Barry F.R. Jeffery - Vice President of Investor Relations Kevin G. Fitzgerald - Chief Financial Officer and Executive Vice President Roger W. Jenkins - Chief Executive Officer, President, Director and Member of Executive Committee John W. Eckart - Senior Vice President, Principal Accounting Officer and Controller.

Guy A. Baber - Simmons & Company International, Research Division Leo P. Mariani - RBC Capital Markets, LLC, Research Division Roger D. Read - Wells Fargo Securities, LLC, Research Division Paul Y. Cheng - Barclays Capital, Research Division Paul I.

Sankey - Wolfe Research, LLC Edward Westlake - Crédit Suisse AG, Research Division Pavel Molchanov - Raymond James & Associates, Inc., Research Division John P. Herrlin - Societe Generale Cross Asset Research.

Good afternoon, ladies and gentlemen, and welcome to the Murphy Oil Corporation Second Quarter 2014 Earnings Call. Today's call is being recorded. I would now like to turn the call over to Mr. Barry Jeffery, Vice President, Investor Relations. Please go ahead..

Good afternoon, everyone, and thank you for joining us on our call today. With me are Roger Jenkins, President and Chief Executive Officer; Kevin Fitzgerald, Executive Vice President and Chief Financial Officer; and John Eckart, Senior Vice President and Controller.

We've posted a few informational slides on the Investor Relations section of our website that you can follow along with as part of the webcast today. Today's call will follow our usual format. Kevin will begin by providing a review of second quarter 2014 results. Roger 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 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 2013 Annual Report on Form 10-K filed with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements. I'll now turn the call over to Kevin..

Thanks, Barry. Net income for the second quarter of 2014 is $129.4 million or $0.72 per diluted share. This compares to the net income in the second quarter of last year of $402.6 million or $2.12 per diluted share. For the first 6 months of 2014, we had net income of $284.7 million or $1.57 per diluted share.

This compares to income -- net income for the first 6 months of last year of $763.2 million or $4 per diluted share. This year's second quarter included a loss of discontinued operations of $13.3 million or $0.07 per diluted share compared to income of $142.8 million or $0.75 per diluted share for the same period last year.

For the 6-month period, 2014 included a loss from discontinued operations of $27.3 million, $0.15 per diluted share compared to income of $320.7 million or $1.69 per diluted share in 2013.

Our income from continuing operations in the second quarter of this year is $142.7 million or $0.79 per diluted share compared to income in the second quarter of last year of $259.9 million, $1.37 per diluted share.

Income from continuing ops for the 6 months of 2014 is $312 million or $1.72 per diluted share compared to the 6 months of 2013, $442.6 million or $2.32 per diluted share. Looking at income by segments. On the E&P segment for the second quarter of 2014, we had net income of $200.8 million compared to $290.2 million for the second quarter of last year.

Lower E&P earnings for the 2014 quarter were mostly attributable to higher exploration expenses, higher extraction cost in Malaysia, lower realized sales prices for our production in Sarawak and unfavorable effects from commodity contracts.

Crude oil and gas liquids production for the current quarter was approximately 139,000 barrels per day as compared to approximately 136,000 barrels per day in the 2013 quarter, with the increase mostly attributable to higher production in Eagle Ford Shale, partially offset by reduced volumes in Canada.

Natural gas sales volumes averaged 425 million cubic feet per day in the second quarter of this year compared to 431 million cubic feet per day in the second quarter of 2013.

The decrease was attributable to lower volumes at the Tupper area in British Columbia and from fields also -- offshore Sarawak, Malaysia, partially offset by increased productions from the Eagle Ford and from the startup of the Dalmatian field in the Gulf of Mexico.

In the corporate for the second quarter of '14, we had net charges of $58.1 million compared to net charges of $30.3 million in the second quarter last year. These increased costs primarily related to unfavorable effects from foreign exchange transactions and higher financing cost.

During the second quarter of this year, we completed the accelerated share repurchase program we got in the first quarter, and retired an additional 123,380 shares over that previously reported. Additionally, during the second quarter, we initiated the new $125 million accelerated share repurchase program, and received a little over 1,850,000 shares.

This current program should be completed in August. As of June 30, 2014, Murphy's long-term debt amounted to just under $3.8 billion or approximately 31.1% of total capital employed. This long-term debt figure includes approximately $342 million associated with the capital lease production equipment for the Kikeh field offshore Malaysia.

And with that, I'll turn it over to Roger..

we're making progress in the U.K. downstream sales process with the signed agreement for Milford Haven refinery in place and advanced negotiations on the retail business. On exploration, I'm very satisfied with the focus and rigor that the teams is applying to our program.

Strategy is sound, and we're building a strong properly-risked portfolio that will yield results long term. And I believe a new focus back in the Gulf of Mexico will allow for improvement we need in exploration results. In all of our new offshore fields, we will see DD&A unit rates improve with further reserve booking across all of these properties.

We remain pleased with all subsurface results and deliverability from our new fields. Operationally, I'm very pleased with the execution at Eagle Ford Shales. We continue to improve our drilling and completion metrics and lowering operating costs.

Our new offshore fields, along with the continued execution in Eagle Ford, will support continued production growth as we're headed toward new record levels for the third consecutive year and 8% growth over last year.

We continue to have reserves at a strong pace and on track to achieve reserve replacement in excess of 150% for the fourth year in a row, and our oil-weighted portfolio, will continue to provide strong cash flow metrics, especially with recent deterioration in North American natural gas prices. We can now open it up for questions.

Before that, I'd like to recognize Kevin today. We think this is 75 calls in a row, and I don't know when we'll see that again. So we'll go from there..

[Operator Instructions] We'll go first to Guy Baber with Simmons..

A strategic one for me. So the production difficulties this quarter, obviously, mainly attributable to the offshore and some of the unpredictability that comes with that business.

So the question is, did a quarter like this change at all your view of the optimal portfolio mix between offshore and more predictable onshore operations? Does it maybe add a little more sense of urgency to M&A on the margins? Just trying to get an understanding of your thoughts kind of M&A on a leading-edge basis and portfolio optimization.

And then I have a follow-up..

Thanks, Guy. No, we're probably in a long-range plan basis. We're about 50-50 onshore and offshore. Eagle Ford Shale is doing very, very well.

But we made a lot of money in the offshore, too, and I'll look at great projects like Dalmatian, it's -- has incredible deliverability above plan, and we are seeing Siakap North-Petai and we execute a lot of subsea wells. There's a lot of rate of return there.

I do think you're seeing people going back to the Gulf that were formally in the onshore and some announcements today. I still believe that some onshore to try to balance some of these problems, and we have had some problems with it, we'll admit. Over a long haul of about 9 quarters, we're in pretty good shape here.

You just had a run of it as we execute, there's a lot of things this year in the offshore. But overall, no, I believe that an onshore business [ph] to help balance some of this. Once we get our projects streamlined and all of the new things online, I think it will still bode to better returns.

It gives us a competitive advantage, too, Guy, because we're a -- we have a super major execution ability in deepwater and built a very, very successful onshore effort. So we have the ability to play in both. I think it bodes best for our staffing, our people, our company's history and how we perform, and so I like to be 50-50. And I'm happy.

As to the M&A, I think if you were to portfolio yourself out offshore, we probably would look for some more balance in the onshore. I don't believe that going into something for sale by a super major, which has been a source of a lot of our delay, is somewhere where we really probably want to go.

Does that answer your question?.

Yes, definitely. That's helpful. And then my follow-up was on the 2015 production outlook. I was hoping you could just address that, if even at a high level. But I know you have some longer-term production slides that you put in presentations that would show a pretty high '15 production number.

So just wanted to kind of talk through, if the 2014 guidance changes would impact 2015 at all, do we need to be risking maybe the offshore piece in your graphs a little more heavily than what is shown? Just trying to put those slides in appropriate context as we start to think more seriously about the 2015, 2016 production outlook in underlying drivers and assumptions..

a nonoperated LNG plan in Malaysia; a nonoperated methanol plant for Kikeh gas in which we achieve little value; and then we have some third-party start-up at Kakap-Gumusut. And we're now flowing Dalmatian, which is probably successful to a super major field in the Gulf. So I'm exposed to things out of my control.

It's hard to put the pin on what the factor may be, if you ask me today what we're looking to do, it's more than likely we're going to take an 8% off for these other years just from planning purposes. And you're probably exactly right, it'll probably come in the offshore. It's hard to say exactly where, but the onshore is fairly accurate.

And if I have an onshore business, I probably would be doing pretty good. So that's kind of the number I'm looking at. But we really would like some time to work that to our budget and apply some risking factors to the right place.

But it would be inappropriate just to maintain that with the struggles that I've had through mid-year this year, Guy, to be fair..

And we'll go next to Leo Mariani with RBC..

Just wanted to get a little bit more color around the Eagle Ford. It looks like production this quarter was a little light versus your prior expectations. You guys are expecting a pretty big ramp in the third quarter.

Can you just kind of walk us through what's going on there?.

Yes, overall in our onshore North American business, it's pretty tight because we have risked -- kind of over-risked Syncrude, and it did a little better, and out Montney is doing better, and our Eagle Ford did have a bit of a miss. We fill a lot of gas into DCP pipeline.

And that DCP pipeline went down, causing us some back pressures and to shut in some wells and some recovery from some offset fracs and sometimes a in that game, what we're running to in the Eagle Ford, there's a little bit of an issue with other people frac-ing near us which caused us to have to shut in because there's some areas are condensed down there.

I consider it a one-off thing where we have a lot of production to add this quarter because we are putting 18 wells on together at Karnes and a big thing where we've kind of real concentration of wells, an area that we control the frac-ing around us. And we're also executing wells in this month, so they're very early in the quarter.

We'll probably add 10 more wells operated this quarter than last, and most of them are early in the quarter. So we feel pretty good about the big build we have coming there. We're doing very, very well of late. We're also capturing some more gas and add some more facilities. And we do that, we'd catch some BOEs there and catch some NGL as well.

And that issue is a pipeline issue and offset frac issue that was early in the quarter and I consider it isolated earlier..

That's helpful color for sure. I guess, just jumping over to Seal. Productions have kind of been shrinking for the last few quarters here.

I mean, how should we think about what that looks like over the next couple of years?.

Well, just when you start trying to make sure where cash and CapEx where we are as a company and do the right stewardship around rate of return, we've kind of got out of the primary business at Seal. For years and years, we did some primary horizontal drilling and now we're all about EOR-type work at Seal.

Our Seal steam project at Kudat is doing very well. I'd say 2 of the 4 wells are really well. And so we are looking to just focus our efforts on capital, on EOR and last on primary, and that's why the pullback production.

And if you look into our long-range plans, you're probably looking at some growth in -- significant growth in '16, '17 and we'll be hopefully sanctioning some steam and small fields, so you're starting last part of this year.

We'll also look for that time when our global prices just saw improvement in WCS and some improvement in heavy and hopefully some help with Exshaw pipeline and things to that nature by that time that we'll meet our build. Our long-range plan is to go all EOR, no conventional, and that's why there's a pullback in the barrels earlier [ph]..

Okay.

So I guess, prior to 2016, should we expect kind of a slow decline? How should we think about it between now and then?.

I would say that'd be best, yes..

Okay. And I guess just looking at the Montney, obviously, it sounds like you guys have some wells flowing back, it's early days, it sounds like decent results there. Any comment on what you guys are seeing in terms of well costs in the Montney..

We're drilling these wells cheaper than the Eagle Ford wells, probably in the $5.5 million range. These wells are a little more expensive because they're going to the slick water big tonnage per frac, of course they're still half the sand of an Eagle Ford well.

But a lot of competition up there to drive costs after the pullback in gas over the last few years. And we're pleased with the costs, we're pleased with the result. And you know as we struggle a little bit with production, I'm not a big gas player, I don’t have the heavy gas BOE and a lot of that will help in a lot of ways.

So we're really pleased with our early wells. So I think one way to describe the Montney is of all the wells we have in Tupper West, we have about 17 of them that we consider cream of the crop. I mean, they make -- they have EURs that's greater than 5 BCF and the type of the pressures they have.

Well, 5 of the first 6 of these new completions meet our cream of the crop. So we're really on to something with this. I think there's some other in-fill out in the press from others nearby. And we think we're on to something here and has some price hedging, have some improvement in supply costs, have people come across our facility.

Got this thing to net income here, and have a nice little business so we can build on here..

Okay. And I guess just shifting gears slightly, you guys talked about recently selling South Louisiana. Can you maybe just give us the proceeds in terms of what you all got there and give us an indication of when that closed? And I guess I wasn't aware you guys had properties in Alaska, it sounds like you're looking to sell.

Can you give us any more color on that?.

Sure, Leo. They're just some very small -- just trying to clean some things up. I mean, in Alaska, you're talking about 120 barrels a day forever up there. I don't know the real history of it to be -- before my time, there was -- Hill Court [ph] bought some properties there from BP, we got in with them and sold at the same metric.

We're talking $6 million sales price with 250,000 barrels of reserves. And South Louisiana, not even 1 million barrel equivalent resolves and selling that thing for $3 million cash and probably had a small loss if you dig into this big document here, Leo. I'm sorry..

Okay. That's helpful. And I guess just in terms of your LOE, it looks like we're moving in the right direction. In terms of what we're seeing at the Eagle Ford, it's coming down nicely. But looking at Canada, that's kind of been going up recently, and Malaysia has kind of been bouncing around.

Should we -- what should we expect out of those couple of areas? I'm assuming Eagle Ford keeps getting better as you guys grow.

But can you talk about LOE in Canada and Malaysia?.

Malaysia, I think, we're kind of there we are. We start up these new fields and should be slightly better as we go out the rest of the year because we put 4 new fields on pipelines, all the [indiscernible]. We start off with low rates, and park a jack-up rig and you add wells, so the OpEx will get better.

In Canada, it's primarily related to Syncrude and primarily related to that big unplanned CoCo repair. When you had all that at cost without any barrels that drove it up to the first half and I think it would improve a little bit in the second half, but that's what got that out of kilter there..

And we'll take our next question from Roger Read with Wells Fargo..

I guess if we could get any more detail on the sale of the U.K. refinery and retail assets. Going back through the notes, the thought process has typically been something in the range of $600 million, you said $550 million after taxes are paid on the repatriation.

Is that a material change or that's -- I'm just kind of wondering what else is moving around here?.

No, I think that we just have to pull back a little bit. It just hasn’t gone maybe quite as well as we originally thought. It's always been our thinking that the tax situation would equal itself out on the loss and the gain of the various parts, and I'm going to have to Kevin comment on this.

But I think it's best to pull it back to where we are, and we're just trying to describe this, Roger, just trying to exit this business, trying to be a pure E&P player has been a goal for a long time. I think that's going to be the money that ends up coming back. And I just sort describe it's what that is, and that's what the focus is by me.

And I'll let Kevin add any other color you might need for help there..

Yes, Roger. I mean, frankly, one of the reasons that, that number has drifted down is as we've held on to this refinery longer and longer, if those periods we have -- actually runs cash flow negative, so we've actually eaten into a little bit of what we've had over there. The retail is a good business, it's kept on going along.

But we're just eating a little bit into the cash so we dropped that number, so..

Okay, that's helpful. And then delving in a little bit more to the Eagle Ford Shale, your comments about the Upper Eagle Ford being available more well sites and all that.

I was wondering, we see -- we didn't see it necessarily from you all, though we've heard from a lot of others where you see continued improvements in terms of lower well costs, higher EURs, advanced completion.

Just wonder if you could give us any more detail on those lines, kind of frame up maybe how we should think about future growth at least out of the Eagle Ford even if your long-term kind of growth profile may be from a risk-adjusted standpoint needs to maybe been -- be bent down a little bit?.

No, I mean, I think from our perspective, our EURs that we originally guided to are about the same. 700-plus in Karnes, 450 in the Tilden area, an enormous acreage in Tilden, we found that wells to be very, very economic.

I think when we downspaced from down to 40 acres and maybe going down to 20, we will see some -- in some areas, maybe a 20% reduction in EUR. In some places, none; in some places, no interference, same with the Eagle Ford Shale, Upper. Now we have 11 wells on there, all for various ports [ph] of time, they appear to be in the 350 to 400.

I'd say they're -- to be honest, they're a little insubordinate, a little below the regular Eagle Ford. But again, in pad drilling and the lower drilling costs we have, they're very, very economic on a single-well basis. So we're trying to identify more what our total resource is in the Eagle Ford, which is very, very large for a company of our size.

We're in on the ground floor, we have added a lot of value there. And that's kind of -- I'm not so sure we're into adding of the EUR but we're certainly maintaining. And I think it could be an add of EUR by technology and they're certainly going to be longer laterals, more stages and things to that nature.

We're starting to work a lot on -- as move to change things in certain parts of the field and longer laterals, so I think we have a good bit of an upside to go there technically to change EUR. But we're pat with what we have, and we haven't changed EUR to the enormous resource we have here as shown today here, Roger..

Okay. And well costs, is that fairly static or are you still seeing some....

Certainly, there's some slide in here today as you look into our slides that we provided about our call. I mean, we're doing -- we call the slide doing more with less for the same amount of money, we're drilling a lot more wells. So drilling continues to come down.

I see completions staying about the same, and we're looking at $5 million or less in Tilden, $6 million in Karnes and probably $4 million in Total. We're drilling these wells in 7, 8, 9 days across the play now and that used to be 22 days. So enormous improvements there, and I'm happy with the whole thing, really..

Okay. And then my last question.

The comment in the press release, the $100 million of BOE prove reserve additions, how did that breakdown by geography?.

Let me just get to -- return to this, here in my little thing and I'll tell you exactly. Better than that, I'll tell you off the top of my head, and I won't look for it.

It's about 73 million barrels of the Block H Floating LNG sanction; 14 million barrels of Eagle Ford, and that's the bulk of it; and the rest would be the smaller field adds as it just gets started in Malaysia, but a long way to go there.

So it's a one-off event, primarily on the sanction of the Block H and the signed gas agreement with the Petronas and the continued percolating of adds to lower DD&A and Eagle Ford as we go throughout the year..

We'll go next to Paul Cheng with Barclays..

Hope fully these several quick questions.

Kevin, just want to confirm that the $530 million, that's including the sale of both the refinery terminal and the retail or it's just the refinery and the terminal?.

No, that's all in. That's everything..

That's all in..

Right..

Okay.

Secondly, do you have a preliminary budget for 2015?.

No, not this time. I think this year was $3.8 billion and we're keeping that flat. We have no changes in our recent outlook. And I recall next year's to be slightly less, $3.7 billion or so, but where we're just getting started with that, Paul. But I don't see a big change in it..

Okay.

So it should be pretty flat to this year level?.

Flat or slightly less is my guidance..

And Roger, that -- with the cash coming from the U.K. and there's also rumor out there talking about someone have put a bid on -- I don't know whether that is a percentage of the entire Malaysia or just the U.K.? Yet indeed that you're going to sell part of the Malaysia also.

What's the cash usage that we should assume?.

Well, I mean we've been wanting to repatriate the U.K. first for a long time. I'm very, very anxious to do so, and we signed agreements to do so. That would be coming into our revolver situation, lowering debt here and be better positioned in the U.S.

Largely, I would think, Paul, I mean, there's a lot of squawking, I think, primarily by Reuters in that region about us selling 30% of our business. We really haven't -- we did not start that rumor, we don't comment on it. I'm not a big believer in sharing all the portfolio work.

I believe it's a disappointment primarily on what ends up happening and the timing. As we know these portfolio moves is never what you originally say. And we just really aren't commenting on that, I do have a team of people working our portfolio both in and out, and probably a lot more rigor than we have in the past.

I don't want to be the guy to turn off all lights and all these things. And I want to investigate possible mark-to-markets in our -- in all the things we own globally. And we should do that as a good steward of what we have here, and that's where we are, and I really don't comment on all those articles..

Right. Sure. I understand.

But how about if I can ask that when you have excess cash, what's the cash priority going to be? Is it going to be going back and moving it back into the business for other M&A-buying assets and that type of new platform or they're just more of the priorities returning the cash to the shareholders?.

I think it'd be a mixture of all of the above. I mean, we have had a very strong history here of late of share repurchase. We have not been a historic heavy M&A player, but I think that I'm very, very happy with things near Eagle Ford area where we're working very well. We built a very successful team there in only a 3-year period.

I think that we would look at mixture of all of the above if they were to be some cash there to brought over there. No special dividend, anything like that, but share repurchase and possible M&A into onshore wouldn't be something I wouldn't -- it'd be something I'd be interested in reviewing with our board..

And Roger, maybe that in stuff, say, comment specifically to Malaysia, but on an overall there, when you're looking at your upstream asset to determine that whether you want to sell down the asset other than, say, in terms of the price, is there any characteristic of the asset that you'll you say, okay, once I reach this day, I will be more eager than I want to be a seller..

I have exactly that plan, Paul, but I'm not telling you today..

Okay, that's fair.

In Malaysia, Block K, based on your production outlook, when do you think we're going to reach the 50-50 profit split -- that the profit split, it will go down to 50-50?.

2018..

2018?.

Yes..

And then in the press release, you're talking about the SK oil price, oil and gas price realization lower because of the PSC impact.

Is that a temporary because of the profit -- because of the cost barrel is getting smaller or that this is something more permanent?.

309, 311. 309 has the historic West Patricia in it. So its costs current will be forever. It has a high oil to sea level, so there's no significant changes in entitlement in 309 until 2019 or more. The other block, 311, has some of the newer fields that we -- that we've been -- putting on production of late.

They will not have a significant entitlement change from a barrels basis until 2016. And all of this will be in our plan. At the prices in the third quarter, we've guided that today. And I would say that would improve in the fourth quarter by about $7, $8 a barrel, and then stay consistent there through and on into '16..

So you're not that worried that your miss, it's just a onetime-one-quarter issue, in this particular case?.

309 versus 311. We have a very detailed model of it here. We know what we're doing on it. And so it ended with less cash and that would have pulled back in the quarter. Then we should recover some in the next quarter, and it would be in pretty good shape on a per barrel basis on price for a long time.

And then apart from these entitlement things that are involved in production, many years to go there, and we have all that built into the plan..

Perfect.

My one final one Seal, are we still expecting by 2016, the growth trend will start to kick in? And what is the petrol peak rate you guys are currently assuming several year down the road?.

I don't have that in front of me today, Paul, to be honest with you, on Seal -- Barry do you have the....

I mean, in long-range plan, Paul, all through that, we start to really pick it up in about 2018, and the plan there is to get that thing to 20,000 to 25,000 barrels a day..

So that have not been changed?.

No, that's still where we're at now..

And we'll go next to Paul Sankey with Wolfe Research..

Had a couple of follow-ups, I think.

The first one was, did you really say 75 straight calls to Kevin?.

That's correct, man..

Would that be 18 and 3 quarter years?.

It's hard to count..

That's in 1996 when I was made Director of Investor Relations..

Impressive, Kevin. You've only got 6 years to go and you'll be at 100..

It just means I'm old..

Going to the follow-ups I had just....

Got to have something today..

Yes, I just really have follow-ups in the previous -- in fact, directly from Paul's questions. Were your about these Malaysian tax changes because you're saying now that you have a detailed model of what happens going forward.

Was it a surprise to you this past quarter?.

No. Not so much. Not on the spending side..

Right. So you kind of knew it was coming. And on the volumes, I guess, what we're saying is the operational side was disappointing, and therefore, that's how the target got missed again..

Yes, there's nothing there in entitlement. And looking back, I should have guided a price, and we did it today..

Right. And then, did you say in the Q&A session, just to confirm, that you'll be lowering your long-term guidance now as a result of....

Well, I'm not officially lowering it, but I mean I have to look at it. And I've done this before. We had a really good run through '12 and '13 on production. And I thought that with my Eagle Ford taking on a bigger position, in which does pretty well. Then I -- what I -- I don't have a problem on subsurface, I've just had a lot of third-party issue.

And it really gets down to it. I need the price on top of factor and one of the earlier calls was about primarily in the offshore, and that's true. Of course, Syncrude has been problematic. We're a very good execution company. I'm very, very proud of our ability to deliver subsea project execution, Eagle Ford wells.

And I'm partnered with a lot of people. We're one of the better players. But we simply couldn't overcome this year of the third-party events. We couldn't get perfect enough to overcome it. And I have to get off this parade, and it's going to take some type of factoring to do so. And I rattled off an 8% factor. That's what I'm working today.

But I haven't guided into all of that yet. I got a big thing going and working on it. Working on the budget and the long-range plan right now. But clearly, I need to do something a little bit different. I'm working on it, Paul..

Okay. And then the final one was just again somewhat of a follow-up. But in the instance of a notional billions of dollars of potential additional cash, I think what you've fairly clearly said is it would be something between share repurchase and maybe some Eagle Ford stuff. I'm assuming you wouldn't accelerate your drilling program..

Probably not this time, but I never said we had billions of cash coming back. That's a lot. People would put that word into my mouth there. I mean, there's a lot of yakking in the Internet these days. But I -- if you ask me my favorite things, those 2 would be it today. Everything changes, but that's it today..

And we'll go next to Ed Westlake with Crédit Suisse..

A follow on to Paul's question, I guess. You've always been fairly clear about keeping the Eagle Ford upward that sort of, I think, 70,000 barrels of them and sort of having a plateau. You're already at 53,000.

Any plans to sort of drive that a bit harder or just keep that in the back pocket as a source of longer-term cash flows?.

No, I just think it's -- we need to something that's balanced and very predictable as we have these -- Dalmatian project, Siakap North project and the shallow water Malaysia projects are very, very economic. Even with this pullback in price, these things are enormously economic.

So I need something that's balanced and long term and flat, and we're very happy about that. We want to really do a full-on effort to get back to cash flow CapEx parity and not outspend our cash flow here. And that's the way we're thinking about it, it's flat over increase at this time..

And then on the Upper Eagle Ford you've got, in Karnes, some of the folks there have said, "Look, here's some Upper Eagle Ford wells, co-development, Austin Chalk." And you've had the same type of fumes as some of the productive wells underneath, so that's awesome.

But maybe just some color on any of the tests you've got on the Upper Eagle Ford in the Tilden and Catarina areas because obviously those are the larger sort of areas for your footprint in the Eagle Ford..

In Tilden, we're doing very well, I described the EURs there, they're very near the Lower. We have wells, for me they are a week to 11 months online. We don't have a lot of wells but we're very happy about their performance. We're happy about the lack of interference.

We're actually in the middle of doing some macro sizing interference testing between the Upper and the Lower now. At the Catarina area, this is a place where we've cut the drilling cost just enormously out there, maybe 2/3 reduction. So these are lower EURs as what we've previously guided, but we're really not showing any decline.

And now we're in an area out there that has some Upper Eagle Ford in it and it's performing very well and very near our EURs there. So we're really happy with those 2 areas and have a good, big growth.

And we tried to -- it's quite a complicated slide, you may have to call Barry and go over it, but we're trying to guide as to the reserves that we have and the resources we have in these different intervals both from offsets and downspacing and Upper-type distinctions there.

If you take some time, look through that and call Barry, I think you'll get a better feel that we put a lot of rigor around this resource calculation..

And then just switching to Titan. I mean, obviously, you're disappointed with the main objective, and then you're sidetracking the well. Did you see something in the well that gave you because -- but it seems like it's across the fault block.

I mean, just give us some sense of the confidence interval in the sidetrack or what you saw to make you do that..

Well, we saw a -- this is again why we do this business. I mean, this is why we have the strategy, we have what we're doing. And we stopped drilling in 700 feet of high-quality sands, some of the best quality sand I've ever seen in my career. So would've had -- this is 700-foot-plus type of a column here we could've had success.

And what we had risking here is we needed to have oil be formed here and oil be migrated here. And when we needed a lateral seal, again, it's all for Titan to be very big. And we didn't have that lateral seal. And when you do the modeling it appears that the oil would accumulate just at the very most up crest and then possibly across the fault.

And we know that from Appomattox, we have oil levels that are different across major fault features. And we know that here, we see that here, and because we had oil, and this is oil that we got from MDT in the sample. This isn't fake oil, this is oil you can pour out on the desk here.

We -- once we find that in a very small accumulation we have, we're going to go through this across the fault adjacent well that we have because the modeling work shows that it should accumulate there. And that's why we're doing it. I'll consider the 25%, 30% chance it would be anywhere else, and a deepwater-portfolio-type of a risk here..

And the timing to finish that sidetrack, is that going to be as long as a normal well or?.

No, we kicked well off at 20,000 feet. I think, we're drilling a 27,000 or 28,000, be over in about 40 days, something to that nature..

And we'll go next to Pavel Molchanov with Raymond James..

Well, I appreciate the fact that you're not going to comment on press rumors.

But conceptually, what percentage of your production base, reserve base, whatever metric you choose, would you like Malaysia to represent in an ideal scenario?.

Oh, I don't know. Well, it depends on -- these fictitious things is hard to say. I mean, I guess -- it's just hard to say. I mean, there's different days, different situations, and I hate to say that. At this time, I would say that typically we do better when we operate, when we're in charge of the fields, bring a competitive advantage to that.

I'd just rather leave it at that..

Okay, fair enough. And then on the U.K. monetization. The press release indicated that concurrent with the sale of the refinery itself, you're looking to monetize the downstream or the retail assets as well.

Any sense of what the level of proceeds could be from that part of the sale?.

We're just really, at this time, trying to say that we're going to bring all this money home as we said in the comments here today, which is $550 million.

I think you would describe that business as an EBITDA-multiple-type sale that wouldn't be shocking and wouldn't be unbelievably high or unbelievably low but very fair and very known to benchmarks of industry.

And to me, it's about exiting that business, becoming focused on E&P, continuing with the execution of that, which is our goal, getting the money back into our revolver and have a very low revolver and flexibility here for Kevin and moving forward. That's kind of what we're focused on..

Pavel, $550 million relates to all of the downstream assets over there..

Okay, understood. And then just a quick one.

On Titan, any sense of how long until the sidetrack reaches Kiti?.

Just said, I think about 45 days from now..

45 days, okay..

And we'll take our final question today from John Herrlin from Societe Generale..

Two quick ones. You mentioned that OBO situations can sometimes be problematic.

Is Syncrude still strategic now that you have bigger North American production onshore?.

Well, I mean, it's strategic and it's a big part of our R/P and we got in on that at very, very low ground floor prices. And it still delivers $200 million or $300 million of cash to us in Canada. I would say that if we could have some more success in exploration, it might not be as strategic.

But we wanted that our R/P to the 10 level and on, and it's in our plan to do that and it's a key part of that. Are there other things that could tell us that goal to be made and allow it to be less strategic? Yes. I would say, today our early entry and the cash it provides and the R/P is the main and only strategic advantage that gives me today.

That's a very disappointing year, and it just continues to struggle there. And even though this maintenance is behind it, to get back going again has been difficult. So -- but that's how I view it. It's more of an R/P, very critical to us at this juncture, but getting less all along..

Okay, that's fine. Last one for me is on the U.K.

Any charges associated with the sale that you'll be taking any future charges?.

We made a big write-off last year as to the assumed sale. And we think we're okay there, but you'll never know if it's over, and we got to close out our books. And I'd be very anxious, even for this one, to end this chapter, I assure you..

Okay. Yes, that's why I was wondering whether there was something incremental..

And that does conclude the question-and-answer session. At this time, I'd like to turn the conference back to Mr. Roger Jenkins for any additional or closing remarks..

I appreciate everyone calling in today. We'll be back the same time and station in late October, it will be cool. Football season will be going, and we'll try to have a better quarter and get well in here. And we appreciate all the time, and we thank you, all..

Again, that does conclude today's presentation. We thank you for your participation..