Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation Second Quarter 2021 earnings conference call. [Operator instructions] I would now like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining us on our second quarter earnings call today. Joining us is Roger Jenkins, President and Chief Executive Officer; along with David Looney, Executive Vice President and Chief Financial Officer; Eric Hambly, Executive Vice President, Operations; and Tom Mireles, Senior Vice President, Technical Services. Please refer to the informational slides we've placed on the Investor Relations section of our website as you follow along with our webcast today. Throughout today's call, production numbers, reserves and financial amounts are adjusted to exclude non-controlling interest in the Gulf of Mexico. Slide 1. 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 actually cause results to differ. For further discussion of Risk Factors, see Murphy's 2020 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 like to turn the call over to Roger Jenkins.

Thank you, Kelly. Good morning, everyone. And thank you for listening to our call today. On Slide 2, as we kick off our quarterly call and investor meetings, we'd like to remind our investors of our story. We're pleased to do so briefly again this morning as each tenet of this slide remains in effect this quarter and in the future. Our ongoing execution in our three producing areas continues to show outstanding results, while progressing in our offshore long term projects and expansion of the Tupper Montney. Our competitive advantage of executing in offshore again is illustrated by the outstanding progress on our Khaleesi/Mormont/Samurai and King's Quay projects. We also maintain strong cash flow that easily covers our planned spending for 2021 and support shareholders through our long standing dividend. Further, we were able to increase our cash position this quarter, nearly $190 million, which allows us to accelerate our delevering plans. Our ongoing meaningful level board and management ownership highlights our personal interest in the company's long term success. Slide 3. Our three priorities are simply to delever, execute and explore. And I'm pleased with the progress we've made on all fronts in the second quarter and this year. After our initial delevering event, we repaid our revolver in full in quarter one. We stated our goal of reducing long term debt by $200 million by year end 2021. We briefly announced the redemption $150 million of 6.875% senior notes due in 2024. And now today we're able to increase our delevering goal to $300 million, assuming a $65 oil price for the remainder of 2021. The additional cash flow has been accomplished not only through stronger oil prices, but also ongoing operational excellence. As we've achieved less operating downtime offshore while experiencing the benefits of our optimization…

Thank you, Roger, and good morning, everyone. I'll start with Slide 6. In the second quarter, we reported a net loss of $63 million or $0.41 per diluted share. After adjusting for certain after tax items, such as $103 million non-cash mark-to-market loss on crude oil derivatives, and a $49 million non-cash mark-to-market loss on contingent consideration, we reported adjusted net income of $91 million or $0.59 per diluted share. Cash from operations for the quarter totaled $449 million, including the non-controlling interest. After accounting for net property additions of $203 million, we achieved positive adjusted cash flow of $246 million. On the hedging front, Murphy continues to protect its future cash flow in the Tupper Montney with additional fixed price forward sales contracts for a portion of production through 2024. Slide 7. Our 2021 CapEx plan is heavily weighted towards the first half of the year, with $198 million total accrued CapEx in the second quarter, while slightly above our previous guide, this was due to timing adjustments of non-operated activity and has no impact on our annual CapEx. Overall, our ongoing disciplined spending has led us to tighten our CapEx guidance for the year, now ranging from $685 million to $715 million, with $700 million maintained as the midpoint. As we established on our last earnings call, CapEx will step down for the remainder of the year. With the shift in Eagle Ford Shale spending, our fourth quarter CapEx is forecast lower than previously. Approximately 63% has already been spent in the Eagle Ford Shale, as of June 30, and 66% has been spent in the Gulf of Mexico while 76% of onshore Canada CapEx has been spent by that date. We continue to proactively manage our supply chain exposure, particularly with our long lead items. Since 60% of our 2021 capital plan is complete, and key contracts are in place for the remaining plan, we have minimal near term supply chain risks to our capital spending. Our third quarter production guidance range of 162,000 barrels of oil equivalent per day to 170,000 barrels of oil equivalent per day includes 4100 barrels of oil equivalent per day of assumed Gulf of Mexico storm downtime. Additionally, we are adjusting our full year production guidance range to 157,500 barrels of oil equivalent per day to 165,500 barrels of oil equivalent per day, which includes fourth quarter impacts of 1300 barrels of oil equivalent per day for assumed Gulf of Mexico storm downtime and 7900 barrels of oil equivalent per day for net planned offshore downtime. With that, I'll turn it back over to Roger.

Thank you, David. Slide 9. In the second quarter, we brought on line three operated and 29 gross non-operated wells in the Eagle Ford shale. 10 wells were brought online in the Tupper Montney that wraps up our activity in onshore Canada for the year. Our US onshore drilling program is nearly complete with just four operated Eagle Ford wells planned to come online in fourth quarter. Slide 10. Our Eagle Ford Shale wells produced 42,000 barrels equivalent per day in the second quarter, and processed 75% oil and 88% liquids. For the remainder of the year, we plan to drill and complete four wells in the fourth quarter, I just mentioned and our Catarina acreage, all within our planned annual CapEx of $170 million. The team continues to execute and generate efficiencies as evidenced by our 25% improvement or rate of penetration, completion cost per lateral foot since 2019. Overall, we've achieved a 40% reduction in completion costs in four years, through strict focus on non-productive time and making operational improvements. Our average well - our average per well drilling and completion cost has improved to $4.7 million from $6.3 million in 2018. As a result, we're now achieving well payouts of approximately nine months on our 2021 program at oil prices averaging nearly $62 per barrel in the first half of this year. On Slide 11, as Austin Chalk, one of our four Eagle Ford wells we plan to drill and bring online in the fourth quarter is target for the Austin Chalk formation. Overall, our recent Karnes Austin Chalk wells have nicely outperformed our average type curve. Additionally, other public operators near our Catarina acreage in the western portion of our Eagle Ford Shale acreage have reported strong Austin Chart results from their recent wells. We're excited…

Good morning, Roger, some nice results.

Thank you, Arun, I appreciate that.

Yeah, well, I wanted to see if you can, I know Chevron operates but I was just wondering if you could just give us a progress report on Silverback and just maybe also talk a little bit about the Brunei discovery and if this could be a needle mover for Murphy?

Thank you for that question Arun about our exploration program. The way this is really shaking out as to Silverback, new report this week. I'm glad you asked that question, so we can clarify any confusion around that. There was a mechanical issue, or very early days of drilling in the well, what we would call the top hole section of the well. The well had to be respud, if you will, and drilled adjacent to it. That has no at all, any implication as to the prospectivity of the well remains the same. And Exxon and Chevron, and partner with both. Chevron has done a very good well and drilling here and also at St. Malo and due to their operational teams and their ability, they were able to catch back up the cost of that respud. And we anticipate our capital would be identical to our original plan. And it was just an operational matter that was handled and moved on. It happened two or three months ago and I'm not sure where that filing came from at that late date. But there's no impact to our company nor Chevron, on that matter due to their performance.

Great, great. And just on the exploration program in Brunei?

Yeah, so we've had those blocks for a very long time, a very long time. And that has been a really nice well to drill, it's a sub-thrust site well, underneath the major Kakap-Gumusut field, if you will. On the Brunei side of the field we're little over 8% working interest owner there. There's a time when we were exiting Malaysia, we were going to sell Brunei and had that held for sale and due to COVID and other matters, we reassessed. This is a very nice looking well successfully drilled by our partner group, and done very well there and that we pulled that out of held for sale. And then of course, major Kikeh field that we discovered and operated for many years, very near there and of course, the major Kakap-Gumusut field with many successful partners operating that shale and into this region. And we're going to hang on here and hopefully build a long term East Coast Canada kind of a business here, 2000 barrels a day to 3000 barrels a day. Long term for us, it's very profitable, very high oil quality and I'm very happy about it

Great. And my follow up Roger is just talking about the Austin Chalk opportunity at Catarina. You had a nice map in your update, but you're going to be testing one well, but so at this stage, SM is near you but give us some thoughts on the potential of the Austin Chalk.

We'll have Eric come in on that. Currently, he's managing that. But we're glad to get down there and try something new in that area. Go ahead, Eric.

Okay, great. Thanks, Arun. Just a couple of point to emphasize there on the Austin Chalk. As you know, we've had some really nice results in our Karnes County position. We have had limited appraisal effort or development effort in the Austin Chalk in our DeWitt County. Lots of nearby operators have had quite a bit of success. We've done a bunch of work to assess and optimize the landing zone in the Austin Chalk and we think it has some nice potential. And we are sort of stepping our toe into that with one well in the Austin Chalk in a four well pad. And we think it has some nice potential to be sort of top tier performing. But we'd like to go out and prove that it really looks very attractive on our acreage. If it is successful, then we think we have 100 plus Austin Chalk locations that would be top tier performance, which would really help us continue to execute and delever.

Great Roger, thanks for letting us into your conference. And I'll hand it back.

No problem, Arun. Appreciate your help and we'll be talking to you soon.

Your next question comes from Neal Dingmann with Truist Securities. Please go ahead.

Good morning, Neal. How're you doing?

Now you know, nice start and that's about it Roger. My first question just on development activities, or I should say, development opportunities. I mean, you've got that great Slide 40 that really spells out that the spend and production around Khaleesi/Mormont/Samurai, etc. And I'm just wondering, any thoughts or you know, your thoughts there on anything potentially coming a bit early? Or are those going to be just really right as you've been expecting on those? And then I'm just wondering, Roger, any further comments you can make on any other potential development opportunities.

Thanks, Neal, for that question. The way we're doing, looking at this today is that we're doing extremely well. We're doing extremely well in the flow line installation, the mooring installation, permitting, the obvious build and tow of this major facility which is now around the Cape of Good Hope headed up towards almost going over our Sergipe-Alagoas Basin in Brazil on its way to the Gulf, which is ironic. And we're very happy about it. All systems are go, possibly to be send in there, but we're staying with our mid-22 and very happy with our permits. So my team's doing a great job and very happy about that. We all bring on another well called Calliope in the in the region this year as offshore execution. And that's our plans now, all within our budget, holding our budget, doing very well. And I appreciate you asking that question because it's leading to our execution, which is leading to the delevering, which is our major - major thing for us in hitting these major projects on budget is super critical in the delevering plan.

Yes, it does seem like you're running just like clockwork, which is great to see. And then just one quick follow up. Non-op activity was a little, again, I don't mind to see it, good non-op activity on some good wells, is a little higher than 2Q. Could you just talk about your thoughts for the remainder of the year, how you see that going forward? And what opportunities you will continue to have for the non-op side?

I'll let Eric handle that question. That was primarily an advancement of some wells by BP, Exxon in Eagle Ford and I'll let Eric go ahead with that.

Yeah, that's right. So in our Eagle Ford position, we had a number of non-operated wells that we thought would come online in the third quarter was actually progressed faster and came online in the second quarter. That acceleration contributed about 2100 barrels of oil equivalent to the second quarter, which were perks we're really happy to have. It's important to know that even if those wells had not moved faster, our Eagle Ford business still would have exceeded guidance, and been towards the high end of guidance. So our operated business performed strongly, both our new wells this year and our base performance from wells that are brought online in prior years on the back of strong operated well performance exceeding expectations, and lower downtime. So really happy with our Eagle Ford position, operated, non-operated, happy to see production come online sooner as well.

Great details. Thanks, guys.

Thank you, Neal.

Your next question comes from Neil Mehta of Goldman Sachs. Please go ahead.

Again, good morning.

There is second Neil in a row.

Yeah, it is, it would double treble here. So like, the first question is just on Brazil. Again, Exxon does seem to be pretty excited about the opportunity set down there with Cutthroat. Just, can you give us the lay of the land? Sounds like we're going get an update in Q4 and how are you just thinking about the opportunity set in Brazil?

Thank you, Neil, for that question. And that really leads to one of our key tenants of our strategy, of not only delevering and executing, which are tied together, but of course, exploring. This is a series of acreage we built with Exxon and other, Enauta, a partner down in Rio. This goes back several years and built a very large position here. The key to this exploration opportunity is they bored some very successful fields that have been for sale, if you will, which are - has information available on those fields. Of course, it is very adjacent to those in the same geologic setting. We're very excited about the opportunity, very excited to work with ExxonMobil here in Houston as to, seismic and work and the selection of the wells. We have many opportunities to drill there over the next few years. And very excited, these are very large prospects, we disclosed our view of those here in our, in our Slide 19, and very excited about it, and they being ExxonMobil have another rig working elsewhere in the country on something we're not a part of. And when they finish that work, they will be mobilizing up here early in the fourth quarter, and we're very excited about it.

Expanding, probably just on the capital, cadence of capital spending. First half, as you indicated, was a little bit higher. And it sounds like the second half is a little bit lower. How do you feel about the cost inflation side in terms of your confidence to see that step down in CapEx in the back half of the year that makes sense as we are seeing signs of inflation in different parts of the ecosystem?

And we'll have Tom in a second handle the procurement part of that but let me frame the early part of it. We're very confident in our capital program because our work is ending. St. Malo where we're a 20% player has stopped - will be stopping the drilling. The Silverback well is about to complete. We've stopped all our drilling in the mine and you're just harvesting free cash flow. We are about to drill just four wells in Catarina, a most inexpensive place with thousands of wells that were drilled in the Eagle Ford. So we're very confident about the CapEx because we are stopping our program and our program is front-end loaded. And our non-op work is completing. So that really sets the tunnel for most of the CapEx as we don't have anything to inflate in the US this year. But Tom, runs technical services including procurement and I'll have him provides you a bit more color. And I appreciate your question.

Yeah, Neil, as Roger said, we've got the majority of our capital behind this now. But even the remaining that's in front of us, it's pretty much fixed. We've got contracts in place just through our strategic sourcing with supply chain that's given us good visibility and the operations from Eric's organization is continuing to drive down the overall costs. So, as Roger said, we're in pretty good shape with what we expect in 2021.

Yeah, to follow on that, Neil, to me, and I had it in my remarks, I think it's really important. We've really lowered, we're a big player in Eagle Ford and a big player in the Montney for us. We lowered our wells $1 million a well. A million dollars a well, with hundreds and hundreds of wells to go, and today, we're trying to get off the cost per foot and talk about the pumping time during the day and the time that we complete wells, and how much our rate of penetration because if the time is improved and you're a million dollars a well less, it's going to be hard for service to take that away from us, very hard.

Thanks, Roger and team.

Thank you.

Your next question comes from Gail Nicholson with Stevens. Please go ahead.

Good morning, Gail.

Good morning, Roger. And you guys posted a really good LOE in both the Eagle Ford and Gulf of Mexico this quarter. I was just curious, was the Eagle Ford LOE lower quarter-over-quarter driven by the higher volumes, or was there's something else that you guys did that improved LOE in both those areas this quarter?

I'll let Eric handle that for you and let him have glory on it today, Gail.

Thanks, Gail. I don't often get glory, so I'll take it when I can. We're really happy with our operating cost performance in the Eagle Ford. Of course, in the second quarter, we did have high volumes, which helped. We had continued work from our team to lower costs. Our remote operations center and our operations team and engineering teams have been working diligently over the last year plus to enhance our operations to lower cost, lower downtime, which leads to better production, steady operations. We did have in the second quarter $3 million of a prior period adjustment that was related to gas that we purchased periodically at one of our facilities that we realized through an allocation error that we had been paying royalty on gas that we were purchasing, which we should not have. We made a correction for that. So that's a $3 million impact to the quarter that will not repeat going forward. So we expect in the latter half of the year, Eagle Ford operating expenses will be a little bit higher due to the declining production, not repeating of the prior period adjustment, as I mentioned. But if you look at the whole company, we expect operating expenses to be in the $8 to $9 range. So it's still quite a strong performance for us across the globe.

Now, it was really is really great to see, so excellent work there. And then I was just also wondering if you guys could provide us any incremental details in regards to Terra Nova. And do you think that those volumes will be back online in 2022? Or is that more 2023 situation?

Thank you, Gail, for that question. The way we're sharing information about Terra Nova today is as follows. It's still being executed by all the partners. I can tell you that our board sanctioned it yesterday in the idea that everyone else will also sanction. So we're going to move forward with it if everyone else does and when that - when all that is complete with all of our partners, we will disclose more. The - it is a late '22 flow back at Terra Nova, very late. So practically in early '23, would make no difference in that regard. And the way the deal is structured, it makes no change to our guided capital, or average capital, I just discussed in our remarks. And it's a really good project. We're very happy to be in it. And I look forward to work with Suncor and Cenovus, long term on that project.

Great, thank you and excellent quarter guys.

Thank you, so much.

Your next question comes from Leo Mariani with KeyBanc. Please go ahead.

Good morning, Leo.

Good morning. Want to follow up a little bit on some of the exploration comments that you guys made here. So you talked about success in Brunei, you mentioned 2000 barrels a day to 3000 barrels a day of oil here. Would that be gross or net? You know, to Murphy and just any kind of high level timeframe and when that might come online? Is that going to take a couple years to get to production and what do you see there?

Thank you, Leo, for that question on our exploration program, which is, key of our strategy here. What that means is that just a type of net production. It could be for long term and of course, the operator, Shell, and of course, the Government of Brunei and our other partners have to go through, assess a delineation of the wells, very successful well. And then we will go and determine all that down the road. And I don't really have an idea of that timing, that's not immediate to us at this time. It's just the discovery well, it's a nice project. We pulled it out of held for sale and we're glad with our position there and glad we kept it.

Okay. And then just on Brazil. I think you guys have always characterized it as a very large prospect that you guys are drilling down there. And I guess I just wanted to kind and get a sense of probability of success. Is this kind of your typical one in four, type of offshore exploration well, in terms of how you view the chances there?

Thank you, Leo, for that question on our program there. It's a key part of our strategy this year. Yes, I would think of one in four, typical big, deepwater opportunity would be clear. But this is all offsetting major fields that are discovered and operated by Petrobras in the region and offsetting of course, shale production, historic shale production, and a successful air in Brazil. So that adds a little bit of positivity to that, where we, as our strategy, is to drill near, known oil areas instead of rank exploration with no success inboard of the water. So I think it meets all that criteria, it fits right into our strategy on F&D, size, scale, partner, and we're very happy about it.

Okay, thanks, guys.

Thank you, Leo.

[Operator Instructions] Your next question comes from Josh Silverstein with Wolfe. Please go ahead.

Good morning, Josh.

Hey, good morning. Good morning, guys. I'll stick with the expiration front for the first question. Mexico used to be really bigger focus for you guys. I know you have some activity there until a while ago. It's kind of nowhere to be seen now on the slides. And so I just wanted to get an update as to what's going on there. And maybe just rank that relative to the opportunities that you have elsewhere on the portfolio.

Thank you, Josh, for that question on our exploration program. Brazil, still major in focus for us. There is a slide in the Appendix around - I mean -

Mexico, I apologize.

It is going to be drilled next year, there's - but everyone's working on their budget with their partners. It's very likely to be drilled next year and get back on schedule, post to COVID world of 2020. This very nice opportunity in the sub, so, especially in the world called Tulum. It's on Page 42 in our Appendix. There's recent discoveries all around this area, in same aged rocks and reservoirs. We see this week that E&I had yet another discovery in that region. Cholula is a play just discovered and will be delineated, but we've advanced Tulum. It has a series of sub-salt opportunities that are larger, very nice and on a trend of success in the region. It just so happens that our focus in the slides is trying to - as you know, Josh, because you follow the company closely, we're delevering, executing, and exploring, really working on that this year while we've increased our debt reduction target this morning. So the Mexico drilling is into next year with our partner group. And in no way, if we pull back there, our focus there, our likeness, if you will, of Mexico, it's actually very strong for us because we get to operate it. And we have running room of similar plays in that area. So just because it's not up in the deck on our delever, execute and explore area, it doesn't mean that we're not there and liking that or changed our view there in any way.

Got it. Thanks for that. And I know you have a multiyear kind of outlook for what you're trying to do at Tupper when you grew and let the project and then hedged a bunch of volumes there. It was a while ago. Prices have obviously risen pretty significantly since then. I'm curious, as you think to next year, is there any thought about stepping up some activity here given the significant increase in gas prices? Or is the outlook kind of steady from the project that you've outlined already?

Thanks for that question. The way we're thinking about Montney today is it's a long-term project. It's going to flow near 500 million a day for a long time, and we took a long-term view on the hedging. And we have an activity plan to reach that level of production that we've disclosed in our capital plans. And it's just like drilling in the Eagle Ford or anywhere else. When it gets better, we're not going to change those plans because we can reach our planned level there without it. And we have about 15% on raw AECO today. We're enjoying some of those prices. I'd also like to commend my outstanding team under Eric's leadership there, where we handled this heat wave crisis there with very little downtime. It's the way we operate and execute in our facilities and our fields. And it's going well, and it's going to be bigger this quarter than the last quarter. And no change to - of our program there. Just enjoy some higher cash flow on the non-hedged piece at this time, Josh.

Great, thanks, guys.

Thank you.

No further questions on my phone line. I would now like to turn the call back over to Roger Jenkins for any closing remarks.

Thanks, everyone, for listening to our call this morning. We had a really good quarter, and we look forward to having another one. And thanks to everyone's help and efforts, and I appreciate it. We'll be talking to you soon. Any questions here with Kelly, and we'll get it going from there. Appreciate it.

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