Welcome to the Murphy Oil Corporation's second quarter Earnings Call. (Operator Instructions). At this time, I would like to turn the presentation over to the President and Chief Executive Officer, Claiborne Deming. Please go ahead, sir.

Thank you. Good afternoon. I am joined today by Kevin Fitzgerald, Senior VP and Chief Financial Officer; John Eckart, VP and Controller; Mindy West, VP and Treasurer and Dory Stiles, Manager of Investor Relations. I'll turn it over to Dory at this time.

Thanks Claiborne. Welcome everyone, and thank you for joining us. Today's call will follow our usual format. Kevin will begin by providing a review of second quarter 2008 results. Claiborne will then follow with an operational update, after which questions will be taken. Please keep in mind, that some of the comments made during this call will be considered forward-looking statements. As such, no assurances can be given that these events will occur or that the projections will be obtained. A variety of factors exist that may cause actual results to differ. Many of these have been identified in Murphy's January 1997 Form 8-K filed with the SEC. I'll now turn the call over to Kevin for his remarks.

Thanks Dory. Net income for the second quarter of '08 was $627 million, or $3.27 per diluted share, as compared to the net income in the second quarter of '07 of $250.3 million or $1.32 per share. For the six months of '08, net income was $1.36 billion, $5.40 per diluted share compared to the net income for the six months of '07 of $360.9 million or $1.90 per diluted share. Net income in the second quarter of '08, included the $67.9 million after-tax gain of $0.35 a share on the sale of our Lloydminster heavy oil properties in Western Canada. Net income in the second quarter, and for the six months of 2007 included after-tax cost of $24 million, or $0.13 a share related to the closure of 55 retail gasoline stations in the US and Canada. The 2008, six-month period included after-tax gains from the sales of Canadian assets, including the just mentioned Lloydminster sale of a 108.3 million or $0.57 per diluted share. Looking at the income by statement, first we'll look at E&P. Income in the second quarter of '08 was $585 million compared to a $149.3 million in the second quarter of last year. The 2008 quarter included the previously mentioned gain from the sale of the Lloydminster properties. Higher E&P earnings for the 2008 quarter were otherwise attributable to both higher crude oil and natural gas price realizations and higher oil sales volumes. Natural gas production volumes fell slightly. Crude oil and gas liquids production for the current quarter was over 111,000 barrels per day, as compared to approximately 80,000 barrels per day last year. The increase was primarily attributable to production from Kikeh Offshore, Malaysia; we started up in the third quarter of '07 that was partially offset by lower volumes of the…

I will start by updating you on the current activities within our E&P business, and then move to downstream. An active exploration program kicked off last month, and today we have finished three Gulf of Mexico wells and drilling continues at Buntal, in Malaysia. In the Gulf, the first prospect drills are carried well at Sapphire and Lloyd Ridge 268, where non-commercial quantities of natural gas were encountered and the well was plugged and abandoned. Secondly, at Diamond, in Lloyd Ridge 370, natural gas play was found sufficient for subsea tieback. The rig will move to the Manhattan prospect, Lloyd Ridge 511, where we have a 100% interest. There is both the shallow and deep component to this prospect, and at this time we will only be testing the shallow section. Depending upon results at Manhattan, we'll either drill an appraisal well of one of several other exploratory prospects in the Eastern Gulf. Offshore Malaysia in Block K, drilling continues at Buntal, and we anticipate reaching target depth soon. For the second half of 2008, the exploration calendar will be active outside of the Gulf with multiple wells coming up. Offshore Sabah Malaysia, additional well is planed either in Block H area around our Rotan discovery or [Shingal] of Block P prospect. Also in Malaysia, two or three exploration wells are scheduled for offshore Sarawak in the fourth quarter, as we pick up another jack up to complement the rig drilling development wells in the Sarawak gas project. Offshore Australia in the Browse Basin, a well will be drilled in the fourth quarter on acreage we operate with a 40% working interest targeting a multi-TCF size prospect. Offshore, the Republic of Congo, the two wells previously planned for 2008 will slip to mid-2009 due to a different rig being contracted.…

Great. Good afternoon, gentlemen. A quick question on production volumes, again, in terms of the moving pieces for 3Q of '07 a little bit of hard time getting close to the 128, is it just a delay in getting the wells on line in Kikeh or are there any other pieces that we should be aware?

Ryan let me, this is Dory. Let me walk you through, what we have built in there and that might answer your question for you. Specifically in the – some of the oil field in the US, we have 11,000 barrels per day, the United Kingdom 3000 barrels per day, Canadian heavy 8,000 barrels per day, offshore Eastern Canada 16,000, Syncrude 12,000, Ecuador 7,000 and Malaysia 63,000, natural gas in the US 41 million cubic feet per day, in the UK 4 million, and Canada 1 million.

Okay. That’s very helpful, thanks. If I could just ask one more then on refining, or actually on Diamond and Sapphire, can you give any sort of estimates in terms of gross resource or is it too early to say on that?

Well, sapphire is dry hole.

Sapphire was dry, right, but on Diamond?

No, no, it's a tieback size, somewhere 45, 50 Bcf in that range.

35 Bcf to 50 Bcf?

Yeah, I would reckon that.

Okay, great gentleman, Thank you, I appreciate it.

Thank you. Our next question comes from the line of Kate Lucas with JPMorgan. Please go ahead.

Hi, good afternoon.

Kate, how are doing?

Hi, just fine, thanks. Just a quick question on Kikeh, and just the rate at which you've been able to recover your cost there? How far long are you in recovering cost out of the cost recovery pool, and then how big is the overall pool or how much further do you have to go?

Hey, this is Mindy. I'll take that question. Currently the cost recovery pool on gross basis is just a little over $900 million, but it's important to understand that that number is fluid. It decreases as we make listings from Kikeh, but it is also increases as we continue to spend money not just in the Kikeh field, but in the Kakah field as well. So as we've mentioned before, as far our production numbers, for next year we modeled more of a mid-year type payback. That’s probably going to occur as oil prices continue to hold towards the first part of '09, which would decrease our production forecast by roughly 6,000 barrels a day.

Starting in mid-year, next year?

We originally modeled mid-year, but if you look that up to beginning of '09, we would need to take an additional 6,000 barrels a day out of our forecast.

Okay. And then, when do you expect to start paying, if you have 900 million left to recover, including or not including any additional cost you might bring, and then when do you expect to start incurring or accounting for the supplemental payment?

The supplemental payment begins to occur on day one. It's just that you don’t realize, you don’t really notice that now because only roughly 15% of our net barrels are subjected to that right now, as we are fully utilizing our cost recovery allocations. Once you have payback and all the barrels are drawn into the profit back that number is going to approach a 100% of our net instead of the 15%. It won't ever get close too 100%, because you can always recovery your operating costs.

Right

So, the supplemental payment is there, it's just not noticeable right now.

Okay. Do you think that by the end of the 4Q, you would have recovered the remaining more or less remaining 900 million to have basically close to 100% of the barrels starting to reflect the payment or would that be more?

Based on our projections right now, that should occur early '09, so that will start to become much more noticeable on material at the beginning of next year. But also keep in mind that numbers is fluid so as we spend capital going forward in the block that percentage from quarter-to-quarter will change.

Okay, all right. Thanks very much.

Welcome

Thank you. We'll move to the next question from the line of Erik Mielke with Merrill Lynch. Please go ahead.

Yeah, hi. My question relates to the exploration that you have in the Eastern Gulf of Mexico and trying to understand what your pre-drilling estimates are now for Diamond, I beg your pardon, for Emerald in Manhattan following the slightly disappointing results from Sapphire and Diamond?

Well, I don’t think, we're going to change what we think might be there. What happened at Sapphire and Diamond is good reflector, in fact fabulous reflector of, but it was a low gas saturated reservoir and so you had hydrocarbons gas that reflect, but just not sufficient quantities in most cases to be economic. And so, query is that same phenomenon, which is kind of (inaudible) of the seismic events in the Gulf of Mexico does that recur again in Manhattan and again in Emerald? Manhattan which we're going to next is a, it's either upper Miocene or it's a supply of Pleistocene age, different age, a little bit shallower than either of the other two. It's a little bit different age, rock, and traps roughly the same however. And so we'll go from diamond there and, I mean yes, and then depending upon results in Manhattan, we either go to Emerald or we have a coupe of other options that are coming up now. Manhattan has got a shallow component, which we are going to reach and there is a deep component, which we like to, it's probably lower Miocene on lapping against salt, and between the two it’s a really large prospect. Between the two shallow and deep sections, somewhere between 500 Bcf and Tcf. It's really unusually large for the Gulf, at this stage of Gulf, and, I wouldn’t change those on that prospect at this point.

That’s very clear. Can I ask one, I know, it's a difficult one to estimate going into the next quarter, but what should we expect in terms of exploration expense that you know would already becoming during the quarter? We had slightly low exploration in Q2; I guess it has something to do with you had found on Sapphire.

Right, Dory you want to handle that?

Erik our range for the quarter, we have 55 million built in there for G&G with amortization, and you add in the dry hole potential of 55 million, and that get you up to the 110 million top end of the exploration expense range, low end being 55 million.

That’s great, thanks.

Thank you. Our next question will come from the line of Gene Gillespie with Gillespie Consulting Group. Please go ahead.

Good quarter, Claiborne.

Oh, thank you, Gene. Hey I Like that new confident.

You like that? That’s a pretty creative isn't it? Listen, I don’t want to ask you a question that’s unrelated to quarters. Under the new SEC rules, I'd like for your interpretation, it would appear to me that you're going to have an opportunity to book the approximately 130 million barrels of Syncrude reserve that you have in Canada? And secondly, correct me if I am wrong. Secondly, is this going to make it a little easier to book reserves in some of these frontiers areas, like Malaysia where you've had a very, it's been a very slow process in terms of adding reserve to the book?

The answer is, certainly we'll be able to book Syncrude if they continue to, if it holds up what is proposed from the SEC, and I presume it will. I think on the margin Gene, it's going to be easier in Malaysia to book. I mean, they are allowing you to use more technical parameters, and use, it's the latest techniques that people use. However they're still cautious on basins where there is not analogs and where there is not a lot of production history. And so I think we'll wrestle that a bit, but I think the good in Malaysia is that we're going have production. And so really under any of the scenarios, I think you will see increased bookings for us and it will always be a bit measured, but we're producing now from most of the main reservoirs, and we're injecting water and getting good pressure responses. So we pretty have a good sense of where we are, and so I think you will see continued bookings, at least in that particular basin based on that fact if not from the new SEC parameters.

At Kikeh you've got a pretty large number left to go, 250 barrels something like that?

Yeah, its 240 oil it was, is our number for gross recoverable, and we've booked about 65, so the Deltas there 180, something like that. So we'll obviously book fair amount of share.

And then the gas component, if you start production in the fourth quarter, you'll book the gas, or is that….?

Yeah. We book some gas last year from Kikeh

One third.

About one-third of what are recoverable is. Yeah. So, I am sure we'll book some more gas there as well as we get some production history.

So, the metrics could look pretty tall and good this year?

I hope so, we're spending more money, but we've got a fair amount to book.

Is the CapEx number that you had provided before, is that still a solid number?

We're about 3 billion now in total, I mean that includes…

That’s up a couple of hundred from a…

Yeah, downstream as well, and we're 2.8 before. And it represents mainly buying some leases in the Gulf and then buying some leases in Tupper in the Montney.

Well, thank you

Welcome.

Thank you. Our next question will come from the line of Paul Cheng with Lehman Brothers. Please go ahead.

Hi, guys.

Hello.

Hi, Claiborne you talked about say 3 billion for 2008, any update on 2009?

No, we really don’t Paul. We'll go through our budgeting process here, well October when we will take our first real serious pass at it. So I really can't update you.

Okay. I think that you talk about say 2008 130, previously that you have a number that for 2009 on production, can you remind me what's that number or is there any change to that number?

Paul, we had last year, I mean for 2009, we have 204,000 as our production number. Now that is assuming as Mindy discussed earlier that that was assuming that Kikeh would payout at mid-year '09, so you're going – if that occurs earlier, you will drop some barrels from there.

, :

We're looking at Tupper Paul, averaging around 30 million a day for the quarter. It maybe a bit more that, exiting somewhere around 40, 44 million a day, so we'll ramp up as we bring wells on. And Kikeh, I don’t have a demand, our plateau is 120 and we ramp up, we start in late September, I think is our latest

65 for the quarter.

We'll average 65 for the quarter.

So you will ramp up pretty quick in both cases?

Yeah, yeah pretty quickly, and then I think you will see Tupper doing quite nicely in the first quarter of '09 too and also Kikeh.

e:

No Paul, we got into Tupper last year, at mid-year, and then increased our position pretty much steadily all through the back-end of last year. So we got in a real attractive pricing, so now, obviously it's probably double since then. And we think we've got 2 Tcf after royalty there on that 125 sections. And the recent results that we're getting were extremely pleased with what we're seeing from both the upper and lower Montney, in fact in Tupper 1. So, I think it’s a whole month, and I think it's going to be significant volume. It's going to be over 300 million a day net to the company from Tupper. So I wouldn’t back down a bit. Now, a lot of fancy numbers have been thrown about. People get leasehold positions, Tupper now, but also in (inaudible). I think, when the industry gets really frothy and so it's been so fanatic in the last six months with these very extraordinary prices paid for assets. I think you got to put your floor on the brake a bit, and let these things cycle down and we're seeing it. And if all the gas is going to get to market, and the people say it's going to the market from this resource place, then I think there is a risk that natural gas prices come under a bit of pressure here as we go forward, because it's gas not always going to stay in the US especially if the economy is worse. And so, you got folks quite aggressively getting the admittedly very good assets, but even great assets can be over capitalized, and I know that personally quite well from related environment. So, I think you just have to be a bit cautious here. But, if you see a good one, and it fits within your economic parameters like Tupper did for us, I think you have to act and react fast.

So, you said actually that you don’t have a problem in terms of the pay funds that you just think right now the industry maybe is a little bit fanatic thinking about the pricing?

Well, I mean, every one, every company is different, certainly, and I tend try not to put all the eggs in one basket, whether it be resource plays or any particular type of play or type of asset class. And so, having more of these resource plays at the right price, I think would be a very important part of Murphy's future, and I wouldn’t have all from there. I just wouldn’t and so I think over time, if you have a company which is a bit timeless and you think gee what're you going like in 20 years, I think it's good to have, oil, it's good to have natural gas, it good to be in the U.S. its also very important to be in international exposed company. And I think, you will see that from Murphy and certainly resource plays in the U.S. will be a part of that and likely a growing part of that. But over the last six month, buying assets, I think you got to be careful.

I know you must be tired of people asking this question. One of your competitor just indicate that they are evaluating whether they want to split the company into two and wondering that have you guys revisited or whether look at that also and then what is your current view, any change from last time you talked?

No, I've been real open with people that we have thought about our downstream business a lot of different ways, and certainly that was an option that we've looked at. Only note of caution, I would say is one, their assets, the company you're referring to are certainly different than ours and secondly that particular market has changed pretty fast over last six months. And, if you look at the equities of the independent R&N stocks, they are down anywhere from 60% to 80%, and then on top of that credit markets are awfully choppy out there to use a euphemism. And as you probably know, working capital requirements if nothing else for downstream in today's environment are extraordinary high, and then our weakened credit environment, I think you just need to mindful of all those facts just from the way we look at it. I don’t know if you have seen some of the terms that have been paid for some of these credit facilities but while they are awfully high, so I think you got to be bit cautious here in that particular regards. Even though I have to tell you, our downstream company is substantially better than it was. Second quarter certainly benefited from the new asset in UK and the third quarter is going to benefit substantially from our retail assets here in the US.

Very good, thank you. Keep on, have a good quarter.

Thanks very much.

Thank you (Operator Instructions). Our next question comes from the line of Mark Gilman with The Benchmark Company. Please go ahead.

Claiborne, good afternoon, how are you?

Fine, Mark.

Hey, I saw that --

I am sorry. Go ahead.

That Noble drilled the dry hole offshore recently, and I was wondering have you looked at that at all and how it might relate to prospects you would define in the Block you acquired there?

No, best that we know Mark, they didn’t test the same age rock that we have, but we don’t know everything about it yet, but that’s the first pass that we at it. So that’s all I know, and I don’t know much, except I don’t think it's condemned or tainted what we've gotten, because they had a different target there but we still have to shoot some 3D from what we've got.

Okay. In the quarter, if I can read numbers correctly Milford Haven runs over 119,000 a day, which I thought is above name plate, are you writing a name plate on that unit?

Mark that includes some intermediates, we've got an oversize cracker there, and so we can import feed stocks, intermediate feed stocks, and I am not looking at the numbers you are, but I would suspect that’s what it is.

Oh, I see, okay. Back to the Eastern Gulf for just a sec. Claiborne, it sounds to me if I interpreted your remarks correctly, that you are primarily using good old fashioned bright spot technologies to find prospects, is that pretty much true?

Mark, in a particular case of the Eastern Gulf, these were really nice prospects in the sense that they had a deep seated structure, and then there was a structure obviously on top of the deep seated structure. There was a bright spot conformable to structure and there were flat spots, and it almost doesn’t get any better than that. If you do all the statistics typically those things pay our discoveries certainly more than 50% of the time. And so those are just the odds, those are just the statistics as you go through the Gulf of Mexico and you look at those types of structures.

Yeah, but how does it integrate with what might have been the deposition pattern?

Well, everyone has got a depositional model that they use, and certainly we have one as well and we have a way that we can sediments there and sediments certainly were there. It was a breach trap in both cases, and so you had low gas saturated water basically that reflects extraordinary well. And as you all know, this gas, in other way to say to it, has been reason for a number of dry holes and has struck again. I wish I could discount that away with more technology, but so far we haven’t been able to do that. And its early days, I mean, if I don’t they work they don’t work. I mean, that’s why obviously we, recognizing risks we found out Sapphire, and had no financial exposure and with Diamond, we don’t have hardly any money in the leases themselves because we brought in partners we promoted. So, we certainly catered to the risk, we are aware of the risk and financially addressed the risk. Now, I would have much preferred to have made a big booming discovery especially, Diamond which had a lot of potential. But in fact, we managed it which is what we're paid to do.

Okay. Just one other one for Kevin, just so he doesn’t feel unloved.

You know, I was feeling unloved until you got on the line.

How is that you were feeling unloved.

Yeah, because they were saying anymore calls and suddenly there wasn’t a Mark Gilman, I'm thinking my heavens.

No, I was, Kevin I was taking a nap because I'm getting kind of old.

Oh that hurts. Feeling my remarks.

Hey, Kevin the deferred tax number, very large in the second quarter. Is that in any way related to the Kikeh ramp up, I know this a hard thing to predict going forward, but is there any thing unusual that was responsible for that.

No, that’s related to Kikeh ramp up. You will some more there as we continue to ramp up the plateau.

All right, thanks guys.

Thank you

Thank you.

Thank you.

Thank you, sir. (Operator Instructions). And management, at this time we have no additional questions in the queue, and I'll go ahead and turn the conference back to you for any closing remarks.

Well, thank you very much, and we appreciate you being part of the conference call. Good day.

Thank you, management. Ladies and gentlemen at this time, we will conclude today's teleconference presentation. We do thank you for your participation on the conference call. If you would like to listen to a replay of today's conference, you can do so by dialing 1-800-405-2236, and using the access code of 11116776 followed by the pound sign. Once again if you would like to listen to a replay of today's teleconference, you can do by dialing 1-800-405-2236 and using the access code of 11116776 followed by the pound sign. Ladies and gentlemen we will conclude today's teleconference presentation for the Murphy Oil Corporation's second quarter earnings conference call. You may now disconnect and please have a pleasant day and thank you for using AT&T teleconferencing.