Murphy Oil Corporation (MUR) Q2 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation Second Quarter 2019 Earnings Conference Call and Webcast [Operator Instructions] This call is being recorded on Thursday, August 08, 2019. And I would now like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.

Good morning, everyone, and thank you for joining us on our second quarter earnings call today. With me are Roger Jenkins, President and Chief Executive Officer; David Looney, Executive Vice President and Chief Financial Officer; Mike McFadyen, Executive Vice President Offshore; and Eric Hambly, Executive Vice President, Onshore. Please refer to the information of slides we have placed on the Investor Relations section of our website as you follow on with our webcast today. Throughout today's call, production numbers, reserves and financial amounts are adjusted to exclude the non-controlling interest in the Gulf of Mexico. Since divesting our Malaysia portfolio, please note these assets are characterized as discontinued operations. Slide one. Additionally, please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors see Murphy’s 2018 Annual Report on Form 10-K on file with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements. I will now turn the call over to Roger Jenkins. Roger?

Thank you, Kelly. Good morning everyone and thank you for listening to call today. First half of the year was extremely busy at Murphy as we continue to simplify and transform our company following the close of the LLOG and Malaysia transactions. Our second quarter results illustrate our commitment to being an oil-weighted company with production from our U.S. onshore and North American offshore assets generating robust realized prices leading to continued free cash flow. Production from continuing operations averaged 159,000 equivalent per day in the second quarter, 67% liquids and more importantly 61% oil or more than 94,000 barrels of oil per day with only one month of LLOG assets contributing to our business. We also exceeded our production guidance by 5500 barrel oil equivalent per day. Our U.S. onshore production was 44000 equivalents per day with 74% oil. This represents more than a 23% increase in production over the first quarter as we -- as our well execution is on track. Our North American offshore production averaged 65,000 equivalents per day with 87% oil. This includes 8800 barrels of oil equivalent per day from our newly acquired Gulf of Mexico assets, above our guidance of 7600 barrels equivalent per day as our new Gulf Mexico asset base continues to perform. We returned 342 million to shareholders in the second quarter, including 300 million share repurchase. Subsequent to quarter end, we received over 2 billion in proceeds from the Malaysia sale and use the funds to repay 1.9 o billion debt incurred from our two Gulf of Mexico acquisitions along with further increasing cash on our balance sheet. Over the past several months have been made tremendous strides in transforming our company. We've quickly moved to sanction new projects within our expanded Gulf Mexico portfolio, as well as drilling a successful development well at Dalmatian that we expect to bring online in the fourth quarter. I will now turn the call over to our Chief Financial Officer Mr. David Looney to give a financial update.

Thank you, Roger and good morning everyone. Starting with slide 3, for the second quarter, Murphy generated net income of $92.3 million or $0.54 per diluted share with adjusted income of $35.7 million or $0.21 per diluted share. These results exclude the non-controlling interest or NCI related to our MP Gom business and reflect our Malaysia business as discontinued operations. Similarly, all of the balance sheet accounts related to the Malaysian business were rolled up into one of two accounts either assets, or liabilities held-for-sale. Lastly, the cash flow statement excludes the Malaysian operations until you get to the very bottom of the statement where all such cash flows are covered and the section titled, “Cash flows from discontinued operations”. In addition to the NCI and discontinued operations treatment, we had several one-off items in the quarter totaling over $57 million pre-tax. These included $15 million in non-cash mark-to-market adjustments of our potential contingent payment liabilities, $8 million in transaction costs related to our recent acquisitions and divestitures, a $51 million non-cash mark-to-market gain on crude oil derivative contracts and a $13 million credit associated with tax reform in the province of Alberta. Slide 4. We once again generated free cash flow of approximately $63 million more than our CapEx in the quarter, which benefited from a $93 million working capital benefit. This working capital shift essentially represented the unwinding of a working capital drain we experienced in the first quarter, immediately after taking over the MP Gom operations. It is worth noting that for the six month year-to-date, our cash flow from operations after adjusting for working capital changes exceeded CapEx by $15 million. Given the size of the two transactions we recently closed, and the ultimate classification of all of our Malaysian cash generation as discontinued operations, the fact that we were able to once again generate positive free cash flow during this period, is a strong testament to the fact that Murphy takes free cash flow generation very seriously. Other cash flow adjustments for the quarter include approximately $22 million of non-cash long-term compensation as well as an additional cash inflow of approximately $20 million in cash proceeds from the sale of non-core Midland Basin acreage in Dawson County. Most importantly, subsequent to quarter end, we repaid $1.9 billion of debt on the balance sheet, bringing our credit facility borrowings to zero. Combined with our cash, this results in available liquidity of more than $2 billion. Lastly, in order to partia lly protect our increasing exposure to oil prices resulting from our greatly expanded Gulf of Mexico portfolio, subsequent to quarter end, we entered into a series of hedges at the WTI level for the remainder of 2019 and all of 2020. In total, we now have hedged via swaps 23,000 barrels per day for August 1st to December 31, this year and 24,000 barrels per day for calendar 2020 at prices exceeding $63 for the rest of this year and approaching $60 for 2020. On slide 5, this is how we'd like investors to think about our new assets and the high margins they're able to generate. Murphy is really a premium-to-WTI company now with the majority of our operations in the Eagle Ford Shale and Gulf of Mexico, near Gulf Coast markets with existing infrastructure. This slide illustrates the second quarter oil sales 5% and what types of markets they're selling into such as Mars, Brent and new Magellan East Houston, or MEH, that has largely replaced LLS in many contracts, all have premium differentials over WTI. And while there might be some softening over the next few quarters, we still expect each of these barrels to trade at a premium to WTI, especially when you take our newest offshore assets which are very valuable from an API oil quality perspective, we expect to once again realize premium prices going forward. On a combined basis, our portfolio of oil assets realized over $63 per barrel and post all transportation adjustments, as compared to WTI at almost $60. At an asset level, our Eagle Ford Shale is able to generate an EBITDA per BOE over $35 and our North American offshore assets generate an impressive $38 EBITDA per BOE. With that, I'll turn it back over to Roger.

Thank you, David. As previously stated, we produced 159,000 equivalents in the quarter exceeded guidance for 4%, all our operated assets continue to perform very well as we experience lower downtime and offshore assets especially in our recently purchased fields and better online execution across our onshore assets. On Slide 7, Murphy has a long history of supporting shareholders and we continue to do so over the past 10 years, we've returned over 3.8 billion to shareholders and have not issued equity. In the second quarter, we repurchased 300 million or roughly 7% of our outstanding shares which equates to purchasing our proven barrels for only $9.75 per boe. We still have 200 million remaining under our board authorization, which expires at year end 2020 and will continue to be opportunistic when repurchasing shares going forward. With recent success and free cash flow generation returns to shareholders since the price collapse of late 15, we're one of only six peers who actually have free cash flow yield, and have a history of not overspending our cash flows. During this time, we’re the leading company in the peer group when dividends and buybacks are added together, net of issuances of which we have none are considered. We move forward now to Slide 9, in the second quarter, we brought on 35 operated wells, 23 of which are in Karnes, 12 in Tilden. As completion efficiencies led to advancing our 2019 drilling program, the Tilden wells in which we were scheduled to come online in the third quarter were actually brought on line in the second quarter Overall, we expect to bring 91 wells on line for the year and relatively equal division between Karnes, Tilden and Catarina. Our oil production in the Eagle Ford Shale increased by 28% over quarter 1, which is we feel is an outstanding benchmark for us and as we anticipate a near 7000 barrel equivalent add of production increase for quarter three over quarter one, over quarter two rather in this asset. Slide 10. In further detail, our second quarter Eagle Ford Shale wells performance have been strong in both Karnes and Tilden with the recent Tilden wells are the best we've ever drilled in this area. This quarter, we drilled all three zones, often shot the Upper, the Lower Eagle Ford Shale with average well results exceeding type curves, importantly, we achieved average IP 30 rates across all three zones, and Karnes or approximately 1200 equivalents per day with 90% liquids content. The Tilden wells are important because we’ve applied our latest completion techniques for the first time in this area. Our Central Tilden assets specifically align with the robust performance of our Karnes wells, and have achieved significant IP 30 rates averaging 1,370 barrels equivalent per day with 92% liquid content. We're encouraged of our recent well results and excited for the future development of this acreage. Slide 11, and the Kaybob Duvernay asset continue to perform well as we brought online six wells for the quarter across our Kaybob north and two creeks acreage. The initial volumes have proven strong with facility, constrained IP 30 rates, of more than 1000 barrel equivalents per day and Kaybob north and 750 barrels equivalent per day in two creeks. We have also closed the cash cashless acreage swap in Kaybob East, thereby gaining approximately 20,000 contiguous gross acres in exchange for only 5800 non-core acres in another area. Following quarter end, the three wells in the Simonette area resume production after third-party midstream spec constraint prevented them from flowing to sales in the first half of the year. Going forward, our focus for the remainder of the year is on acreage retention with drilling 13 wells are scheduled to come on line in 2020. Slide 12, our Tupper Montney wells continue to deliver steady performance, added five wells in the quarter and highlight the new volumes trend in line with our 18 BCF per well type curves. Our price mitigation strategy continues to be successful, as we realize second quarter pricing of $1.82 per Mcf Canadian, excluding transportation compared to an AECO price of $1.03 Mcf Canadian. This is a tribute to our excellent marketing team, which remains focused on diversifying our price exposure through hedges and off AECO sales. Slide 14, we're pleased with our expanded Gulf Mexico portfolio, and after completing two major transaction, Murphy is now the fifth largest producer in the region. We successfully drilled a development well at Dalmatian that we plan to bring along in the fourth quarter with the growth rate of more than 6000 equivalents per day. The well has very robust returns, as would any nearby infrastructure tie back in the Gulf Mexico. We drilled a successful well at Hoffe Park number two. We countered all in three zones. The well is just completed logging and the evaluation results are ongoing. We discovered resources that can easily be produced through our nearby Murphy operated Delta House facility. We unfortunately found volumes below our mean projection for the well. Slide 15, in the Gulf Mexico the long runway of higher rate of return projects that will provide production and cash flow for several years to come. Our board sanctioned three of these key projects in June. One of the projects is a King's Quay floating production system which will host to production from two recently purchased fields and the LLOG transaction as well as our recently sanctioned Samurai development. King's Quay is being constructed in Korea with first steel cut last month. We have a 50% working interest in the production system and we're currently analyzing our options to sell down a portion of this facility as it is highly sought after in the midstream asset market. The facility will be designed to capture third party volumes as well for additional cash flow and tariffs. We expect to flow Samurai development and the Khaleesi/Mormont fields to the facility with first toll anticipated in the first half of 2022. Slide 16, our board sanctioned two developments at Khaleesi/Mormont Samurai’s well which was successfully drilled by Samurai, which was successfully drilled by Murphy in 2018. Khaleesi/Mormont, our two adjacent fields that we acquired from LLOG. Khaleesi/Mormont is a seven well development project of which four of the wells were previously drilled and cased with a total of six wellbore penetrations previously drilled. We’ve invested approximately 200 million over four years with first oil [ph] in the first half of 2022. The gross resource is 165 million barrels equivalent with 90% liquids and we expect it will produce for the next 20 years, generating a full cycle rate of return of more than 30%. The reserves have been confirmed by two third party audit firms. The third project will start in the second half of 2019 is a multi-well development in Samurai, which further benefits from lower Gulf of Mexico acquisition achieving synergy being located less than 10 miles from the Khaleesi/Mormont in King's Quay facility. The proximity to now Murphy owned and operated facility not only enhances the economics, but increases the recoverable resources net to Murphy. We expect several decades of production in this development as well, and a project full cycle rate of return of over 35%. We're providing a 10 years of disclosure for all three projects to clearly illustrate the timing of spend and the long runway of production and cash flows following the initial investments. Slide 17. We've laid out our upcoming short cycle capital projects through 2021 in the Gulf of Mexico along with their spending requirements and associated production gains to highlight the returns of our new asset base. Overall, we generate nearly 12,000 barrels equivalent per day from this work and additional volumes by 2021 upon completion of the six projects, which includes single wells and work overs and generate an average IRR of more than 80%, that further illustrates a significant runway of long term growth provided by the Gulf Mexico business with excellent returns. Slide 19, as a review of production, we need to keep in mind that these volumes are from continuing operations net to Murphy unless otherwise noted. As we look to the third quarter, we expect production to be 192,000 to 196,000 equivalents per day of which approximately 118,000 barrels will be oil. This is a real engine behind our new cash flow generating ability. Our full year production is forecasted to range between 174,000 to 178,000 barrels equivalent per day. This implies fourth quarter production will be more than 200,000 equivalent per day at a level we've not seen since 2015. This is our new baseline going forward, as we've adjusted our asset base the past few years and particularly, enhancing the Gulf of Mexico and Eagle Ford Shale. The 2019 CapEx guidance of 1.35 billion to 1.45 billion remains within the range regarded at the beginning of the year prior to any of the transactions that we've conducted. This tightened range includes a reduction of $106 million from Malaysia and an increase of $140 million allocated toward the newly acquired Gulf of Mexico assets. Approximately 20% of the new LLOG capital is allocated towards short cycle tie backs that are expected to have first oil in 18 months, 20% toward long term tie back projects, and the remainder allocated to the King's Quay FPS. Slide 20. In closing, we've clearly positioned Murphy for long term value creation. We transform the company with no equity or debt issuances and while buying stock and creating a new company with more oil waiting and premium pricing. Eagle Ford shale is performing, with production continuing to ramp up. We're executing short cycle high rate of return projects in the Gulf, as well as Eagle Ford. And from this, we would generate significant levels of cash flow. As always, we continue to focus on our shareholder friendly activities, executing on our share repurchase program, and paying our longstanding dividend, while maintaining cash flow parity. With that, I’d like to turn the call over to the operator and be glad to take your questions this morning.

Thank you. [Operator Instructions] And your first question is from Brian Singer from Goldman Sachs. Brian, please go ahead.

Thank you. Roger, you provided some helpful project detail on the Gulf of Mexico short and medium term impact from a short and medium term project spending and production. When you put these together, with your legacy base, can you talk about what Gulf of Mexico total spending in production looks like in 2020 and 2021?

We are still -- you know that really gets it back into another way of really asking Brian in 2020 CapEx and let me frame and start off with that. We of course have these projects that we sanctioned there will be additional CapEx that we have. We have a rig program at front runner. We have some non-operated wells to do next year. We have not -- went beyond that work at this time. And I appreciate the call and focus on this 2020 matter, and I know that people are very interested in this before. And then we get started on that I'd just like to start over and frame where Murphy is on this. And we -- again when we look at data for 2015 to now, we're one of the few companies that have even free cash flow at all. So we're not a -- an over spender all what being a big dividend and shareholders support due to buybacks. So our goal is to be a free cash flow providing company. Those other projects we'll need to fit into what we do when we decide our free cash flow CapEx parity as we go into 2020 and 2021, which have triggers that they can change as well as the project to disclose here if we need to. So we're not disclosing all those other project CapEx now. We just went with the new projects. We felt it was important to illustrate to investors and analysts that we have purchased some really good assets and what the work is and then went out with many years of disclosure trying to illustrate the value of new assets as well as the ones we just sanctioned.

Okay. Thanks. Maybe switching to -- switching to the Eagle Ford, you highlight the big ramp up in production that's happening there. Can you speak to once you get to the 57,000 BOE a day type rate that you expect to approach in the fourth quarter, what would be needed to hold production flat from a rig count and capital perspective? And then maybe another way around the 2020 question is what your strategy is for incremental growth in free cash flow at the Eagle Ford, once you get to that rate?

I’m going to have Eric answer that for you, Brian.

Thanks for the question. So we've looked quite a bit at what our maintenance capital is to maintain production at a similar rate for our average for this year. That looks to be somewhere in the $425 million to $450 million to maintain at 57,000 BOE a day or something like that would be a little bit more than that. We haven't really worked out exact number, but I think you could do some math to figure approximately what that looks like.

Great. And that strategy in 2020 beyond the 57 continue with further rig adds there are price dependent and free cash flow dependent?

Well that Brian gets into our 2020 CapEx. Let me just stop, and take the other what we have prepared to say on the 2020 CapEx today. As I said earlier, we're not a habitual over spender not by a long shot, not by our long history. When you look at 2020 CapEx, we really have not worked on this yet. We know the new projects that we just sanctioned with our board and partners. We're just starting to work on it next week. This usually begins after our August board meeting and conference call. If you ask us for a range of what's going to happen, it would be a low teens to -- be below 10% to below 15%, an increase in both production and CapEx for our company. The CapEx that we've disclosed for this year. But like any view of those things with free cash flow parody in play, we will continue to work that as we get into our budgeting process. And as I just mentioned, we entered into a very nice floating production system arrangement with LLOG in which we wanted to take over that operator ship of that facility, execute it in the history and ability that we bring to the table, and we have a big ability to sell that project down. So our capital as put here today, has an ability to sell down FPS, which is greatly being looked at by many midstream companies that we want to take control of the schedule, and how the facility is being built before we took that on. So, a lot of moving parts with six months before we disclose the CapEx here, Brian this morning. Does that help you with what you need there, so the Eagle Ford CapEx will probably be flat to slightly higher, for sure. And that we want to maintain capital in both there and Gulf of Mexico because those are key parts of our company they would make enormous cash flow and have great operations running there.

Appreciate the color. Thank you.

Thank you.

Your next question comes from Arun Jayaram from JPMorgan. Please go ahead.

Hello Arun, good morning.

Good morning, sir. I wanted to ask you about your comments in the press release about achieving free cash flow growth over the long term. You're clearly in a bit of an investing cycle in the Gulf of Mexico. I was wondering if you can maybe give us a bridge to those free cash flow comments that you made in the press release.

Well we disclosed a plan that over a billion dollars of free cash flow over a longer period involving an average capital spend in our Gulf of Mexico business over that period, and we stand behind that today until we rework that plan over the next few months. But I have no reason to see a significant change in that plan today. That's been previously disclosed. And we're just reiterating the prior disclosure of our plans of which we will be increasing production at a moderate pace not an incredible growth trajectory. A lot of increase in there is oil, which is a good thing. And now we stand behind a significant free cash flow that we've disclosed throughout the years throughout this year in conferences etcetera as we relook at our plan starting next week.

Okay. And is there a point in time that you can point to when the inflection comes,,,

Inflection in what way?

In terms of the free cash flow inflection.

It’s -- we've disclosed it over that long period of time. And we're just staying with what we have and I do not see that changing over that period. And the inflection point is, we're not talking about that. We work it again, starting next week.

Fair enough. Thanks. Thanks for that Roger. Just just a follow up. I was wondering if you could elaborate on your comments on the floating production system. You made some commentary that this could be something that's intriguing from a midstream monetization perspective. So I just wanted to get a little bit more insights on that?

It's quite common in the Gulf of Mexico today to have facilities handled by third party. There's several of these facilities. We also have a long history of dealing with lease facilities in Malaysia and another facility in the Gulf Mexico, that we prior had ownership of. So this is nothing new. The project was going forward in very early stages when we made the asset purchase. We have a lot of execution ability in our company, and we're not happy with the terms of that the way that was headed took over the operatorship of it, and sanctioned it as very nice, very nice returns without oil price risk of course. And we took over that, and arranged a tariff system to flow into by other parties and one of our other partners became a partner with us in the facility, and the facility continues to be sought after by midstream companies in which we would remove this CapEx, enter into a leasing arrangement with that party. It's probably -- it's primarily a take over the project with a really nice rate of return, wish we could just focus on the returns here to the capital, CapEx every single quarter in year. However, we take over this projects, a very nice project then we have the ability to swing our capital as we look at oil prices and free cash flow analysis as we look at our Eagle Ford and other Gulf business. We felt we needed to disclose that our board sanctioned it and we have operator ship and 50% owner of it today.

Great. Thanks a lot Roger.

Thank you.

Thank you. Your next question is from Roger Read from Wells Fargo. Roger, please go ahead.

Good morning, Roger. I guess what most people are trying to get out here on the CapEx front and just to beat the same horse here, is understanding maybe what your flexibility would be in 2020 across a range of oil prices. You know, you think about Gulf of Mexico and a little longer lead time, you commit to something it's tough to change versus we look at the Eagle Ford or Canada. So maybe without giving us a number, can you give us some idea of what your flexibility would be within the Gulf of Mexico next year in terms of you know pushing things back or not versus what would I think we would consider fairly normal abilities to move things around in the Eagle Ford and Canada?

Appreciate that Roger, and thanks as I continue to try to explain. We're working on our plan now and have already a big swing and just to sell down of this floating production system. So naturally, when you look at capital allocation, you have a ranking. We have a very large dividend payment and we're going to make it. So that's first thing. We know, we want to work in the Gulf and we want to work in Eagle Ford, because we have the best prices in the oil field, Murphy. So why would we not invest there. And you get further away from there. We have things like exploration. We have things like Canada onshore and we have international development such as Vietnam. So we have a lot of flexibility on those top matters. We've also gone to 600 million CapEx in 2016 and never issued equity like almost every other company as well. So we've stopped offshore projects before we start one of the biggest projects in the world at Blockades filling LNG one time, so we have a flexibility to start, stop and do what we needed as we respond to oil prices and our allocation of capital across those things. So naturally want to have the Eagle Ford and the Gulf the primary benefactors of our CapEx along with our continued shareholder support. That's been a long history for us. Also, with a strong liquidity, a lot of money in the bank no nothing drawn on the revolver, and a long history of not overspending here.

So, no I think we appreciate that. It’s just – I mean that's what the market's concern is across the board. You're getting the same treatment everyone else's is. As a secondary question, from an operating standpoint, obviously a lot of moving parts here in the second quarter get a little more clarity as things roll into the third. Give us an idea between the joint venture with Petrobras and then the LLOG acquisition here, as you think about cash OpEx in the Gulf of Mexico, how that is progressing and whether you've been able to pull out all the savings and kind of integration expectations there?

The assets are very similar to what we do. The facilities are very similar. All of that is really has been very seamless. We've transitioned very well our team in Houston. These are a lot of deals that we've done and had to execute on the accounting side, the oil sales side, marketing and operations. We're -- you know a $10 to $13 kind of OpEx in the Gulf. And the total Gulf we have to work over in the third and fourth quarter. Very highly incredibly high rate of return workover to repair safety valve on a well, that we purchased in the Petrobras acquisition that would take place in the third quarter. Without that, we'd be a solid $8 or $9 dollar OpEx company. So really good shape on the price we receive for the barrels and the operating expense and their assets are very similar to ours and rolled in and a very similar OpEx starts.

Great. Thank you.

Thank you.

Thank you. Your next question is from Muhammed Ghulam from Raymond James. Please go ahead.

Thanks for taking the questions guys. A couple of months ago you mentioned that there were plans for additional exploration on Block 5 in Mexico in 2020. Are there any further details you can provide, now that we're in the second half of 2019?

We're doing our work to drill two wells there and the difference between one, two, or three wells will be determined when we go through our budget process. But we're eager to drill there. We have oil that was found there amplitude is oil. We have nearby amplitudes we can drill and we have other prospects. We can drill more excited about going down there when we'll get to our capital allocation process.

Okay. And kind of another area of exploration. Any updates on Australia, are there any plans we can be aware of over the next year or two?

We have turned over our operator ship of about one portion of our blogs to E&I there. We’ll be closing that office and moving back to Houston, a very limited one or two man team to look after that. The big Ceduna Basin of course remains a working interest, a large working interest we have there and a very large block. Equinor is supposed to drill a well there over the next couple of years. The outcome of that well could be important to us, but we would need to wait on that execution, hence we've closed that office and retreated back to Houston with a very limited team as part of our global exploration team that we were focused in the western hemisphere and that's the update there.

Okay. understood. That's all for me. Thanks.

Thank you.

Thank you. [Operator Instructions] your next question is from Paul Cheng from Scotia. Please go ahead, Paul.

Hey guys. Good morning.

Paul. Paul I haven't heard from you in a long time.

Yeah have been a while. That has been on garden leave. Quick question. It look like with all the management sessions Murphy has become a North American onshore and offshore operator. Is that how we should look at the company going forward? Or you're just one…

100% you should look at it.

Okay. And that I think….

Very, very powerful company that we have with high oil rates increasing oil rates, incredible cash flow, top pricing.

And I think Roger you had previously said you target Eagle Ford to be about 90,000 BOE per day by 2021, is that still the target?

No, I’m not sure where that target comes from. That wouldn't be the target, it would probably be in. And going forward it would be 60, 70, 80s as we look to 21 to 23 kind of a number Paul.

So 60 to 70, okay.

And 80s and to 22, 23 that would match with the previously disclosed guidance we have on cash flow generation and all of our prior decks and we've been using all year. There's no change in that.

Okay that probably my mistake then. For Murphy, can you just remind me what your working interest in Samurai, Mormont and Khaleesi?

We are 50:50 in Samurai and we're 34% in Khaleesi/Mormont and 50% in the floating production system facility.

Okay. And it look like based on what you disclosed on the Gulf of Mexico projects, you it appears that to suggest you would be able to hold the Gulf of Mexico production which is roughly about 100,000 barrels per day including your joint venture to be atleast for the next ten plus years. Is that correct?

Our plans that we disclose in which we stand behind going into our CapEx would be next week because it's a focus area is to maintain Gulf of Mexico near 85,000 with an average capital span of 325 per year over a five year period leading to significant cash flow from that five year period. We stand behind that and we have these assets here are illustrating. Number one, they were put there to illustrate the returns of the asset, an incredible rate of return and disclosure of the long profile of cash flow. Also Khaleesi/Mormont has been reserved, reviewed by two third party firms. So the point of the slides are to illustrate the returns and the long cash flow and CapEx that we have. We have natural decline in our field and these and other work projects we have inside the capital we previously disclosed maintain that flat strong cash flow providing production base or Eagle Ford is our growing oil production base.

Well Roger, when you are talking about 85% is that net off your minority interest or you include….

Everything I say is, everything I say is net to Murphy.

So that when I when I was talking about hundreds its including the….

Yeah, that's that's of course correct. But as we say in the call it's written all over the place and it is confusing. I understand that, but we always report when it comes out of my lips is mine not a symbol.

So whatever that is the number that you talking about is net the minority interest?

Correct. Yes sir. Eighty five Murphy.

And that, if I looking at that do you maybe that you use probably not ready to talk about yet. If I look at your current -- mix as the company as a whole if I want to maintain that production level in oil and gas mix, what is that CapEx number. I think previously, that before this transaction you sort of talking about in the $800 million or so. So what's that number may look like today?

The maintenance CapEx number Paul?

Yep, to maintain your production mix and your current production level.

Yeah. We feel that 850 to 900 million.

Okay. Very good. Thank you.

Good. Good talking with you again, appreciate it.

Thank you. There are no further questions from our phone lines. I would now like to turn the call back over to Roger Jenkins for any closing remarks.

Thanks everyone for calling in today. We look forward to continue to update you on our continued oil production growth in our North American assets, which are outstanding. Thank you and see you soon.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.