Q2 2021 Murphy Oil Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation second quarter 2021 earnings Conference call. If at any time. During this call you need assistance. Please press star zero for the operator, I would now like to turn the conference over to Kelly Whitley Vice President Investor.
<unk> 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, it's 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 <unk> Senior Vice.
<unk> technical services. Please refer to the information of slides, we 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 1095 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, Dan 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 would now like to turn the call over to Roger Jenkins.
Thank you Kelly and good morning, everyone and thank you for listening to our call today.
The long term debt by $200 million by year end of 2021.
We've reached the announced the redemption of $150 million of 6875 per cent senior notes due in 2024 and now today, we are able to increase our delevering go to $300 million assuming of $65 oil price for the remainder of 2021.
The additional cash flows of accomplished not only through stronger oil prices, but also ongoing operational excellence is we've achieved less operated downtown offshore oil experiencing the benefits of our optimization efforts and upgrades completed over the previous 18 months.
Along with content continuing to bring on our onshore wells online below budget and ahead of schedule.
As a result of this work production from every single asset was above the midpoint of guidance of this quarter with all onshore operations exceeding the high end of the guidance range.
Additionally, we produced 100000 barrels of oil per day in the second quarter topping our guide by 5% offshore Gulf of Mexico projects remain on budget and on schedule.
We also remained focused on advancing our exploration program, we participate in the drilling in Brunei in the second quarter with the Jagger thrust 1 the ex exploration well along the Spudding non operated silverback well in the Gulf of Mexico.
In the fourth quarter will participate in the drilling of the cut throat exploration well in Brazil.
On our sustainability reported on slide for a.
A report has been published on our website and includes expanded disclosures to share of sustainability efforts and further Linus with multiple international standards, such as the UN sustainable development goals and 5 reporting principles outlined in sustainability reporting guidance for our industry. We've now established ago zero routine flaring by 2030.
<unk> and obtain third party assurance of our 2000, Tony scope, 1 in scope to greenhouse gas emissions of.
Additionally, we have revised and strengthened our climate change the physician instituted the human rights policy.
Advanced our diversity equity inclusion efforts.
The statistical highlights include receiving a 47 per cent reduction in scope 1 in scope to greenhouse gas emissions since 2016, and a 10% decrease decrease in greenhouse gas emissions from 2020.
From 2019 to 2020 excuse me.
But in the phone our current top quartile of low carbon emission of intensity for oil weighted peers were continuing the internal work to reduce our environmental footprint and advanced the energy transition.
Acting in supporting our people and communities in which we work.
On slide 5 our second quarter production volumes of 171000 barrels of oil equivalent of the day, where 4% above our guidance midpoint for the quarter of crude capex for the quarter was $198 million revenue of near $700 million, which is the highest in a year was achieved through strong realized pricey.
Of 65.53 per barrel for oil.
Of now like to turn the call over to our CFO, David Looney to give the financial update thank you.
Thank you Roger and good morning, everyone I'll start with slide 6.
In the second quarter, we reported of net loss of $63 million or 41 cents 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 of contention consideration.
We reported adjusted net income of $91 million or 59 cents per diluted.
Cash from operations for the quarter totaled $449 million, including the Noncontrolling interest after accounting for net property editions of $203 million, we achieved positive adjusted cash flow of $246 million on the hedging front Murphy can you continue.
Used to protect its future cash flow and the tougher montney with additional fixed price forward sales contracts for a portion of production through 2024.
<unk> R 2021, Capex plan is heavily weighted towards the first half of the year with 198 million total accrued capex in the second quarter by slightly above our previous guide. This was due to timing adjustments of non operated activity and has no impact on our annual Capex Oh.
Overall are 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 per sale spending our fourth quarter Capex is forecast lower than previously.
Approximately 63% has already been spent and the Eagle Ford shale as of June 30th 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 risk to our capital spending.
Our third quarter production guidance range of 162 to 170000 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 1.
Hundred 57, 5000 barrels of oil equivalent per day to 165.5000 barrels of oil equivalent per day, which includes fourthquarter impacts of 1300 barrels of oil equivalent per day for assume Gulf of Mexico Storm downtime and 7900 barrels of oil equivalent per day.
<unk> for net planned offshore downtime with that I'll turn it back over the Roger.
Thank you David <unk>.
Slide 9 in the second quarter, we brought online 3 operated 29 gross non operated wells in the Eagle for jail, Tim Wilson brought on line and the top of Montney that wraps up our activity announcer candidate for the year R. U S. Onshore drilling program is nearly complete with just 4 operated equal will Eagle for Wales plan to come along.
In the fourth quarter.
Slide 10.
Eagle for share Will's produced 42000 barrels equivalent per day in the second quarter and price of 75% oil and 88% liquids.
For the remainder of the year, we plan to drill and complete 4 wells in the fourth of order of just mentioned Caterina acreage all within our planned annual capex of $170 million.
The team continues to execute and generate efficiencies as evidence of our 25 per cent improvement of rate of penetration completion cost per lateral foot. Since 2019 overall, we've achieved of 40% reduction in completion costs and 4 years through strict focus on non productive Tom and making operational improvements are.
Average of well our average per well drilling and completion cost has improved to $4.7 million from $6.3 million in 2018 as.
As a result, we are now achieving well payouts of approximately 9 months on our 2021 program that oil prices, averaging nearly $62 per barrel and the first half of this year.
On slot of 11 as the Austin chalk 1 of our 4 Eagle Ford Wells, We plan to drew and bring online on the fourth quarter as target for the Austin Sharp formation overall of our recent columns Austin Chartwells of nicely outperformed our average type curve. Additionally, other public operators near our Caterina acreage in the web.
Stern portion of are you free shale acreage have reported strong Austin chart results from the recent wells were excited of Joe This well and highlight the potential Derisk. Another 100, plus Austin chart locations in our portfolio in that area.
On slide 12, and the top of Montney, we produce 248 million cubic feet per day in the second quarter 10 wells were brought on the line, which completes all well activity for the year costs continue the degrees here as well we've seen of 24% reduction in drilling and completion call since 2017, while achieving a total will cost of Jeff.
Just $4.4 million in 2021, and compared to 5 and a half million dollars in 2019.
In particular are completion cost per lateral foot of improved 25% since 2019 through lower non productive Tom optimize wireline operations enhanced water handling of natural gas powered frack pumps.
Further our average comforting average per day has increased more than 50% since 2017 from almost 12 hours to 18 hours per day, the ability to lower our costs per well, but nearly $1 million will add significant value to our tupper Montney project represents the tremendous work of our drilling incompletions.
Team in that area.
As to the Gulf of Mexico projects and extremely well on slide 14 Murphy contains the progresses scheduled with major Gulf of Mexico project Samurai number 3 well was drilled in the quarter and we're now drilling the <unk> 3 well our next 12 samurai for which is playing per later in the third quarter before we begin completions work.
All 7 wells the make up the <unk> see more months samurai development.
Seems to been able to maintain the scheduling capital plan to this project and we still anticipate flowing first of all in the King's ski and the first tagged next year.
Completions work on the final producing well of our non operate Saint Mallow Waterflood project is set to wrap up within the week and thereby completing rig activity on this project for the remainder of the year.
We're pleased that of project. This size has remained on the schedule and highlights the completing the rig work for the remainder of 21 provides further certainty on our capital spending.
As the King's key the second quarter soft completion of the construction of the <unk> floated production system. The Fps is now sales away from Korea and is headed to the Texas Coast, where final work the accomplished at the shore based private placement in the Gulf in early 2022.
This team zone incredible job on this project and the only remaining on schedule, but also keeping everyone safe and healthy through the pandemic. We're excited to see the has come to fruition. This is yet. Another example of our industry leading offshore execution ability.
In Brunei on slide 17 in the quarter, we participate in the drilling the discovery well and blocked CA 1 in Brunei with the Jag of Sept thrust 1 ex well for a total cost of Murphy of just $2.8 million at approximately 8% working interest post this well were reclassified are working interest in black.
1 of Brunei is not held for sale any longer partners of assessing development appraisal plans, we're evaluating seismic data further prospectivity.
The exploration of the Gulf of Mexico in the second quarter of the page 18, drawing was commenced at the Chevron.
<unk> operated silverback prospect in the Gulf, which we anticipate finishing this month of participation provides access to 12 box with potential for of attracted play opening trend is adjacent to the large position Murphy holes with our partners.
And the slide 19 in Brazil cited about our non operated exploration position physician. So GPL would go with the basin and the additional Optionality and resource of potential. It provides our company Murphy along with the operator, Exxon Mobil and partners playing the spud the cut throat, 1 well in the fourth quarter of 2021.
And the approximate net cost of Murphy of just $15 million.
On slide 21 of them to our capital program I'm pleased with our excellent production results. This quarter of our oil production exceeded by 5% has remained consistent in our ever improving operations and operated offshore and and the Eagle for jail, we remain on track with our full year production or mid point of 161.
Thousand barrels equivalent per day with 55% oil waiting we remain very disciplined on our capital spending with no intention of changed our plans of the remainder of the year as such to reaffirm the 7 are being mid point of Capex for 2021 of announced that day that were timing tightening the range around this midpoint.
On Slide 22 has remained focused on our strategy of Delevering executing in exploring the note that our long term plan remains unchanged. Our continued execution in capital of discipline laid in maintaining our capital span of $600 million from 21 through 2024 with the production keg of Approx.
6 persists through that period.
Of course, we are training well in our current oil waiting and above the plan for 2021 of 55%.
Assuming the average long term wty price of $60 per barrel Murphy stable will be able to cut debt and half to less than 1.4 billion by the end of 24.
While maintaining of quarterly dividend payment to shareholders. We note the discipline accelerates using an average price of $70 per oil and twenty-three enable us to reach the debt reduction by just mid 2023.
Beyond Delevering remain focused on our exploration program and portfolio of over 1 billion barrels of oil equivalent net risks resource potential.
Long term once of our major Gulf projects are complete will have significant optionality, when making capital allocation decisions and we'll look to what's best for Murphy and our shareholders and stakeholders of that time, while we have many options will seek to balance increased asset development with funding exploration success and potential A&D and execute additional.
Debt repurchases in return more cash to shareholders.
Slide 23 throughout the remainder of of 21 and longer term, we're steadfast and focus of our priorities of delevering executing exploring the inside to accelerate of long term debt reduction go for 2021% to $300 million from $200 million, assuming the oil price of $65 of the rest of the year.
And look forward to achieving our goal of 1.4 billion in long term debt reduction of about 24 with the long term average price of $60 per barrel.
Able to competition part by disciplined spending, but also continued execution of our major Gulf of Mexico projects. So ahead of first of all of next year as well as keeping everyone safe and healthy while protecting the environment, which we're operating lastly, we're excited with the recent exploration of success in Brunei look forward to drilling wells with operating partners in the Gulf.
And Brazil of this year.
Planning for next year's exploration campaign.
Murphy could have achieved the successful second quarter of of that the effort of all of our employees to continue operating with the excellence in every single Department.
Like the personally thank each and every 1 of them maintain their individual focus on our strategic priorities in the long term vision for our company.
But that would be glad to take your questions. This morning.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the 1 on your Touchtone phone you were hearing 3 tone prompt acknowledging your request and your questions will be pulled in the or anything I received should you wish to decline from the pulling process. Please press the.
The star followed by the queue should of using the speaker phone. Please lift the handset before pressing any keys.
The first question comes from Erin J Ryan.
P. Morgan. Please go ahead.
Good morning, Roger some nice results.
Thank you room 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 silver back and just.
And it just maybe also talk a little bit about.
The Brunei discovery, if this could be a needle moving for Murphy.
Think of that question Rune about our exploration program. The way. This is really shaking out his 2 silver back.
The report this week I'm glad you asked that question. So it can clarify any confusion around that there was the mechanical issue very.
Very early days of drilling in the world and what we would call the top whole section of the well well at the Beach Reece.
If you will and drilled adjacency that has no at all any implication as to the cost of activity of the well remain the same and excellent.
Chevron and part of it was both Chevron and a very good well and drilling here and also of St Mallow and do their operational teams and their ability they were able to catch back of the cost of that re spud and we anticipate our capital will be identical to our original plan and it was just an operational matter of that was handled moved on it happened 2 of 3 months ago.
And I'm not sure of that filing came from at that late date, but there is no impact to our company nor chevron on that matter due to their performance.
Great Great and just on the the exploration program and Berneice.
Yes, we've had those blocks for a very long time, very long time, and there's been a really nice well the drill it's the sub thralls the sub gross site well underneath the major coquette of good months of field. If you will on the Brunei side of the field, where little over 8% working interest owner there.
There was a time when we were exiting Malaysia, we were going to sell.
Brunei and had that held for sales and through Covid and other matters of reassess the sort of very nice looking well the successfully drill of our partner group.
I am very well, there and we pulled that out of Hell for sale and the of course, the major key K field that we discovered and operated for many years very near there and of course, the major cockup of months of field. Many successful partners operating about shell and into this region, we're going to hang on here and hopefully build of long term east coast.
Canada kind of of business here 2 to 3000 barrels of day long term for US is very profitable very hot oil quality and I'm very happy about it.
Great and my follow up Roger is just talking about the Austin shock opportunity at Caterina.
Had a nice math in your in your update that you're going to be testing, 1 well but to.
Set the stage of no S. M. S is near you, but give us some thoughts on the potential of the Austin Chuck.
And we will have Eric.
Free in your own managing that but we're glad to get down there and try something new in that area go head area. Okay. Great. Thanks, The room, just a couple of points to emphasize of their on the Austin chalk as you know we've had some really nice results in our current county position. We have had limited appraisal effort of our development effort in the Austin chalk.
And our Dimmitt 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 1 well in the Austin chock full well pad of.
And we think it has some nice potential to be sort of top tier performing.
We'd like to go out in the 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 confidence in the end all hand, it back no.
Maroon appreciate your help and we'll be talking to you soon.
Your next question comes from Neil Tinman with true of Securities. Please go ahead.
The more Neil how Ya doing.
Hey, How're you doing nice nice board Roger.
My first question just on development activities or I should say development opportunities. I mean, you you got that great slide 40 that really spells out the the.
Spend the production around close the in Vermont and samurai.
Et cetera, and I'm, just wondering any any thoughts or your thoughts share on anything potentially come at a bit early or those going to be just really right as you've been expecting on those and then I'm just wanted to Roger any further comments you can make an and the other potential of development opportunities.
Thanks knee of that question.
We are looking at this today is that we are doing extremely well doing extremely well in the flow line installation the mooring installation the permitting the obvious build in total of this major facility, which is now around the Cape of good hope headed toward almost going over our surgery. So GF of.
Let go of space 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 sooner, but we're staying with our mid 22 and the very happy with how the permits Goma team is doing a great job and the very happy about that we all bring on another well called Kelly open.
The in the region of this year.
As to offshore execution.
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 Lee leading to our execution, which is leading to the duty delevering, which is our major.
Major thing for us and hitting the major project 1 budget supercritical in the Delevering client.
Yes, it does seem like Red and just like Clockwork, which is great to see and then just 1 quick follow up.
No not the activity was of little again, I don't mind to see a good good none of the activity on some good wells the little higher <unk> could you just talk about your thoughts for the remainder of the year of how you see that going forward and what opportunities you will continue to have for the non upset.
I'll, let of Eric kind of of that question that was primarily an advancement of some wells by the <unk> in the Eagle Ford an outlet Arago habitat, yes, 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, what's actually progressed faster and came online in the second quarter.
That acceleration contributed about 2100 barrels of oil equivalent to the second quarter.
Which we're <unk>, we're really happy to have.
It's important to note that even if those wells had not moved faster or Eagle Ford business still would it exceeded guidance and been towards the high end of guidance. So are operated business perform strongly.
Both of our new wells this year and are based performance from wells that are brought online in prior years on the back of 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 Neil.
Your next question comes from me out and they have the Goldman Sachs. Please go ahead.
Good morning.
The second nealon of rope.
Yeah.
The double travel here is that like the first question is just on Brazil, again, Exxon and does it seem to be pretty excited about the opportunity sat down there with cut throat. Just can you give us lay of the land. It sounds like we're going to get an update in queue for and how are you just thinking about the opportunity.
In Brazil.
Thank you knew of that question and that really leads to 1 of our key tenets 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 another Ah not turn a partner down in Rio This goes back several years and built a very large possess.
This year the key to this exploration opportunity is outboard of some very successful fields that have been for sale of if you will which which have information available on those fields of course. It is it very adjacent to those in the same geologic setting.
We're very excited about the opportunity very excited to work with Exxon Mobil.
Here in Houston is too seismic in the work in the selection of the wells with many opportunities to drill there over the.
The next few years and the very excited these are very large prospects, we've disclosed our view of those here.
And our and our slide 19.
The very excited about it and they they being Exxon Mobil have another rig working elsewhere in the country on something we're not part of and when they finished that work there'll be mobilizing up here early in the fourth quarter and we're very excited about.
Okay surprises.
Just on the capital cadence of capital spending.
Spending.
First half of the indicated.
With a little bit higher it sounds like the second half its low bit lower.
How do you feel about the cost of inflation side in terms of your confidence to to see that step down in capex in the back half of the year that makes sense as we are some signs of the inflation in different parts of the.
The ecosystem.
And we'll have Tom and the second handle the procurement part of the air but let me frame. The early part of it we're very confident in our capital program because of the work is ending Saint Mallow, where where 20% player.
His staff, who will be stopping the drilling the silverback well this about the complete we've stopped all of our drilling and the year.
Just harvesting free cash flow, we are about the drill just 4 wells and caterina or most inexpensive place with thousands of wells, we've trilled in the free so.
So we're very confident about the capex, because we're stopping our program and our program is front end loaded and are non work is completing so that's really set the time for most of the capex of so we don't have anything to inflate in the U S of this year with Tom It runs technical services, including procurement and I'll have them provide.
You're a bit more color and I appreciate your question.
Yeah, Neil is Roger So we've got the majority of our capital behind US now, but the even the remaining that's in front of US It is 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 from Eric's organization is continuing to drive down the overall.
Costs so.
Roger said, we're in pretty good shape with what we expect in 2021.
The following that Neil to me in the headed in my remarks, I think is real important we really lowered we're big player in the Eagle for in a big player in the Montney per us and we lowered our wells a million dollars of well million dollars of well with hundreds and hundreds of wells to go and today, we are trying to get off the cost per foot and talk about the pumping Tom during the day and the time.
That we complete wells and how much of a rate of penetration because of the time has improved and your million dollars of well less it's going to be hard per service to take that away from us very hard.
Thanks, Roger and team.
Thank you.
Your next question comes from the Gal Nicholson with Stevens. Please go ahead.
Good morning, Roger.
You guys post it really good alley in both the Eagle forward and Gulf of Mexico quarter, I was just curious what the equal sorry low.
While recording of of a quarter of driven by the higher volume that like there's something else that you guys get that in cramped low and both of those are areas at the corner.
I will let Eric handle that for you and let them have the glory on it the day.
Thanks scale of often get glory, so I'll take it when I can.
We're really happy with our operating cost performance in the Eagle first of course.
In the second quarter, we did have high volumes, which helped we had the continued worked from our team to lower cost.
A remote operations center and our operations team and engineering teams have been working diligently over the last year plus to enhance our operations to the lower costs, lower downtime, which leads to better production steady.
Steady operations.
We did have in the second quarter $3 million of of prior period adjustment that was related to gas that we purchase periodically at 1 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 of correction for that so that's the 3 million dollar impact to the quarter that will not repeat going forward. So we expect in the last half of the year Eagle forward operating expenses will be a little bit higher due to the declining.
Production not repeating of the 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.
No I wasn't really as of late great to see the excellent work there and then I was just wondering if you guys could you provide us any incremental details regarding the tearing out of that and do you think that those volumes of feedback online in 2022 or is that more of 2023 situation.
Thank you Gail for that question of the the way we're sharing information about Terra Nova today is as follows it's still being executed by all of the partners I can tell you that our board sanctioned it yesterday and.
And the idea of that everyone else will also sanctions. So we're going to move forward with the if everyone else does and when net with all of that is complete with all of our partners we will disclose more.
The it as of late 22.
Flow back at turnover of very late so practice early twenty-three would make no difference in that regard and the way the deal structured it makes no change to our guide capital of average capital of the just discussed in our remarks and.
Really good project, we're very happy to be in it and I look forward to work with Suncor and synovus.
Long term on that project.
Great. Thank you an excellent quite our guys.
So much.
Your next question comes from Leo Mariani with Keybanc. Please go ahead.
Good morning Leah.
Good morning.
1 of the 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 2 to 3000 barrels of day of oil here.
Would that be gross or net.
Murphy and just any kind of high level timeframe and when that might come online as they can take a couple of years to get the production or what are you see there.
Thank you Leo for that question of our exploration program, which is the key of our strategy here.
What I meant is that just the type of the net production. It can be for a long term of course, the operator of shale and of course of the government Brunei and our other partners have to go through assess a delineation of the wells of very successful well and then we will go in the determined all of 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 wells of Nice project.
We pulled it out of Hell for sale.
Go ahead with our position, they're glad we kept it.
Okay.
And then just on on Brazil.
Think you guys have always characterize it as it very large prospect that you guys are of drilling down there.
And I guess, just wanted to kind of get a sense of possibility of success is this kind of of your typical 1 in 4 type.
Type of offshore exploration well in terms of how you view the chance to share.
Thank you lift that question of our program there to key part of our strategy of this year of yes, I would think of 1 in 4 typical big deepwater opportunity would be clear, but this is of offsetting major fields that are discovered and operated by Petrobras in the region and of.
The setting of course shelf production historic shelf production and of successful air Brazil, So that as a little bit of positivity to that where we as our strategy of nose to drill near known all areas instead of rank exploration with no success and board of deep water. So I think it meets all of that criteria it fits.
Into our strategy on F&B size scale partner, and we're very happy about it.
Okay. Thanks gas.
Leah.
Ladies and gentlemen, as a reminder, should you have a question. Please press the star followed by the 1 you're.
Your next question comes from Josh Silverstein with please.
Please go ahead.
Good morning, Josh.
Hey, good morning, good morning, guys I'll stick with the the exploration front for the first question.
Mexico, you used to be really big and focus for you guys. I know you have some activity there it's low awhile ago.
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 ranked debt relative to the opportunities that you have elsewhere in the portfolio.
Thank you Josh for that question on our exploration program.
Brazil still major and focus for us.
The or to slide in the appendix around.
Mexico I apologize.
It is going to be drilled next year, there's but everyone's working on their budget with our partners is very likely to be drill next year and get back on schedule of post the Covid world of 2020 the.
He's a very nice opportunity in the sub salt, especially the well call to loom. That's on page 42 in our appendix.
There's the recent discoveries all around this area in the same aged rocks and reservoirs see this week that Eni had yet another discovery in that region.
<unk> has a play the discovered and will be delineated, but we've advanced to loom and it has a series of sub salt opportunities that are larger very nice and on the trend of success in the region and just so happens that our focus in the slides is trying to as you know Josh because you filed the company closely we're dealing.
Bring executing in exploring really working on that this year, while we have increased our debt reduction target. This morning. So the Mexico drilling is into next year with our partner group and in no way of we call back there are focus there are.
Of likeness, if you will of Mexico, it's actually very strong for us because we get the operators and we have running room of similar plays in that area. So.
Just because of the setup in the deck on our Delever execute explore area doesn't mean, we're not there in like a matter of changed our view of that.
The way.
Got it thanks for that and I know you have a.
A multiyear kind of outlook for what you're trying to do it at tougher when you're Greenlit. The project and then hedged much of of volumes there.
It was a while ago prices of obviously risen pretty significantly since then.
I'm curious as you think to the 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 from the the project that you've outlined alrighty.
Thanks to that question the way we are thinking about montney today that the long term project gets going to flow near 500 million of day for a long time, and we took a long term view on the hedging.
And.
We have an activity plan to to reach that level of production that we've disclosed in our capital plans and it's just like drilling in the Eagle further anywhere else when when it gets better we're not going to change of plans because we can reach our plant.
Plant level of their without it and we have about 15% on Rahway co. Today, we're enjoying some of those prices I'd also like to commend my outstanding team under <unk> leadership, there, where we handle this heatwave crisis, there with very little downtime is the way, we operate and execute in our facilities in our fields and.
It's going well and it's going to be bigger this quarter than the last quarter and no change 2 of our program there just enjoy some of.
Higher cash flow of the non hedge peace at this time Josh.
Okay. Thanks, guys.
Thank you.
There are no further questions to my phone line I would now like to turn the call back over the Roger Jenkins any closing remarks.
Thanks, everyone for listen to our call. This morning, we had a real good quarter and we look forward to have and and the other 1 and thanks for everyone's helping the efforts and I appreciate it and be talking to you soon any questions get with Kelly.
And we will get it going from there appreciate it.
And gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.