilips and adding financial flexibility to the company. In the quarter, we generated about $0.5 billion of proceeds from asset sales in the North Sea, and we continue to advance our progress on other assets. We still estimate that our announced program will be complete by mid-2013. I also include a point about our unconventional and our conventional exploration program as a strategic highlight. We made progress in the corner -- in the quarter on these important activities with more to come in the year. And I'll speak about our exploration activities in more detail in a moment because this is an important part of our plans for the future, and we have a lot of going on in this area. Operationally, the…

Thank you, Ryan, and good morning, everyone. I thought I would start this portion of the call with a list of some of the key drivers that underpinned our financial and operating performance for the quarter. These are drivers that either affected our segments across the board or represent some noteworthy impact to our financials. The first is no surprise, North American crude, bitumen and natural gas, and NGL prices continue to trend lower and we'll have more detail on that on the next slides. In terms of production, our volumes came in as planned with a solid performance across our portfolio. Ryan stepped through a few of these, but as a reminder, our Lower 48 Shale and Canadian oil sands achieved production increases, which were somewhat offset by unusually heavy planned maintenance efforts and the impact of dispositions. Generally, operating costs were as expected and dispositions also had some impact on our financials and we'll cover that as we go through the segments. I'd also note that the format of the slides we're using this morning are quite different from our previous earnings calls, with a lot more information being presented about each of our geographic operating segments. What's also different is that we'll be providing outlook information as we go through the presentation instead of all at once at the end of the presentation as we have done in previous earnings calls. So if you move to Slide 7, we'll start the discussion with a discussion of our realized prices. About 55% of our production consists of liquids and about 45% consists of natural gas. Of the 55% that's liquids, about 30% is tied to Brent or international prices, which were strong early in the quarter and began to decline later in the quarter. The remaining 20% of…

Thanks, Jeff. And if you could turn to Slide 19, I'll try to wrap up a little bit. I think the takeaway that we'd like to have for you all for today's call is that the business is running well, and our plans are on track. The spinoff of Phillips 66 was a big milestone for the company, and it successfully launched ConocoPhilips as an independent E&P company. Operationally, we had a strong quarter, and that part of the business is delivering on our expectations. Certainly, our focus will remain on returning value to the shareholders through our dividends, and by executing on our major projects, our exploration programs and our asset sales. The asset sales are important because they generate proceeds that help fund our high return growth projects. And we certainly will keep a close watch on the macroenvironment and we believe the investments that we're making today are going to position the company to deliver on our long-term value proposition of 3% to 5% growth in production and margins, with improving absolute financial returns and combining a sector-leading yield. So that wraps up our summary that we had today, and look forward to the questions from the audience.

[Operator Instructions] And at this time, we have a question from Faisel Khan from Citi.

On Slide 5, I think you mentioned in your prepared remarks the amount of cash flow you expect to generate from operations under consensus estimates. I just want to clarify that, was that $40 billion, did you say? In '12 and '13?

No. The consensus cash from operations is not the $40 billion. We think per year it's in the $12 billion to $14 billion range.

$12 billion to $14 billion. Okay, great perfect.

Yes, so you add the $6 billion of cash on hand, plus what we expect to get from asset dispositions, is what adds up to the $40 billion, Faisel.

Okay. Got it. And then on Peng Lai, what's -- assuming you can get up to full operatable capacity, what is that potential number over the long-term, assuming you can get to your, all the permits in place and be able to get back to producing in all those fields?

Yes, I think you ought to think in terms of 110,000 to 120,000 barrels a day gross.

So net back to us is in the 40,000 to 50,000 BOE per day level.

Okay. Got you.

And we would -- that compares to around 60,000 before the events.

Okay, understood. And then at APLNG, given your reduced working interest now in that facility and also given the project financing that you have in place, what kind of spend or what kind of equity contributions will have to -- will you be obligated to make to APLNG over the next sort of year or 2?

So what we find is that over the second half of 2012, that the project financing and the fact that the additional interest that Sinopec is going to acquire as part of the final investment decision on the second train will fund most of the -- most of our capital requirements for the balance of the year. And then we'll see lower capital requirements on APLNG as primarily related to project financing next year as well.

Our next question comes from Paul Sankey from Deutsche Bank.

I'd very much like for you, your continued clarity and also, really, truly appreciate your level of disclosure that you give it. It's admirable. On the basic question of the cash flows, just one point, you didn't say anything about growing the dividend, but assume that's your aim.

Yes. Certainly, I think our strategic intent, we talked about is delivering 20%, 25% of our cash flows back to the shareholder, primarily through the dividend channel. And so as we grow our production, grow our earnings, grow our cash flows, that 20% to 25% is intended to grow as well.

Okay. I understand. It's actually also a very interesting target. I was going to move on to that, that the idea that you would give back around 25% of your cash flows. I guess what we're all struggling with is you mentioned that the consensus cash flows right now at $12 billion to $14 billion annually, which even arguably, I think, is on a relatively aggressive oil price forecast. So that's why it's helpful to see the uses of cash by priority. I guess what we're struggling with is the extent to which, over time, you're going to have to cut back that capital program. Could you just talk more, yet more about the sensitivity of the program and how much you could potentially cut that back to balance your cash flows over the longer term?

Yes. So a couple of comments there from Paul first. As I talked about, the company is going through some fairly significant production growth and growth that's occurring at fairly high margins. So if you think about it, it's going from production level 1.5 to 1.6 up to the 1.8 to 1.9 kind of level over several years, that adds significant cash flow and then, as we've talked before that regardless of the price environment we're in, by virtue of moving the portfolio more to liquids and as well moving it more to jurisdictions, which have lower taxes, we're going to see margin improvements. So as we look at out over the next several years, the difference between what we're generating in terms of cash and capital and dividends, of course, shrinks over time. What we're trying to lay out for you this morning is that in this interim time period where it may not be covered then, and then we have other sources of cash to balance that gap and then we think it makes sense to continue to invest in the capital that we have. Ryan, I don't know if you want comment on where we might cut capital if we end up, really, lower price environment?

Yes, certainly if -- so we've seen some drop off here from branded $120 down to arguably $100 reductions over the last -- through this last quarter. We still think Brent's in the $90-ish, $100 range is probably reasonable over the short-term. But if we saw some cycling down of prices and we felt like they were going to be here for 2 or 3 years, we would make adjustments to our capital program. We're doing some of that through our disposition process and -- but we've identified some high capital-requiring assets that we would like to dispose of. We've got capability to throttle back on some of our exploitations and in -- across all of North America, really across the whole global portfolio, and we would look at that as well. We want to continue some of our, what we think are the high-quality, high-margin, high return major projects. We're not going to whipsaw some of those right now, being some of our ones in the North Sea at, in Norway, the U.K., Malaysia, some of those we'd like to continue going. But we've got some optionality and in the portfolio, if we saw lower prices, we're going to persist for 1 year or 2.

Yes, I think we've experienced over time too, is that as prices come down, the activity levels come down across the industry. You'll get the same amount of scope done for a lesser amount of money as well.

Yes. The -- if I think about the relationship you have with between the SCCLs and the share repurchases, and the commitments you made essentially to buy back shares through the first half of the year, where are we sitting now on buybacks for the rest of 2012 and into the first half of 2013? And knowing what you're saying about asset sales and share repurchases because it feels like you might be in a position to actually pretty much stop the buyback now?

Well, we completed the $5 billion that we said we would fund through the first half the year. Our priorities have just kind of shifted with some of the reductions in the commodity prices that we've seen over the last quarter. So as we look out ahead, the asset sales and dispositions will be used to help fund our capital program. If we end up getting an increase in dispositions above kind of what we're forecasting, or if commodity prices ramp back up a little bit, then that would leave room for us to consider more share repurchase.

Is that saying that basically the share repurchase has stopped now?

Yes, they have stopped.

Our next question comes from Ed Westlake from Credit Suisse. Edward Westlake - Crédit Suisse AG, Research Division: Just that you've laid out how cash flow margins are going to rise and therefore, cash is going to expand over time. Just still running through these cash balance numbers, do you have a number, I mean, a rough range? Obviously we don't know what you're going to sell, but for the CapEx that is associated with the disposals?

If you looked at -- had we disposed of kind -- a rough range, yes, if we would dispose of everything that was on our -- that they were contemplating as asset dispositions as of the beginning of this year, probably would have taken $1 billion to $1.5 billion of capital out of our -- out of this year's capital program. Edward Westlake - Crédit Suisse AG, Research Division: Right. And so that will free up that CapEx, plus maybe once APLNG is got through to invest more aggressively in shale?

Yes. I think as we look forward over the next -- right now, we would think that our capital expenditures in 2013 are going to be in the range of $15 billion. And that includes, as you mentioned, a fairly -- a continuation of the aggressive investment levels we're doing in the Lower 48 and in the resource plays. Edward Westlake - Crédit Suisse AG, Research Division: And then, obviously, as you look to the divisional disclosure, Canada is suffering, maybe you could take back in the Permian is suffering from low realizations. Apart from others, building pipes to help you get to higher realizations on the production you're getting there. I mean, can you talk through your strategy to try and maximize realization for those onshore assets?

Yes, Ed, we're -- we talked a little bit about that in terms of the 2012 capital that we see clarity on for the rest of the year and part of that is spending a fair amount of infrastructure to help our realizations and make sure we can move the product where it's getting bottlenecked and make sure we can get it sold. So we're doing a fair amount of that where it makes sense, where there's competition and where we can get to third parties for a reasonable cost, we will do that. But we're also focused on spending our own capital if we need to build our own infrastructure to make sure that we're maximizing the realizations. Edward Westlake - Crédit Suisse AG, Research Division: Final one for me, you mentioned the Mancos. Any other, any results you can share from them? And I do see your permitting down and your acreage down in Southern Louisiana, I mean, any results or targets that you are probing there?

Well, none that we would -- that I think we can disclose today, it's all a pretty competitive position. We want talk a little bit about of the Mancos because, obviously, we've got a lot of that acreage held by production. So we're still studying that and hope to have results later this year.

Our next question comes from Arjun Murti from Goldman Sachs.

Just wanted to clarify the stock buyback commentary. I think we've always thought that future asset sales, those proceeds would be used to buy back shares. It sounds like it's not probably as direct going forward, it will be a function of what cash you have available, is that accurate?

Yes, I think that's fair, Arjun.

Yes, that's great. And then, in terms of the -- so you're going to spend $16 billion in capital this year, you have the kind of $15 billion-ish number for next year in long-term. Does that contemplate the $8 billion to $10 billion of asset sales? Or would that $15 billion-ish kind of number come down once you're finished with your asset sales?

No, we think that that's -- as we look at the portfolio, look at the opportunities that, look what we've added in the North American on conventionals, we look out over time and $15 billion feels like a pretty reasonable kind of capital figure, if that -- if commodity prices hang in at kind of today's level or even a bit softer.

That's great. That make sense. And then just last one for me, some of the peer companies in Australia LNG has had some budget increases, I'm -- my understanding is you all had more of a contingencies built into your budget. But just wondering if you could comment on what you're seeing down there and how good you do feel about the current budget?

Yes. I know we have seen some announcements. When we came out, we felt like all along, Arjun, that 1 Train project or a 2-train project in Curtis Island was about $20 billion. That was our estimate a couple of years ago, and we're -- we haven't seen anything to think that, that would be any different. I think the, we -- I think the other projects are just now realizing what it's going to cost if the -- on Curtis Island.

Our next question comes from Jason Gammel from Macquarie.

I had a few more on APLNG, if I could, please. First of all, on the Upstream program, I believe you guys are actually a fair bit ahead of the other projects that are going forward in Queensland. But can you talk about what type of a forward drilling program that you need to have to match the Upstream with the Downstream requirements, I guess, in terms of number of wells to be drilled and then also in terms of rigs that you would need to run?

Yes, might have to get back with you on the specifics with that, but I -- we would think we're running today a 3, 4 rig program, and feel like we've got, with the efficiencies that we're gaining and the number of wells we're drilling on a daily and a monthly basis, we're ramping up the well count in front of the start up of the first train. So when the first train's ready to come online in 2015, we'll have the supply ready to go. And then we're continuing to drill because 6 to 9 months later, the second train will come online so we continue to drill and have the Upstream capacity available for that.

Sure. And then, in fact this was the logistics are obviously fairly difficult, trying to match that number of wells with the requirement that you have, so do you feel that the arrangements that you have commercially with the domestic market and some of the other projects give you more flexibility in how you manage that Upstream process?

Yes, I think we're probably uniquely positioned there, because we're selling over 200 million a day to the domestic market today, and we've got the ability to dewater wells and throw wells into the domestic market in knots. We've got a lot more flexibility to be able to manage our available capacity on the front-end to make sure when the plant's ready to go, that we can deliver the gas to the plant.

And then one more on APLNG if I could, please. You mentioned that you have project financing in place. Can you talk about, just in rough numbers, what percentage of the overall capital requirements will come from the project financing facility?

Yes, the project financing that was completed was the agreements were signed back in the second quarter is an $8.5 billion project financing, so it's so roughly 40% of their requirements.

Great. And just, how much cumulative cash flow would you need to generate -- to repay whatever principle amount you have to do first and fund any contingency accounts before APLNG could start dividending cash back to you?

Well, the repayment of the financing happens over a long period of time, so as soon as APLNG starts stuff, it will start paying out a dividend.

Okay. So you wouldn't have contingency account funding that would have to come in front of dividend payments to the partner group?

No. I mean, it's going to be part of what gets funded overall with the project, so when we start up we will begin to make distributions.

Our next question comes from Blake Fernandez from Howard Weil.

If I could just tack on to the APLNG question. So I'm just curious, you've sanctioned the second Train, obviously, that helps with scalability and efficiency, and should improve overall return. So just curious, given the second quarter return on capital employed for the entire company at around 11%, do you think this project will be accretive to overall returns?

I think APLNG will be accretive to overall returns in the long-term, but it will be a challenge to our overall returns in the near-term. And that's pretty consistent with all long-life projects where you end up putting a lot of capital on the books upfront and then you get that back over a long a period of time. So it's probably not accretive in the short-term. It will be accretive in the long-term.

But it is -- then the issue there is the reason you've seen us dilute from our -- are willing to sell equity to a marketing entity to purchase a portion of the project and our willingness to be able to do that and that's caused us to go from the 50% down the 37.5%, and we're looking for -- probably some opportunities for some further dilution at APLNG.

Okay, great. The second question was on the exploration front. Ryan, I know you gave us a few impact wells going down on the Gulf of Mexico. I was just curious, is there anything else globally that we should be aware of that could be high-impact? And then I know you mentioned Angola, seismic, could you give us an idea of when we may spud the first well there?

I think we're looking in Angola the end of 2013, early 2014 for a well. We're in the middle of capturing 3D seismic. I think we pretty much completed our initial program in Bangladesh and we'll get that data in, so that well is probably pushed out. The other one I would probably point out in terms of impact is we're kind of at front end of our Poseidon appraisal program in the Browse Basin of Australia, but that will be a, probably a year-long, 5 or 6 well program.

Our next question comes from Doug Leggate from Bank of America Merrill Lynch.

A couple of things for me. When you did the separation, Ryan, you projected or you laid out all these projections, there was one point that we're assuming $120 Brent at that time. The margin improvement assumption of 3% to 5%, I guess, had that as a backdrop. If you have to reset, I'm guessing why haven't you reset your assumptions to what the futures curve looks like right now, and would that change the margin improvement? That's my first question.

Well the, yes, I know we continue to get some of those questions, Doug. I just remind everybody, we, when we came out in April and we described that a little bit, were trying to describe what current prices were and how the margin of an improvement. The important part is this, we look at the portfolio, and we look at where we're investing the money, whether you pick $120 or $100 or $90 oil or $80 oil, our margin is going to improve on a flat price basis, and we believe the 3% to 5% is coming at a flat price. So it's not reliant on $120. So as we look at our plans today, and we look at the investments that we're making relative to the existing portfolio, our margins are going to be improving over the next 3 to 5 years, and we -- the absolute production growth and the margin growth is coming. And we're investing in things that are changing the mix in the portfolio, and are changing the tax burden on the company as well.

I just have a couple of other quick ones, if I may add. As usual it's -- I guess this is where my confusion comes in. It's related to that issue of mix. So when we look at Australia LNG, and that's a very large part of your incremental organic growth. I certainly had discussions with your team about this, but the implied, the IRR presented on Australia LNG which shows 8% to 10% at your internal assumptions, can you share with us what -- how those assumptions differ your cash flow assumptions, in other words $120 oil, because what I'm trying to figure out is, in the world oil price assumption was so much of your growth coming from APLNG, how does that then jive with the incremental improvement in cash margin, that 8% to 10% IRR?

So if I may, a couple of clarifications there, Doug. So the 8% to 10% IRR is not what you would have at $120 oil price. And we seem to be doing much better than that, $120 oil price. So when we talk about margins, we're talking about cash margins. So when the APLNG starts up, you're getting a significant return of, you're getting a return on your capital, you’re getting your capital back as well. So the cash margins is going to be pretty robust on that project, kind of regardless of what price environment that we're in. So that those -- that will be a significant source of cash for us upon start up.

What I'm trying to figure out, Jeff, is well, can you share with us what commodity assumption does equate to 8% to 10?%.

That was more on a $90 tough type price environment.

Okay. So $90 per barrel, would that still be accretive to cash margins?

Yes.

Okay. Final one then for me is on the disposals, the $8 billion to $10 billion, can you give us some scale of production and cash flow associated with those? And I'll leave it at that.

From a production standpoint, like we said before, it would depend upon the mix, because there is a, in that $8 billion to $10 billion is a mix of assets that are currently producing and currently not producing. So impacts on current production are probably in the 50,000-barrel a day type range, and depending upon the mix, it could vary from plus or minus 25,000 barrels a day on either side of that. Then cash flows, I don't think I have a number that we can throw out to you on that.

Our next question comes from Iain Reid from Jefferies. Iain Reid - Jefferies & Company, Inc., Research Division: Jeff, could I just go back to your comments on the U.K. part of the business. And you were talking about the impact of the tax change on abandonment. And you mentioned a number, which is going to affect, I think you said third quarter earnings. Can you just confirm what that is, and whether it's a onetime charge? And with the kind of ongoing effect on DD&A could be?

It's a one -- that is a one-time charge of around $175 million, and that just really reflects the fact that when the U.K. increased tax rates earlier, or it was last year, up to around the 62% range, they said they might be coming out later with some restrictions on how much you could deduct on abandonment obligations. What they've done that now, and said that only 50 -- you only get 50% tax relief on abandonment obligations. That mark of our deferred tax liability down to reflect that change is what the $175 million should be. So it's to be a onetime special item type event in the third quarter. Iain Reid - Jefferies & Company, Inc., Research Division: And there won't any kind of ongoing effect on your DD&A per barrel rate?

There could be some, no, no, no, there isn't, because it's just -- that's just a -- that's a before tax item. Iain Reid - Jefferies & Company, Inc., Research Division: Okay. And secondly, on NGL pricing, there's going to be a fair amount of investments in infrastructure, et cetera. I just wanted to -- when you look at these very depressed prices you're getting in the Lower 48, how long you expect those to have such a big margin to oil prices going forward? And whether you've thought about any sort of hedging program, for that? Obviously, it's not great to under hedge now, but whether that's something we should might want to look to protect in the future?

So NGLs, as we've pointed out, are around, globally, about 9% of our production and the Lower 48 and Canadian portion of that is like 6% or 7% of our production. As we look across over time, if you roll the clock forward several years, our NGL production, we would anticipate to be relatively flat and with our growth is going to be coming from crude oil production. So we don't have increasing exposure to NGLs going forward. I think we see that the market is going to be fairly soft, particularly for ethane in the near term, which is what's really driving down the overall price of NGLs. And -- but that will get solved with all the capacity expansions that you're hearing, talked about in the chemicals side of the business right now. So we don't think it's a long-term phenomenon, but that kind of low NGL price is going to attract additional investments. Iain Reid - Jefferies & Company, Inc., Research Division: Okay. And my last one, I'm going to go back to APLNG, I'm afraid, the other guys have announced big increases, also talked about the translation effects of the Aussie dollar, and I presume, that when you launch this project, you were looking at a much lower level of the Aussie dollar versus U.S. dollar. So is that -- does that $20 billion budget you have, do you cover this kind of big increase in Aussie dollar exchange rates? Because I believe that's a very substantial portion of the overall CapEx is denominated in local currency?

It is. I mean, that number reflects our current estimates with the way the market looks now on the Australian dollar, but -- and that continues to be, like with the other projects, that continues to be one of the larger exposures we have on the project is, is if there is a further weakening of the U.S. seller relative to the Aussie dollar. Iain Reid - Jefferies & Company, Inc., Research Division: So is it fair to say you've probably used up all contingency you had initially on that project?

No, I wouldn't say that. I'd say that we feel like the numbers that we had out there now still has contingency in them.

Our next question comes from Paul Cheng from Barclays.

First, I want to echo to early comment that wanted to thank you for the expand disclosure, very helpful and I appreciate it. But just one possible request, that since that you're going to break out the earnings by different regions, can you also break out your exploration expense in the future by the corresponding region? That would be helpful in the modeling. And that, Ryan, in your presentation that you give the production and the margin improvement target, do you have a proven reserve growth target?

Yes, certainly, Paul, we expect, over time to be more than replacing the production. So we haven't come out and said exactly what it is, but it's -- clearly targets over 100%. It'll be lumpy and there'll be years when it probably dramatically exceeds it, and years when it will be right at it.

Should we assume that you were trying to hold your RDP rates flat, or were -- that's not really a target?

I don't think about, Paul, trying to hold RDP flat. In fact, as we shift our investments in some of these higher-margin, the profile of the some of these investments, I actually expect our RDP will go down a little bit over time, not a lot or not, but will trend down versus trying to trend flat.

Okay. And Jeff, on the asset sale, I just want to clarify that. $8 billion to $10 billion -- does it, for 2012 and '13, does it already include the $1.6 billion year-to-date and also the expected farm down of the -- on the APLNG?

So we do include -- we think about that number as a 2012 and 2013 number. The farm down on APLNG ends up being a contribution into the joint venture, so it's not an asset sale, so.

Okay, so APLNG is not included, but the $1.6 billion year-to-date is included?

That's correct.

And since I've got you, Jeff, that I think you guys have an open leak [ph] in the second quarter around 29,000-barrel per day. What region that if it's -- come from? And also as of the end of June 30, you guys balance or still net overweight? Open leaks [ph]?

Paul, we'll have to get back to you on that. I don't have that right in front of me.

We'll get back to you, Paul.

Our final question comes from Jeff Dietert from Simmons & Company. Guy A. Baber - Simmons & Company International, Research Division: This is Guy Baber here in for Jeff. I was hoping you guys could talk a little bit more about current and planned activity levels and what you're seeing in the Permian basin? And specifically wondering if you had any update with respect to pilot programs in the Avalon and the Wolfcamp? Any comments there will be appreciated.

Well, we, yes, we've got quite a bit of activity going on as Jeff described earlier, we have 6 or 7 rigs running in the Permian basin and those are all targeting some of the existing conventional opportunities that we have. But largely focused on the unconventionals. It's mostly liquids investments in all of the Permians, so we're active in piloting and drilling both the Wolfcamp and some of the other plays in the Permian basin. So yes, we're pretty active there right now. Guy A. Baber - Simmons & Company International, Research Division: Okay. And then also, I had a strategic portfolio management type of question, but Ryan, as you look at the existing portfolio, are there any gaps or areas where you're lacking exposure now that you would like to enhance your position? And then relatedly, internationally, the focus has largely been on OECD geographically for one at risk, and that's worked well for you all. And should we assume that that remains the case going forward? And that would -- would that preclude you from potentially entering some of these international plays that may offer significant long-term resource potential, but do carry a higher risk profile? And I'm thinking of some plays like East Africa for one, or even Kurdistan region of Iraq, any comments there will be appreciated.

Well, I mean, as I look at the portfolio, I'd say we're more after low-cost to supply opportunities, whether that's gas or oil, where we can make a competitive rate of return within our portfolio. As I look at that today, you see are heavily focused on unconventionals in North America because we see a lot of opportunity that are working well. We've got a great position, and so, large part of our investments are going there. But internationally, I'd say as we've -- as you see from our exploration, we're growing our deepwater position, and that's not only in the Gulf of Mexico, but also Angola and the subsalt opportunity there, Bangladesh, we're offshore Sabah island in Malaysia, so you'll see some things that we're doing in the deepwater. We think the liquids-focused deepwater investments make a lot of sense. So I think as we think about it, going around, it's really opportunity by opportunity but looking for a good low-cost to supply and looking for areas. So even playing the Barents Sea in Norway makes sense to us right now, and you've seen us capture some acreage positions up there. So I, we -- in terms of holes, don't think we have a hole that we're really trying to plug. We're just really focused on value and focused the returns and making sure that what we do go after and capture competes well within our existing portfolio. As you said, we're largely OECD today, so we can take on a little bit more risk in terms of political risk and something like that if we think the returns are going to be competitive.

Okay, thank you, everybody. Go ahead, Kim.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.