Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation Third Quarter 2020 Earnings Conference Call. [Operator Instructions] I'd now like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead..

Thank you. Good morning, everyone, and thank you for joining us on our third 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; and Eric Hambly, Executive Vice President, Operations.

Please refer to the information on slides we placed on the Investor Relations section of our website as you follow along 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.

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 discussions of risk factors, see Murphy's 2019 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..

Thank you, Kelly. Good morning everyone and thanks for listening to our call today. We continue to successfully execute our focus strategy, and Murphy steadfast with the goal of keeping the strong balance sheet through commodity price cycles, and plan to allocated free cash flow to reduce overall debt levels and an oil price recovery.

Despite the record breaking hurricane season this quarter, we still achieved free cash flow above our dividend. Our third quarter results were helped by the flexibility and strength of our multi-basin portfolio, as production from our oil-weighted offshore and onshore plays continues to see higher margins, driven by lower cost structure.

We know that to remain in business over the long-term, we must operate in conscientious manner protecting and supporting not only our employees, the areas in which we work. As disclosed in our recent 2020 Sustainability Report, I'm proud to say we have proactively established a greenhouse gas emission intensity reduction target of 15% to 20% by 2030.

We're further advancing our diversity inclusion programs and practices. A multi-basin portfolio provides additional risk reduction and flexibility, we remain committed to our focused exploration portfolio, and our partners as we see it has the ability to deliver company making resource upside to our shareholders.

On the Slide 3, looking back on the quarter, Murphy produced 153,000 barrel equivalents per day, with 86,000 barrels of oil per day. Production was significantly impacted by historical Gulf of Mexico storm season, resulting in 12,000 barrels equivalents per day shutting compared to our guidance of just under 5,000 barrels equivalent per day.

This impact was partially offset with stronger performance in our onshore business. We spent approximately $120 million of accrued CapEx in the quarter, including $19 million for the construction of the King’s Quay Floating facility. Our various oil pricing points traded closer to the WTI in the quarter than usual due again to the unique storm season.

This led to realized oil price of nearly $40 per barrel on par with WTI. Our realized natural gas price continues to improve at $1.78 per 1000 cubic feet in the U.S.

Further in the Tupper Montney, the AECO / Henry Hub basis differentials are produced and tightened due to improving market access from infrastructure build outs, and less capital spent in the region by our peers. I will now turn over to discuss the financials with our CFO, David Looney..

Thank you, Roger and good morning. Slide 4, like our peers ongoing low oil prices continued to affect our business, resulting in a net loss of $244 million, or negative $1.59 per diluted share for the third quarter.

Several non-cash charges impacted earnings for the quarter, including after tax impairments of $146 million, primarily related to the Cascade and Chinook field in the Gulf of Mexico. Non-cash mark-to-market loss on crude oil derivatives and contingent consideration of $66 million and restructuring expenses and unutilized rig charges of $8 million.

After backing out these items, Murphy had an adjusted net loss of $24 million, or negative $0.15 per diluted share. Slide 5, with oil prices off their record lows, our net cash provided by continuing operations improved to $209 million in the third quarter, including a cash outflow of $28 million due to a working capital increase.

When combined with property additions and dry hole cost of $134 million, including $23 million for King’s Quay, we had positive free cash flow of $74 million in the quarter. Excluding the working capital change, we would have achieved free cash flow of $102 million.

Following our budget changes and cost cutting measures taken earlier this year, we have maintained strong liquidity of $1.6 billion, including $220 million of cash as of September 30.

Our G&A expenses continue to trend in the right direction, and we remain on track for achieving approximately $100 million in total G&A reductions between 2019 and 2020.

Lastly, Murphy has taken additional action to protect its future cash flow with additional 2021 crude oil hedges, as well as fixed price forward sales contracts for a portion of our Tupper Montney production through 2024.

Slide 6, liquidity is a key tenant of our business and we have maintained a strong balance sheet with $1.4 billion available under our $1.6 billion senior unsecured credit facility, as well as $220 million of cash and equivalents as of quarter end.

Murphy remains focused on reducing our total debt level with excess cash flow, including our next maturity in mid-2022. This will give the company even further resilience in commodity price cycles. As stated last quarter, our goal remains to have at year-end, nearly the same level of liquidity as we did at the beginning of the year.

With that, I will turn it back over to Roger. .

Thank you, David. On Slide 8, Murphy's long history of protecting our environment, employees, and all of our stakeholders achieved in part through our strong corporate governance processes. We continue to achieve low spill and recordable incident metrics, also reducing environmental impact with flaring reductions and increased water recycling.

We've also expanded our internal diversity inclusion practices and programs and maintain a program to aid impacted employees in towns of need through our Disaster Relief Foundation, which is taking place now, as we're impacted by Hurricane’s pulleys on the Gulf Coast.

Our operations team has made ongoing efforts to reduce our environmental impact while lowering costs due to changes such as electrification of our practically and opening remote operating center for managing all onshore Canadian operations.

Overall, these small changes add up to a larger, longer impact by reducing downtime and costs and improving the efficiency of our field employees. Additionally, we utilized bi-fuel hydraulic frac spreads for all well completions in Canada this year, which resulted in considerable Co2 emissions reductions.

On Slide 9, we recently released our 2020 Sustainability Report which features expanded disclosures and metrics and more closely aligns to various reporting frameworks, including TCFD and SASB. A key highlight of our goal is reducing greenhouse gas emissions intensity about 15% to 20% by 2030 from 2019 levels.

This report also outlines diversity disclosures, workforce development, and employee engagement programs. Murphy has also expanded our HSE Board Committee to include the oversight of corporate responsibility. We formed an ESG Executive Management Committee and created a new director of sustainability role.

We will continue to evolve and advance our sustainability efforts. On slide 11, like most peers, Murphy is taking deliberate actions to have a sustainable business in the New Energy landscape. Prior to COVID, we streamlined our portfolio to high margin or weighted assets to accretive deals.

We refinanced certain bonds last year, and are maintaining our liquidity with manageable debt structure. Post COVID, we contain the streamlining and reducing costs, with adjustments in capital and dividends.

We maintain operations in multiple basins with focused exploration opportunities in certain countries outside the United States, providing us with portfolio diversification for long-term resilience. Slide 13, looking at our Eagle Ford Shale business. The asset produced near 35,000 barrels equivalent today in the quarter which is ahead of our guidance.

We continue to see improvements in our base oil performance and have established low decline rates, reutilizing our remote operation center and operating model to lower downtime and wells and facilities are optimizing artificial lift performance.

Production from the wells brought online prior to 2019 delivered over 20,000 barrel equivalent today in this quarter in straight less than 14% decline over the prior 12 month period. We anticipate 2021 base decline of just 22% for our Eagle Ford asset and this is a significant improvement in base decline for the Eagle Ford.

On Slide 14, Murphy produced 13,000 barrels equivalents per day in the Kaybob in the quarter with 4 wells online. This asset continues to show strong well performance with tightening differentials, and is achieving higher cash flow metrics. Our team's done a tremendous job improving the efficiencies across their onshore business.

Our new remote operating center in Fox Creek Canada manages all onshore Canada production activity and well performance which will enable us to reduce downtime and costs through more expedient repairs. Slide 15, our Tupper Montney wells produced 235 million per day in the quarter and continue to generate positive free cash for the year.

Since our last earnings call, Murphy has added fixed price forward sale contracts in AECO and at the Malin Hub through 2024, locking in further price protection. As stated earlier, we've seen improving basis differentials and higher prices coupled with higher EURs and strong execution ability.

Slide 17, in the Gulf Murphy produced 59,000 barrels equivalent per day in the Gulf of Mexico this quarter, which is negatively impacted by record breaking storm downtime of 12,000 barrels equivalent per day. It's also caused a delay in achieving first oil at Calliope which is now scheduled to produce in the second quarter of '21.

The non-operating Kodiak and Lucius wells remain on schedule, with the Kodiak executing later this year. Lucius drilling is ongoing with strong results in the first well of the program. On Slide 18, on our long term projects. Our Khaleesi, Mormont and Samurai projects and non-operate St. Malo Waterflood development remain on schedule.

Instruction in King’s Quay Floating Production system has advanced and is approximately 77% complete with mid-22 remaining as a target for first oil. At this time, we've submitted all permits to the Khaleesi, Mormont and Samurai projects. We're excited to launch the drilling campaign in second quarter '21 and take the next step toward first oil.

Two rigs are presently drilling at the St. Malo Waterflood project, and the first producer well has shown results to plan. And exploration on Slide 20, we continue to progress our various exploration projects as we maintain optionality across our diversified portfolio.

This quarter, our operating partners the Highgarden well in the Gulf of Mexico and has encountered delays in drilling due to the significant storm season. Our Vietnam plans move forward with partners signing the joint operating agreement on Block 15-2.

We remain excited for the opportunities here but more than 900 million barrels of oil equivalent of net risk resources across our exploration portfolio. On 22, on our future plans.

For the fourth quarter we anticipate production in the range of 146,000 to 154,000 equivalents per day, guidance has impacted by two factors, actual storm downtime earlier this quarter of 8,000 barrels equivalents per day, and a planned downtime of some 6,000 equivalents per day as well.

We maintain our full year 2020 capital expenditure guidance of $680 million to $720 million, and note that $649 million has been spent through third quarter. Additionally, we're on track to reduce full year G&A expenses by $100 million in 2020, and improve our liquidity position by paying down our revolving balance.

We maintain a deep rooted safety culture at Murphy, leading to strong HSE performance throughout 2020, including safety protocols established early in the year to protect our employees and contractors from COVID-19. Murphy has made significant progress on our long-term Gulf of Mexico projects this year.

At this time, all permits submitted for approval in advance of our campaign launching next year. Meanwhile, our onshore team is preparing to launch our 2021 Eagle Ford drilling program.

Going forward, as previously stated, we plan to maintain a flatter production profile of 150,000 to 160,000 barrel equivalents range with CapEx in line with 2020 spending for 2021. Our focus remains on cash flow CapEx parity after dividend, with debt reduction in a price recovery.

As noted in our 2020 Sustainability Report, we have been more focused on having sustainable and transparent operations, including our proactive goal of reducing greenhouse gas emissions intensity. We will continue to allocate capital to our unique exploration program.

In closing, I'd like to thank our talented group of employees for their innervations and dedication this year, in light of all the challenges that we've faced. I'd like to turn the call over back to the operator for our question period. I appreciate you this morning. Thank you..

Thank you. [Operator Instructions] So your first question comes from Duncan McIntosh from Johnson Rice. Duncan, please go ahead..

Thanks. My first question would be on a ’21 and kind of nothing has changed versus what you message on the second quarter.

But what are some of the things that you could do that might put you more towards the higher or the lower end of that 150 to 160?.

Well, really, we feel real good about that, we were working toward that. I think our main focus is to stay with that range and get our CapEx in a way where we can have recovery prices and have more free cash flow and debt. So really not that interested in moving it up and down the assets that we have today, clearly for this quarter.

With the guidance that we have, you could put on top of that the production we have already lost with this significant hurricane season. We have a pretty robust set of production going into the year. And then, we're really looking at executing that and then not really wanting to do any levers to move it up or down.

So I feel good about hitting that target, and keep in mind too that, we have almost $300 million set aside for capital for Khaleesi, Mormont and Samurai and St. Malo.

So, the production that we have and the CapEx we have for cash flow CapEx parity to pay our dividend and stay within our liquidity, is our main focus rather than production increases at this time, Duncan..

Okay, thank you very much. And then, since I know it'll get asked anyway, on King’s Quay and the sell down processes, any update there, are things still progressing or any those slots have been taken out.

So just kind of how you're thinking about that now?.

Yeah, I'm going to talk about that and thanks for asking that, get over with here. On King’s Quay, really I made a mistake that I rarely have ever make in business development. We've done a lot of business development here at this company. And that's commenting on a closing timing of a business.

And making this the way that's negotiated and I'm not going to be doing that further. And but I will say that it is progressing. King’s Quay continue to progress. There was an email on my phone before walking in here. But naturally, I'm focusing on this meeting at this time. King's Quay is a very valuable midstream asset for our company.

It's an asset that's completely almost de-risk. It's been built through COVID and which is no easy task for our team, so we build through significant typhoon season that hit that project as well twice, and is now 80% complete. King's Quay is set on top of a very valuable field and Khaleesi, Mormont that’s been previously drilled that we purchased.

So, its value has not diminished at all with this closing delay. So, where we are there's two groups involved with this closing an owners group and a producing group. With our owners group, we've made a clear directional path forward there, and that we're now working with our producing group toward closing. So, I am pleased with the work in progress.

It's a good derisked asset, and we're progressing and settlement. I'm just not getting involved with the date of all that here, Duncan to be honest with you. .

Yes, sir. I appreciate it. Thank you..

Yeah, no problem. Thank you for asking. .

Your next question comes from Neal Dingmann from Truist Securities. Neal, please go ahead. .

Morning Roger, could you be [Indiscernible] correct me if I say too much on this just on that Green Canyon [Indiscernible] [Multiple Speakers].

I'm having a little trouble talking so a little bit slower for me here. .

Sure. I just was wondering on Green Canyon 895.

I know there are storms this side, anything you could talk on timing, etcetera around it?.

No, this is a rig operated by another partner. It's an experienced partner that we know well. They've had downtime with the rig pulling the rods and various things that happens in typical offshore exploration, the Gulf this time of year. And we’re in the middle of recovering from the last storm.

And getting set up back on the rig to kind of know where we're going forward, we progressed the oil, drilled through salt, and made a lot of significant progress. But it's really a held up for hurricane reasons, primarily right now would be the case with almost any rig operation conducted this quarter in the Gulf..

And then just for a follow-up, I was wondering on Canadian production, nice increase in the third quarter I think by 6% Canadian, I should say, onshore production.

Could you give comments on there, do you think that could continue in that regard or anything you could talk about the onshore Canada?.

Well, our Canadian operations are going extremely well. We also have to keep in mind that, sometimes it kind of glosses by all the significant events that happen is coming like we close our office there, we’re working it now in Houston. You see in my comments today, we set up this remote operating center.

And to continue with these incredible results is really outstanding, considering what all we've done on the G&A side and office moving. These assets, the Duvernay shale is performing extremely well right now, and gives us a lot of flexibility on all kinds of things in our company for the future.

The wells are performing better this year than we thought. We’re hitting above guidance in the asset. The pricing there has gotten just below at times of the Eagle Ford due to a lot of weird differentials going on in the Gulf Coast, and a lack of capital being spent in Canada in general.

So, these assets are doing well also Montney doing extremely well on decline rates. And we mentioned in our script today, all this focus with these operating centers on these small amounts of downtime improvement, but big significant improvement in Eagle Ford to improve the base.

So, Eric and his team with limited capital are spending a lot of time focusing on base production. As I mentioned, the Eagle Ford has very low base decline, lower than we've ever had. Tupper is no different and Duvernay is just a smaller asset, but it makes 13,000 barrels a day at prices just below the Eagle Ford.

So, a lot of unique things going on in Canada, around gas there right now most people paying attention to this. It's quite on the outer realm. But AECO has been very positive. There's been a lot of debottlenecking, and things that were talked about a few years ago.

Almost 1.5 BCF of additional new gases supply availability in pipes by 2022, the supply in the countries declined 2 BCF a day due to COVID. Investing gas demand in Canada is improving, with the goals switching some 5 BCF a day. Another LNG there in 2025, the [Indiscernible] hub was very poor, from ’16 to ’19.

Now, that's all recovered, and it's very nice basis going forward due to all these pipes. So Canada is slipping place, but has greatly improved and allows us a lot of flexibility in our diverse portfolio that we talk about all the time. But if you’re in the game and you do different things, the game will come to you over time.

And that's kind of where we are of that asset today..

Great details. Thanks, Roger. .

Thank you..

Your next question comes from Gail Nicholson from Stephens. Gail, please go ahead..

Good morning, Roger. You guys have done a really nice job of LOE both in the Karnes as well as the Eagle Ford.

Looking at the Eagle Ford, with the artificial lift optimization and facility optimization that you guys are doing that lowers the baseline, does that also have a positive development potentially on LOE going forward?.

Yeah. I'm going to let Eric take in all that glory and let him answer that question for you. .

Yeah. It's a great question. Obviously, the more we can get production from our base, and continue to lower operating costs, the stronger performance we have on free cash flow. We're pretty happy with Eagle Ford having just over $8 of BOE OpEx in the third quarter.

Our per BOE OpEx in Eagle Ford is, of course, dependent a fair bit on capital allocation going forward. So, we are giving a lot of focus on what 2021 looks like. But we are working very hard as an operations team to continue to maximize production and minimize spending. And I'm really happy with how my team's done on that. .

But [Indiscernible] that these overall OpEx levels for us this quarter are good with a bunch of the Gulf shut down. That's also hard to do on a per BOE basis, very hard to do..

Yeah, I think I was going to mention.

I was wondering if $10 unchanged number per BOE is a good run-rate to use in the Gulf going forward, or when we return to kind of a normalized rate ex-downtime, that will likely be better at workovers?.

It's going to be in that range. But ex-workovers I think we're really good shape on OpEx on gulf doing really well there and working on a bunch of plants to improve it..

Great. And then, Roger, you guys have submitted all the permits for Khaleesi and Mormont and Samurai.

Can you just talk about what's the next piece of the puzzle? Is it approval or just the standpoint of any clarity on timing of that?.

Well, there's a lot of, as you can imagine complexity around that with this, a lot of yakking really on the administration change that [Indiscernible] are parts of department and continue to operate through all administrations. We hope to gain our approvals. We'd like to gain those approvals in January as you would anticipate, before January ’21.

Working toward doing that, you have to get them in and submit them. They're quite a bear documentation there that we have to go through. So got that in and we own these assets, we have a right to these assets, but if all this yakking and talking about different things, it's really not known at this time of course.

We feel really good about our position. We've gone through a lot of presidents in seven years and a lot of different things. This administration that's coming in was also part of a tried attempt to stop drilling in Macondo.

We're very much understand what was called upon then, but to keep them on these fields are already drilled, which is an advantage where the completion is different than a drilling permit.

Keep in mind that what drilling is to be done is unknown pressure regimes, which gets away of some of these issues put on us post Macondo by the prior administration. All these things we're very aware of, we're very knowledgeable about going through and working all of our options.

And again, on all those things, Murphy always has another thing to go to outstanding Canadian assets, thousands of locations in the Eagle Ford exploration, out of the United States. So very rarely find this to all in one ball, thereone ball. So that's our situation Gail. So that’s our situation Gale as you know. .

Wonderful. And then just in the standpoint of the 2022 notes. You guys have an undrawn credit facility, cash on hand. You have the flexibility to adjust budgets, make sure you generate free cash in '21.

Just an updated thoughts and how you guys are thinking about those upcoming maturities?.

Yeah, Gail. This is David Looney talking. I mean, obviously, we have a total of $578 million coming due in '22 not quite evenly split between June and December. We obviously keep an eye on the bond markets and candidly where the bond markets are today and where our papers currently trading is certainly not anything that's attractive to us today.

But as we've seen over the last several years, there's a high correlation, I think between where bonds trade and what oil prices look like et cetera. So, we don't have to do anything, immediately, obviously. And we still have an excess of year and a half, 18 months before that first maturity. So, we look at that.

As you point out, we do have plenty of availability on the revolver and if the bond market didn't come back to us, if you will, over the next 18 months to two years, that is an option, but obviously we look at it, we watch it and we try to -- we try to be opportunistic. .

Great, thank you so much. .

Thanks, Gail. I appreciate. .

Your next question comes from Roger Read from Wells Fargo. Roger, please go ahead. .

Good morning, Roger.

How are you doing?.

Doing well, Roger. Good morning to you. I guess a couple things I'd like to make sure I understand a little better. You mentioned a couple different times Eagle Ford Shale well, base decline is really, I don't know we call them shallow out of 22%, but certainly better than what we typically see.

I just wondered what all is factored in there? Is that a larger base of truly mature wells that are declining slower or something you've done different turns choking back production early on or combination of factors?.

Well, what we've grow done is kind of right size this asset around 30,000 a day going forward, a really low maintenance charge to do that CapEx. And that's really what we're doing. I'll let Eric expand further than that for you, Roger. .

Sure. I mean, we have a natural phenomenon with the shale oil wells that have a shallowing decline through time. If you look at our Eagle Ford this year and what our thoughts are in terms of the bass performance next year, with a fairly limited capital allocation to Eagle Ford in 2020, we have less production from high decline rate.

We've established as we comment on our slide deck, a 20,000 barrel a day a piece of our business from wells brought online prior to 2019. That has demonstrated very shallow declines, which of course, we expect to continue to shallow going forward.

So, our focus on managing our base on limiting downtime, on maximizing production, on increasing well performance through artificial lift optimization, allows us to shallow out our decline even more than sort of a natural phenomenon.

And we've been happy to see that performance over the last 12 months or so, and expect it to continue going forward as the wells naturally shallow up and decline as well. .

Okay.

So just kind of isn't all of the above process is really the right way to think about it?.

That's correct. Everything you said. .

All right. Then, I don't know which one of you all wants to take this, but on the CFO parity for dividend in CapEx, and also the desire to pay down the debt that's out on the revolver.

I'm just curious, where does the extra cash come from to pay down the revolver? Like, it's just based on oil like 44 for parity, 45 you're going to move it around as oil prices move around, just a little more help on that?.

Well, as I said, I'm not really getting into it today, Roger, I'm sure you can understand why. But, when we sell down this asset to take our revolver to zero this midstream asset that we have King's Quay and if not, that would stay on there and a low-40 world, because cash flow CapEx parity with dividend otherwise.

And then we would make another arrangement on selling that if you will, if we need to or want to. We would still have very good liquidity even with that remaining cost of the project is almost built. So that's the issue there, Roger..

Okay. I appreciate it. Thanks, guys..

Thank you. .

Your next question comes from Leo Mariani from KeyBanc. Leo, please go ahead. .

Leo, good morning.

How you're doing?.

Hi. Good morning here, guys. Just a follow-up on that last comments you made there with respect to the King's Quay. You said that the project is 80% built at this point. So I guess just in the events that, this deal doesn't go through.

What would be kind of the remaining King's Quay spend that you'd have to put in place in '21? I'm getting the sense it's probably not a lot of left here..

I would say that number is probably less than 100. In the 70 range, it's going very well we have a team there on the ground today. And we're executing that well and it's an asset that is valuable to be sold to someone, I'm not concerned of that. And -- but not really negotiating that here anymore, Leo..

Understood. Okay. .

We have a lot of flexibility around that you can see in our debt, in our free cash flow we almost made enough free cash flow this quarter for that. So we're doing really well with our operations, really well with our G&A, really well with our LOE, even through these storms, we've cause of our diversity and our other assets are outperforming.

We're very well positioned to take on what we need and these assets where we work, and of course, have plans to have any outcome involved with that if we need to. .

Okay, understood. And I guess I just wanted to get a sense, I know you guys are talking about kind of restarting the Eagle Ford operating program next year, that's something that hit the ground running pretty early, with a couple rigs in early 2021.

What can you kind of tell us about the way you're looking at the tackling Eagle?.

Well, we have to keep in mind, we have to meet with our board and approve our budget in December, we still have to do that, notice where people do their budgets almost a year ahead, like soon as you do your budget, do the next budget, which is quite a phenomenon we have going out there.

So, but to do that, but we have ducks to do an Eagle Ford probably 14 or 15 of them. I see Eric nodding his head in the affirmative there. And we have ducks to do and some drilling to do, we got plenty of wells to do with a thousand locations there.

But again, that asset is performing very well on the base, that asset is toning in well, at a flatter profile with low maintenance CapEx going forward a lot of flexibility. And of course, like most operators, I would anticipate a front end loading of operations in the year. I don't think will be uncommon in that regard. .

Okay. And I guess maybe just on Mexico, certainly, I think you guys have been talking about a couple wells next year at a minimum.

Just try and get a sense of where you are in that process, I know you got some partners to kind of negotiate with, but is that something we could potentially see start drilling first half of next year, I think it's more second half.

What are you going to tell us about Mexico?.

We're in the middle of our partners on the budgeting there, as you can imagine that things suggested taking close regard these days with these types of prices. I would anticipate it late next year, we have two very nice, very large prospects there that are coming out of the multitude of options we have there.

And also, we’re very excited about our Brazil wells and the budgeting of that with our partner, Exxon Mobil. That will be about a second hack spud as well. So a nice second half year type of opportunities there for us, Leo, in our diverse business that we have. .

Okay, that's very helpful. I appreciate it. .

No, thank you. .

[Operator Instructions]. And your next question comes from Josh Silverstein from Wolfe Research. Josh, please go ahead. .

Good morning, guys. Just on the King’s Quay transaction here. You highlighted the value of the project completion date. I'm just wondering, flipping this around, given how far along it is.

Would you actually consider keeping it at this point, it doesn't seem like you want to do that, but could that potentially be on the table?.

Really, trying not to negotiate it here, Josh, as I said, we can do that, we can afford to do that, we have all the ability to do that. We have decided to go down this road. We've progress the road along the way, and continuing to progress that. It's just a delay in the closing timing so far is really the issue.

And putting out additional dates on that is not helping the matter at all, and continue to progress towards the original goal. But we have ultimate flexibility to do anything we need here.

But the goal is still to do it and as long as we're progressing as I'm saying, then we're going to continue on with that until it no longer progresses, of course, but that's not the case today. .

Got you finally. And then, I wasn't sure if it isn't accounted for. I think it was asked a couple questions ago.

But as far as the volume guidance and spending for roughly kind of flattish around $700 million year-over-year, what's the breakeven that you guys have on crude oil and gas price, I know there's a little bit of flexibility to shift capital around but what was the…?.

Breakeven in what way, Josh?.

Cash flow breakeven. .

With dividend or with capital?.

Of course, the dividend. .

In the low 40s, very low 40s. Below 42..

Okay, thanks guys. .

No problem. Appreciate your call..

Your next question comes from Arun Jayaram of JP Morgan, please go ahead. .

Welcome in, you’re last one today. .

Hey, Roger, how are you?.

Doing great..

Roger, wondering if you could give us an -- and again, I apologize. I'm dialing in a bit late.

But I was wondering, you could give us an update on the development program at Khaleesi and Mormont and confidence and delivering on that? Is it first half, is it '22 production outlook?.

Yeah. Well, first step, the facility which is going very well, we have very experienced in building and constructing these things. That's and I think we are in charge of that, an asset that we own we're also the operator and building it. So that's a big advantage, and a hell of an advantage.

And so then, it really becomes, the wells that are drilled Khaleesi/Mormont/Samurai will require some additional drilling. Khaleesi/Mormont is greatly derisked by I think, six -- I mean, wellbore penetration is seven wellbore penetrations and six wells that are cache there. And we have the wells or pay on log. We have the reserves third party.

So you need to get out there and do the completions, it's real important to differentiate between completion and drilling permits if we want to have the concern about some of these political matters and things that nature which we're very astute about and knowledgeable of. And so, it's an asset that's set up to perform and go forward.

And we really, we have the rig contracted. That's also important in the permitting, that's become more specific through the years and real pleased about just executing like we do all of our business, and we've executed many deep water, different kinds of wells and projects all over the world.

And this one's in line and very pleased with my team and we're doing well..

Okay. Roger, my second question is just a little bit more, maybe a color or clarification on Mexico and Brazil next year.

Does the Mexico plan include the Cholula appraisal or are you direct drilling some rank exploration wells? And then you're saying that in Brazil, you could spud a well in the second half of '21?.

Yes, that's correct. Well, we're not spudding our operator ExxonMobil is. .

Exxon, yes. .

Yes. And in Mexico, we have a call between -- Cholula is an appraisal program approved by the government there. We do not have to execute on it, we have time or we can drill a larger structure, a larger subsalt structure, which has been derisked by some other wells in that region, and much larger prospect if you will, that we may lean toward.

But we're working with our partners now the timing and what to choose between those two at this time. We at Murphy are leaning toward the larger opportunity over the [Indiscernible] this time. .

Flattish CapEx guide right for outlook I should say. .

Yeah, [Indiscernible] also be clear on the CapEx. For next year, we're guiding a CapEx similar to this year. I think it's trending a slightly lower than the midpoint of 2020 at this time.

And also the '22 CapEx would be similar and after that is much lower CapEx and significant free cash flow coming out of this business as the offshore projects come on. So this idea that we'll have that CapEx forever, it really isn't our point we're trying to make in this long-term guidance.

'21 and '22 are the higher CapEx levels by far, absent some incredible exploration success in our business. .

Okay, I got one more Roger if I could sneak one more in. You did note that most of your debt maturities are in 2024 and beyond.

My question is you do have some 2022 maturities and you've got some time on those but, what is the general thought on addressing those? Do you issue new debt to term those out or where's your head today on in terms of those maturities?.

Well, while you were talking to Lee or Gail asked that question and David answered it but because you're a nice guy, and we will answer for you again. So David, tell him one more time. .

Yeah, Arun. Obviously, we have like $260 million coming due in June of '22 and $320 million or so in December. So it's certainly on the front of our minds. We as you know, we obviously watch the market on a regular basis. Bond market today for names such as us is not great.

Obviously, there's been a lot of uncertainty around oil prices, political situation, et cetera. So I think, we still want to see how that plays out. We watch it. We're always prepared to go if and when necessary and if and when the market sort of moves in our favor. We feel like we do have that opportunity if we need to.

We have about a year and a half now before that next maturity. So, we're watching it, we look at it and frankly, if it doesn't ever become attractive to us over the next 18 months, we do have significant availability, obviously on the revolver to do something of a temporary nature, if you will.

And then, as we get into a different environment Roger mentioned, as you get out past 2022, particularly our CapEx numbers decline in a big way. And as such, it frees up a lot of cash flow to pay off some of these bonds if in fact, we need to do it at that time.

So, we look at it regularly, consistently and feel like we have a full complement of opportunities to take advantage of it. .

Also I think it's important that the separation of the notes do in the middle of year and end of the year in a post COVID world, six months is a lifetime earnings you know. So I think that's also pause. It's not like it's due in the middle of the year. So that's almost two years away.

Over two years away for the second note which first can easily placed in a revolver. And the key for us is keep our revolver empty. And then when you do that, you can get another one very easily. Also to keep them on Murphy, where we are we have an unsecured revolver.

We've never had a security of any type of revolving credit facility in our company history, nor [Indiscernible] and an enormous flexibility from Murphy on our liquidity and our evolving situation and our long-term positivity in the market around bonds and the deals that we've had in the past..

Got it. Roger, thanks for that. There's a lot more and I guess that serves me right for getting on this call first. So anyways, thanks for your comments..

No problem Arun. I'll talk to you soon. I appreciate you..

Thanks..

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

I appreciate everyone calling in today. We'll see you at our next call in late January. Thanks for everything. See you soon. Take care..

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