Q4 2021 Murphy Oil Corp Earnings Call

Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corp, fourth quarter 2021 earnings conference call, but any time. During this call you require assistance. Please press star zero. So the operator, we'd now like to turn the conference over to MS. Kelly Whitley, Vice President Investor Relations and Communications. Please go ahead.

Good morning, everyone and thank you for joining us on our fourth quarter earnings call today, joining us as 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 informational slides, we have 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 noncontrolling 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 by the private Securities Litigation Reform Act at 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, Steve Murphy 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 with that I will now turn the call over to Roger Jenkins. Good morning, everyone. Thank you Kelly turning to slide two we'd like to continue to reminder.

Best use of our story is Murphy continues to deliver a strong value proposition and ongoing execution of three producing areas proves we are a long term sustainable company. Let's discuss later, we had our best year ever on protecting our environment.

Our competitive advantage of executing an offshore as illustrated by the outstanding progress in our <unk>.

We see more months' samurai fields and the King's key project.

We have maintained strong cash flow due to capital discipline that covers our planned spending and debt reduction goal as well as enhancing our supportive shareholders through our multi decade dividend of which today, we declared a 20% increase.

Lastly, our meaningful level of board of management ownership highlights our personal interest in the company's long term success.

On slide three we established a focus three tiered strategy in early 'twenty, one and I'm very pleased with how the team. The company have remained in alignment with these priorities throughout the year and the fourth quarter, we redeemed $150 million of our 2024 senior notes, which marked the achievement of our long term debt reduction goal of $300 million.

In the second half of 2021.

Overall in 2021, we significantly de Levered, our company with 17% total debt reduction during the year a great first step towards our larger goal of $1 4 billion reduction by the end of 'twenty four at what we are using is very conservative prices.

It is important to note that without our strong execution across our company in 2021 and continued controllable cost focus we would not have generated sufficient cash flow to achieve our delevering goal, our focus and the fourth quarters to maintain timing and schedule of caliche more months' samurai and the Gulf of Mexico, as well as transport the King's key.

<unk> floating production system to its final location in advance of receiving first oil in the second quarter of this year. Additionally, our operating partner transport the turnover Fps, so to Spain to begin dry dock work as part of its asset life extension project.

Third party and our strategy is exploration timing shift on spreading our non operated cut throat exploration well in Brazil in the fourth quarter into first quarter 'twenty two due to COVID-19 delays in Brazil. However, we remain excited about the wells, we prepare to spud with the rig on location also during the fourth quarter of 'twenty, One Murphy parted.

As stated in the Gulf of Mexico Federal lease sale and was named apparent high bidder on three deepwater blocks.

Slide four Murphy made tremendous progress this year as we advanced our 2021 priorities. We achieved the first step in our Delevering plan by reducing debt $531 million or 17% in part through redemption of $300 million of 24 notes remain on track for reaching $1 4 billion debt by the end of <unk>.

'twenty, one 'twenty four rather I'm sorry.

<unk> continue reducing costs throughout the year with record low G&A of 122 million, a 13% decline from 2020 and low of $8 65 per barrel, which is 5% less than the prior year Theyre strong execution efforts are highlight where further highlighted by maintaining schedule on a major operated Gulf of Mexico projects as well.

Maintaining our asset base was 102% total reserve replacement I'm also pleased with the success, we had on sustainability efforts as we continue achieving excellent safety metrics, while accomplishing significant environmental milestones.

Record low emissions intensity and zero out GP spills in 'twenty one.

Lastly, we continue to manage our exploration program and pressure in preparation for drilling key wells in 2022.

In slide five in the fourth quarter production Murphy achieved guidance for the fourth quarter with production of 150000 barrels equivalents per day, while capex of $140 million was 9 million below our guide liquids volumes were 6% for the quarter hybrid <unk> prices enabled us to achieve nearly 700.

Million in revenues for the quarter.

As to slide six for all of 2021, we produced 158000 barrels equivalent per day with 87000 barrels of oil per day.

A 6% above our original pre hurricane guidance due to our outstanding Eagle Ford shale execution total capex for the year was $671 million compared to our 680 <unk> midpoint is important to note that our Capex guidance. Originally did not include the 20 million Lucius working interest acquisition that occurred in the <unk>.

First quarter.

Count for the non budgeted accretive A&D, we were still able to lower our spending for the year from the original guidance overall, we recorded a $2 $6 billion in revenues for the year due to improved commodity prices.

Ill turn the call over to our CFO , David Looney to gave us further financial update.

Thank you Roger and good morning, everyone Slide seven proved reserves, we achieved 102% reserve replacement in 2021 with 699 million barrels of oil equivalent and total proved reserves compared to 697 million Boe.

At year end 2020.

At year end 2021, our proved reserves were 58% proved developed and 45% liquids weighted geographically 25% of reserves were located in U S onshore, 26% offshore primarily in the Gulf of Mexico, and 49% and our onshore Canadian <unk>.

We also maintained a healthy reserve life index of more than 12 years.

They're all we're pleased to have held proved reserves flat the past few years, while maintaining an average of only $400 million of capital spending dedicated to generating immediate production with the remainder of our Capex in 2020 in 2021 being allocated to long term projects and exploration neither.

Which provided production our reserve benefits in those two years.

Slide eight financial results for the fourth quarter, we reported net income of $168 million or $1 eight <unk> net income per diluted share certain after tax adjustments included a $24 million noncash impairment of noncore assets $92 million mark to market noncash.

Gain on derivatives and $33 million mark to market noncash gain on contingent consideration.

As a result, we reported adjusted net income of $62 million or 40, <unk> adjusted net income per diluted share for the quarter.

Cash from operations for the quarter totaled $331 million, including the non controlling interest after accounting for net property additions and dry hole cost of $106 million, we achieved positive adjusted cash flow of $225 million in the quarter.

For the full year 2021, we reported a net loss of $74 million or <unk> 48, <unk> net loss per diluted share I would remind everyone that in the first quarter, we took a $170 million pre tax impairment on Terra Nova as it looked like we were going to abandon the field at that time subsea.

It went to that decision the ownership group worked out a deal with the government and we are now looking to bring that asset back online next year without that charge. We would have easily achieved a positive net income for the year after.

After adjusting for this as well as other noncash charges on the year, we reported adjusted net income of $200 million or $1.29. Adjusted net income per diluted share cash from operations totaled over $1 $4 billion for the year and we achieved adjusted cash flows.

$734 million, including the NCI.

Slide nine as.

As we've often stated our company is focused on Delevering with strong operational and financial execution, we achieved the first steps in 2021.

As of December 31, we were able to reduce our total debt by $530 million or 17% from the prior year end, while also building cash and equivalents on the balance sheet up to $521 million, thereby achieving total net debt of $1 9 billion.

We plan to continue Delevering in 2022 and beyond as we generate significant free cash flow with our previously established target of $1 4 billion in debt by year end 2024 likely achieved at least 12 months earlier at today's strip prices and with that I'll turn it.

Back over to Roger Thank you David on Slide 10, Murphy has been increasingly focused on operating sustainably, while still producing and exploring for oil and natural gas I am pleased and in 2021 were in line with top quartile of our peers as we achieved the lowest carbon emissions intensity in corporate history.

We're on track to achieve easily are 15% to 20% emission intensity reduction goal by 2030 from 2019, we continue to protect our communities having zero hour GP spills during the year, which is a massive feat.

We have one of our top years in protecting our employees as we maintained low recordable incident rates, along with COVID-19 protocols to keep our people safe and operations ongoing.

We're excited that our efforts are being recognized as Newsweek named our company America's most one of America's most responsible companies for 2022 <unk>.

Additionally, our ESG ratings have improved across key riders ISS sustained <unk> and MSCI with our governance score from ISS remaining at a top level since 2018.

Now I'm going to turn the call over to our executive Vice President of operations, Eric Hambly to provide an operational update. Thank you. Thanks, Roger Slide 12 in the fourth quarter, we brought four wells online in the Eagle Ford Shale and produced 33000 barrels of oil equivalent per day with 69% oil at 85% liquids for the <unk>.

Full year, we produced slightly higher at 36000 barrels oil equivalent per day with 87% liquids and brought online 23 operated and 45 gross non operated wells.

The team has done a tremendous job on managing our production with excellent engineering work, resulting in much lower downtime during the year as well as achieving a base decline rate of only one 5% in the fourth quarter overall, our pre 2021 wells decline only 21% for full year 2021.

We had another successful year in our drilling and completions program, achieving an average well cost of $4 7 million compared.

Compared to $6 3 million in 2018 overall, our completions costs are down 40% from 2018.

Our team has done an excellent job in enhancing efficiencies as well and has improved our days spud to rig release by 19%, while increasing the lateral length by 35% since 2020 I.

I am pleased with these accomplishments as they set the foundation for a strong 2022 program.

Slide 13.

As mentioned previously we brought four Eagle Ford shale wells online in our Catarina acreage during the fourth quarter with average 84% oil weighting the two upper Eagle Ford Shale wells and one Austin chalk well all performed in line with our existing type curves, while the lower Eagle Ford shale well was significantly above our type curve in particular.

The Austin chalk well has achieved a preliminary IP rate of 900 barrels oil equivalent per day, when when normalized to a 10000 foot lateral length, along with 76% oil weighting.

Overall the results of these four wells continued to Derisk, our catarina acreage in particular are 100, Austin chalk locations as well as align with production results noted by adjacent operators.

<unk> 14.

In the fourth quarter Murphy produced 263 million cubic feet per day in Tupper, Montney with 259 million cubic feet per day produced for the year.

Our 2021 wells, which came online mid year achieved record high IP 30 rates for the company and a comparison to the industry through modifications and flowback facilities and wellhead equipment and procedures overall, our IP rates are more than 50% higher than the previous three years and a 19% CAGR since 2013.

When combined with our base production optimization I'm pleased at the improvements we've seen in production volumes from lower decline rates the past few years slide.

Slide 16, our Gulf of Mexico Wells produced 61000 barrels of oil equivalent per day in the fourth quarter and 66000 barrels of oil equivalent per day for full year 2021, averaging 79% oil at 85% liquids for the year, notably our full year production was only 700 barrels oil equivalent per day below our original.

<unk> 2021 forecast due to above plan, well performance, which offset the significant impact from hurricane Ida in 2021, a $4 1000 barrels of oil equivalent per day minimal production from one facility remains offline through first quarter of 2022 as third party downstream repairs are completed.

Our major projects continue moving forward as we began completions on the seven well khaleesi more months' samurai project during the fourth quarter with the first well, finishing within the next few days, while the King's Quay floating production system was transported to its final location in the Gulf of Mexico.

During installation was completed this month, while infield pipeline installation work progressed and we remain on track for first oil in the second quarter of 2022.

The non operated St. Malo Waterflood project is also ongoing with installation of the multiphase pump to occur in the first quarter 'twenty two followed by water injection next year.

Slide 17 as announced previously the partner group came to an agreement on the Terra Nova asset life extension project. The project has progressed on time and the <unk> is now in Spain for dry dock work before an anticipated online date in late fourth quarter of 2022 and with that I will now turn the call back over to Roger.

Thank you Eric on Slide 19.

Our operating partner originally plan to spud the cut throat exploration well in Brazil in the fourth quarter of 'twenty. One however, due to COVID-19 delays rig arrived on location. We anticipate this well to spud in the first first quarter for a total cost of $28 million.

Slide 21 involving critical capital allocation.

We're going through capital for going through capital thing details the key of our capital allocation includes a 20% increase in our dividend detailed in a separate press release this morning.

We're pleased to provide a higher cash returned to our shareholders, while continuing to delever our balance sheet.

For 2022, we forecast a capex range of $840 million to $890 million.

While higher than the past years. We note that 2022 is the peak year of spending through 'twenty five as we prioritize 265 million to complete the operated clichy more months samurai project in the Gulf.

With first oil floating in the second quarter of the year and advanced to non operated St. Malo Waterflood project. Our spending is again weighted to beginning of the year with 60% of the capital plan forecast due to the second quarter overall, our capital plan and dividend increase for 2022 is funded by approximately 65% of.

Our operating cash flow at $65 oil prices.

As to production on Slide 22, we anticipate first quarter 2022 production volumes of 136 to 142000 barrel equivalents per day, with approximately 53% oil and 60% liquids.

<unk> range was reduced by planned downtime of 2700 barrels equivalent per day on our operated facilities 2600 barrels equivalent per day on non operated offshore and some 3000 barrels equivalent per day for onshore downtime almost 70% of this total downtime for the quarter is just a pause.

Planned maintenance activities.

It'll be our lowest quarter of production for the full year.

Full year 2022 production is forecast at 164 to 172000 barrels equivalent per day comprised of 52% oil and.

57% liquids of notes the oil production for this year is practically the same as 2021 as production total efforts are higher.

But their offshore projects on track and significant onshore spending coming online in middle of 'twenty, two we see production increasing each quarter. This year with our exit rate forehead of 2021.

Also our 2022 oil rate is planned to be the highest in over three years and the fourth quarter.

We plan with our plan on Clichy more months' samurai project to achieve first gold in second quarter of this year with seven wells brought online sequentially over the year, our onshore drilling and completion program will result in a majority of the wells coming online in the second and third quarters of this year.

As to our North American onshore capital on page 23, we plan to spend a total of 360 million across our onshore assets.

This year with total production forecast at approximately 95000 barrels equivalent per day, with 30% oil and 34% liquids rating. This volume reflects an 8% increase from 2021.

We forecast 2200 $20 million of Capex in the Eagle Ford shale to bring online 27 operated wells in Karnes and Catarina and 32 gross non operated wells in our Karnes and Tilden area. During the year. We note that while this level of spending is 50 million higher than 'twenty, one with started 22 with only six <unk>.

<unk> and uncompleted wells in comparison to high DUC count in 2021, our onshore Canada program includes a 120 million of Capex to bringing online 20 wells in Tupper, montney as well as $19 million in the K, Bob Duvernay, bringing online three wells and support field development.

Overall, our onshore well cadence is heavily weighted to the second quarter 'twenty two additional wells brought online in the third quarter.

As to offshore capital plans on page 24, as previously stated capital spending is heavily weighted toward our Gulf of Mexico major projects completions on the same well clichy more months samurai project for gain in the fourth quarter and expect it to take 40% to 45 days per well with the first well finalizing in the next few days.

We plan for an additional 65 million of Capex allocated to the Gulf of Mexico to support development and tieback projects, specifically drilling and operated development well at Dalmatian to come online in 'twenty, three and executing to nominal operated subsea tie backs at the Lucius field.

Approximately $55 million is allocated to the non op Terra Nova F. P. S O asset life extension, which is anticipated to return to operations at year end 'twenty two.

While these also allocated 15 million to non operated Hibernia to support drilling campaign, there with first oil in the fourth quarter of this year offshore production is forecasted at approximately 73000 barrels equivalent per day, and 22, 6% increase from 21 with 80% oil.

Waiting.

On slide 25, or 22 program planned spending of $75 million targeting approximately 200 million barrels of oil equivalent and net red and excuse me net unrestricted resources.

As I mentioned previously previously the cut throat, well, Brazil is expected to spud in the near term as the rig is on location the operators working on final preparation and obtaining permits.

Selena basin of offshore Mexico, we're targeting drilling to loom. This will be located in a proven oil basin. Your multiple discoveries. We're progressing approvals ahead of drilling in the third quarter.

We also intend to participate in drilling another non operated well in Brunei and 2022 and partners are currently finalizing well objected plans and evaluating prospectively ahead of the final location selection.

As we turn to our long term value and disciplined strategy slide on page 27, our discipline throughout 'twenty. One has enabled us to maintain a long term strategy through 'twenty four with minimal change from previous disclosures contained a targeted debt level of one one.

One 4 billion.

By the end of 'twenty, four which is likely achieve 12 months earlier in todays strip prices, we forecast reinvesting approximately 40% of operating cash flow to deliver average production of 188000 equivalents per day at a CAGR of 7% with an average of 52% all waiting through 'twenty four.

Additionally, our offshore production has maintained during this period of 80000 barrels equivalents per day.

Exploration program remains another focal point was portfolio of approximately 1 billion barrels oil equivalent on our net risk basis.

Overall the plan is to achieve it is achieved by remaining disciplined in our spending averaging $650 million annually in this period, which will provide excess cash flow target towards enhancing our payouts to shareholders through dividend increasing in accomplishing our debt reduction goals.

As we look longer term and 25% to 28, we forecast that our current portfolio produces average annual volumes of 195000 barrels of oil per day with approximately 50% oil weighting as we target a corporate investment grade rating.

Production levels achieved by reinvesting a maximum of 60% of our operating cash flow assuming a long term price of just $55 oil. During this period, we forecast generating ample free cash flow, which funds further debt reductions continue and cash returns to shareholders and accretive investments.

Slide 28, our three pillar strategy remains as we began 2022.

As we advance our Delevering go we've established a debt reduction target of $300 million for the year achieve assuming $65 oil, which will get us one step closer to our conservative $1 4 billion debt target by the end of 'twenty four notably this plan may be accelerated or increased longer term at higher oil.

The team remains focused on quality execution. This year targeting first oil in the second quarter on our operated project in the Gulf of Mexico. As we look forward to continued cost efficiencies achieved our drilling and completion programs onshore along with further emissions intensity reductions overall, the health and safety of our employees and contractors.

<unk> is paramount when tend to continue executing our operations in a manner that protects our people and the environment. Lastly, we continue to target exploration program and look forward to our planned wells this year.

Closing I'd like to thank our dedicated employees for their tremendous effort remaining focus to our strategy throughout 'twenty one their hard work has positioned us well for an exciting year ahead across all of our business units as we continue to progress our priorities and achieve our long term goals with that I'll turn the call back over to our operator this morning.

Good questions. Thank you.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone you look at our three ton prompt acknowledging your request and your questions will be called in the order. They are received should you wish to decline from the polling process.

<unk>, followed by <unk>, and if you're using a speaker phone. Please lift your handset before pressing any tier one moment for your first question.

Your first question comes from Ron <unk>.

With J P. Morgan. Please go ahead.

Yes. Good morning, Roger I was wondering if good morning revised yes. Good morning, Sir I was wondering if you could provide some more details on your updated three year outlook, which you are put out on slide 27.

It looks to be a bit more capital efficient than the street.

650 million of Capex.

188000 Boe ease of.

The output and about 98000 barrels of oil can you give us a sense of.

What's going to drive the growth.

Over the next couple of years and given that 40% reinvestment rate. How are you thinking about allocating the excess free cash split between the dividend as well as some potential A&D opportunities, including the Petrobras.

Assets.

It could come on the black near term.

Thank you Arun for that question, we are quite proud of our plan and it's a great question and thank you for highlighting that.

What we have here is a long term situation Gulf of Mexico capital, that's coming to fruition with our projects.

Projects this year flowing as planned in the second quarter is a great feat for us to achieve this first all right on target right on sanction through Covid as you know St. Malo Waterflood is a significant project for us where chevron has done an outstanding job.

Really happy with the subsurface there that should flow with the subsea pump. Some this year, increasing production slightly as well as keeping this big asset flat longer starting in 2023.

Real solid onshore business, where we try to keep our Eagle Ford shale flat.

Capital will get stabilized here at that level, just over 30000 barrels a day, making enormous free cash flow for us. They are special with these prices and in many of these things are the same as we had a few months ago rune actually as to capital efficiency. We are working very hard to honor and to keep our plan. So we have onshore.

Rules coming on which increase our oil weighting.

Increasing our oil exit wait to higher probably than four years, we have ever increasing quarterly production. This year, which is not common for us with front end loaded onshore production, which is different and those things are helping us out a good bit there and I appreciate you noticing that.

As to of course with these type of prices today is probably predicted by your firm and other major firms. We will have a massive amount of free cash flow here and given that we started off with a debt goal of hiving. Our debt, we see that can be done a year earlier now purely at these prices even $65 65.

We will have enormous debt reduction.

And what we're trying to do is we noticed today has increased our dividend along the way while we Delever. That's news today, that's new information.

<unk> that we were going to wait till we have our debt to do that but we went ahead and we see our efficiency and everything working to raise our dividend our target to raise our dividend as we delever now so our first goal is to get our dividend back to pre COVID-19 levels matching up with our Delevering goal and then go on from there with continued dividends.

Because we are a dividend player.

Paying a dividend for 60 years and Thats, what we want to do and we can probably as well further reduce our debt, even lower where possibly the need to not go to the bond market again for a very long time.

So that's our goals Arun that was a long question long answer and if I didn't get something please remind me.

Okay, Yeah, so over the long question.

No no not my long answer no problem.

My follow up is I did want to ask you about some of the regulatory concerns.

In the Montney kind of expressed by the buy side and one of your peers.

In D. C. Can you just give us an update on your read of the situation in B C and how you're positioned from a permit.

Position as we think about you executing your Tupper Montney program this year.

Thank you have a room for that question and I. Appreciate you, bringing it up you know we've been in Canada for over 60 years, we're very familiar with regulatory also regulatory situations all over the world in our corporate history I.

I think what's a little bit different about what we're doing is murphy's we're able to execute our tupper Montney plan as expected. We believe we can over the past few months, we've been in close contact with senior officials in BC and the British oil and gas Commission regarding our Tupper Montney expansion plans and we're closely monitoring these develops a dell developments.

You would anticipate with the it's really down to the type of things, we're doing with the location of our wells where they are located.

And what we're doing in our development plan.

Within that we believe that we better execute our 22 program and the Montney based on discussions and what we're doing it's also important to note that far plan. This year, we hold 85% of our well permits in our hands.

Also delays persist we could execute our program at a slower pace, but would be within our production guidance to do that and as you know as we focus on delever executing explore in our company. It's really all about free cash flow and we would see the free cash flow from these possible permit delays.

To be de Minimis on any of our free cash flow goals going forward and our debt reduction targets and that's where we are on that matter today arena.

Thanks for the update Roger take care.

Thank you I appreciate it.

Your next question comes from Charles Meade with Johnson Rice. Please go ahead.

Good morning, Charles Good morning, Roger Good morning, Roger David and the rest of the team there.

Roger I'd like to I'd like to have.

I guess revisit Mike My question to you from last quarter on.

On King's key I think Eric mentioned that you guys are are wrapping up.

Completion of the first well today, but can you can you give us a sense of what's happening today, not just on well operations, but with any subsea construction.

Is there a key date or event that.

That we should be looking for.

I appreciate that question Charles about our key project in the Gulf I'd like to highlight today is it.

We're in the middle of it.

To have everything to flow the field. The first step is to safely more the facility on location Theres 12, large mooring lines involved in this operation those are installed and facility secured in great shape.

Today, we'll be picking up risers that are located on the <unk> four and attaching them to the facility and we're completing wells wells with our drillship.

We have seven of them to go and we'll be bringing those on sequentially. When we have the the risers installed and commissioned and our exit pipelines installed which are nearby to long term pipelines are located in the Gulf. So we have our exit pipelines to do a risers and complete our wells and inflows.

Wells that we have and the more wells, we have online when the facilities ready the higher the production will be and we're in the middle of doing that today, we're very happy with how we're going and we finished our first well here just a few days is practically finished now with six wells to go.

Got it thanks for that detailed Roger and then.

If I could ask a question about the.

The lower Eagle Eagle Ford well that you guys brought on this quarter is that was that was so strong is that did you guys do something different with that well or is this alternatively, maybe just the case you know sometimes you reach in and you pulled the long shore.

Oh, it's more than that and I'll, let Eric evaluate elaborate on that for a Charles Thank you.

Thanks, That's a great question, obviously, our Eagle Ford program is critical to our execution focus and the team has been working to improve and enhance our completions through a number of things.

We have been optimizing our landing zones and improving how we're drilling our wells to be more consistently in exactly the target we want optimizing exactly where we're landing within the lower Eagle Ford and then we've been optimizing our completion designs to get the most cost effective most free cash flow generating completions.

And with that we've seen some strong results.

Earlier in the year in 2021, we reported the results from three cone wells in Catarina acreage, which had more than 50% exceeded type curve. They were nice long lateral wells the well in the fourth quarter was over 50% above our type curve again, just getting solid performance with a lot of work.

Work to optimize landing zone completion design and we're really pleased with the results.

And how that's contributing to our ability to generate free cash flow from the asset.

Got it thanks for that detail Eric.

Thanks, Charles talk to you soon.

Your next question comes from Neal Dingmann with <unk> Securities. Please go ahead.

Good morning.

Good morning, Thanks for the details so far Roger luxurious.

My first question I think is maybe drilling a little bit more on shareholder return and really around as you all have done a great job, obviously of reducing debt to now and I didn't quite a low level. So really my question. Ron. This is could you all discuss really your plans how you plan to distribute what we showed to be massive free cash.

Cash flow specifically the second part of this year.

I guess, what I'm, where I'm going with this Rogers.

At this point, maybe why pay down any more debt and then secondary you all said to be a dividend player I'm. Just wondering if you considered buybacks as well. So I guess my question is around debt buybacks.

Yes.

Thank you for that question Neil Yes, you know depend on depend on how you model it with the oil price you're using is significant free cash flow, especially at strip prices today, probably around 87% in the prompt month I think this morning.

So of course, we're doing that of course, we work with our board to increase our dividend in December we are planning a $65 price here.

Where we like to work.

We just announced today our increase of our dividend.

That will be an ongoing thing going forward with any company, that's having well above planned oil prices as the dividend there Neil because we our historic dividend player, but we do want to continue to Delever for sure have that at least and its the way it shakes out in our.

In our planning model, which is targeting and we do not have our board's concern is that you don't want to get ahead of the board on dividends and things that matters you know Neal.

But we.

Can really get below half pretty easily and have really nice dividends.

As to other cash returns to shareholders as part of your question naturally buybacks do come to play at this type of oil price comes for a long time, but first we got to get back to our dividend where it was when we got to get dividend to where it was before 2016 and I get to those levels and and be able to be sure.

That a buyback program can be consistent.

And last longer and be a part of the typical capital allocation and kind of get these wells on Gotta get our program. Further executed you got to continue to see these prices and continue to model toward that effort Neal.

Got it and then my second question really project for you.

You guys continue to do a great job on having sort of diverse both what I'd say onshore great Eagle Ford Canadian.

<unk> production as well as you know a lot of it is offshore coming on soon.

Question is.

Really twofold here one do you all anticipate the Eagle Ford continues to be sort of that steady growth.

Or do you or Eric see that starting dose maybe decline a little bit.

And would you I guess my question more specifically would you intentionally.

The decline as you start to bring more of these offshore wells online you've got some good slides out just showing how meaningful around king's Quay when a lot of those start coming on how that production is really going to start ramping my question I guess.

Is that offshore and potentially other offshore production ramps.

Would you still continue to keep this eagle Ford production flat.

Thanks for that Neil follow up on the Eagle Ford a great asset for one one we bought ourselves probably 12 years ago now.

It's the idea at Murphy is to keep this production level in the low thirty's.

Make sure we had a consistent level of capital and keep it there really no matter what so we're trying to.

Prove our montney production into into a level that will happen at the end of this year keep that flat for a while keep our Eagle Ford flat for a long, while making very nice free cash flow and let our offshore operate as its been operating well and have exploration success prop that up in future years, and keeping the Eagle Ford flat is our game.

Plan and Thats whats really in that long term slide on page 27 today Neil.

Loved the diverse plan. Thank you Roger.

No. Thank you I appreciate it.

Yes.

Your next question comes from Paul Cheng with Scotiabank. Please go ahead.

Good morning, Paul Good morning.

Hum.

I think the first one just where they just want to make sure we did fall.

Little bit confused in the press release, you say the first quarter production guidance is $1 33 to $1 39 and in the presentation, It's 136 to $1 42.

The crestwood needs a typo.

And the dip.

Francis why the businesses here.

It's $1 36 to $1 42, and we apologize if there is an error on that Paul.

Okay. So when you start like loss.

Persimmon is that number.

Alright.

The press release, you must have had a bad version I apologize.

No no no problem.

Hang on Paul was that David Hang on Paul second 36 to $1 42 in the press release press releases 136 to $1 42, Paul but that's what we're going to make.

Okay, that's fine that somehow look at that.

The one that I'd look at it as 130 to 139.

And the way.

I apologize for that.

The next one is coal.

David.

In the cash tax in the U S. How that is going to progress over the next two or three years I assume that this year, you guys not going to pay cash tax, but starting in 2020, we assume.

Majority of them is going to be cash tax.

And also that in terms of the hedging strategy.

Was it just curious that I mean with Yelp answer you in a much better shape yield production, yet scoring up breaking even coming down.

Say.

And we that's why we maintain such a heavy.

Large hedging program at all.

Okay.

I'll take that David. Thank you for that question, Paul we flipped back on hedging and our company is around buying significant assets in the Gulf it's around protecting.

Covenants in our unsecured revolver when times are much more difficult a couple of years ago.

Have some hedging positions in that effort today, we did take some costless collars this year to protect.

A high range of production 70 to 80 noted in our release today.

But in general today, with where we're going and how we're executing in our cost structure, we're not looking for additional hedges at this time.

Axis.

On the attack impacted here, let me answer the tax question with David here Paul.

Okay, Yes, Paul Great question, Great question on the taxes, obviously with prices increasing as they have I think all of us in this sector are going to be looking at some some higher pre tax income numbers I will tell you though.

Largely based on the fact that we.

We do have a pretty large NOL carryforward and our modeling we're not showing paying any cash taxes in the U S probably for about four or five years at this point. So that's sort of the up to date number based on current level of prices.

Okay. Thank you.

A final one for me once you're at that Teva see I think in your presentation you saw up always so.

Full year 2021 to 2020 full cap ex.

Roughly around 600 million kind of range.

We are in this presentation you Dan so.

Should we assume that that.

Although we are still winning and tackle what that that had been changed also.

In the presentation, Paul Farr. The next few years, our Capex average for that period is now $6 50.

Up a little bit from the Providence written on page 27, there Paul this morning.

Okay. Thank.

Thank you.

No problem I appreciate you're out Paul Thank you.

Yes.

Ladies and gentlemen, as a reminder, if you do you have any questions. Please press star one on your next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Good morning, Roger and team.

Good morning, Neil Thank you Carl.

Thank you first question is just on the drilling program at cutthroat it looks like the rig is on location and you guys are preparing to spud.

Any thoughts from your perspective.

First of.

On that asset.

The confidence intervals that you have around that success.

Sure.

Thank you for that question. They of course, that's a important well in our program. We have many wells in our program, including a nice well in Mexico. This year and real late in the year early 'twenty three a very nice well a couple of nice wells to drill in the Gulf.

It's a I would call it a little better than a one in three type of a thing the way we do our internal planning here at Murphy as a as a success. So that's how that is nail you know, it's a very large well.

Very high in size and has all the attributes of a very nice exploration opportunity and we're looking forward to our partner our operating partner getting going down there.

Thanks, Roger and the other Big picture question.

The industry for a long time you've seen.

The birth of shale and work again to another phase of it which is it looks like closer to shale maturity and as to your thoughts on what inning are we in it as it relates to productivity in shale and.

How does the cost inflation that we're going to see across all of these basins.

Affect your outlook for the ability of.

The sector to grow.

In the U S. Thank you.

Of course, we have been in shale for a long time, we've been like I said earlier. This morning, probably about 10 or 12 years in the Eagle Ford.

You know I think we really it's not so much what the shale will deliver its more of a disciplined flatter shale, making more free cash flow, which fits well with with Murphy very well actually and that we appreciate that but as I look at shale and this new flat world and I look at when we cut our capex back.

Our team was able do incredible production engineering efforts, which allowed us to.

Really improve our base production to a lot of work on downtime involving compressors and some facility engineering that we did and had our best base production ever and our lowest decline ever in the Eagle Ford due to our base and our outstanding engineering work, So I see that getting better I see big data see remote operating centers.

See continuing cost reductions and efficiencies all the time that we feel that Murphy can overcome the inflation because were contained to see improvements and we're targeting $5 million well drilling complete costs throughout North America, no matter, what and we're able to do that and we think can make a lot of money doing that also see a lot.

[noise] of technology to re fracking I see a lot of technology to gas injection later in the development cycle I see a lot of engineering and technology, keeping these feels flatter longer and delivering a lot of free cash flow and.

And Eric and his team has done a great job of doing that and that's kind of where we're positioned today on that.

Thanks Roger.

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

Good morning.

Good morning.

Had to ask a little bit more about the Gulf of Mexico. So you've got the seven wells youre going to bringing on it.

It sounds like in succession, starting in Q do you guys have an estimate of what the total say net benefit is of those seven wells to Murphy in terms of like BOE per day, and roughly how much of that is oil.

It's really kind of averages out to about high 3000 to 4000 net of well for us because we have a different working interest at samurai.

And where we feel that's what we're looking at there Neal and it's very high all I'd say, how it is it Eric high Eighty's, 82% all this oil field for sure and we're looking forward to bringing it home.

Okay great.

Just a question about Tupper montney.

What are you guys forecasting for the production of that asset in 'twenty two.

This point in time.

Go ahead, Eric with that.

For the full year, we're looking at Tupper Montney production too.

Let me make sure I get you the right number here.

To be $55 7000 Boe per day.

Okay.

And I guess just looking at the presentation you guys had earlier in the year I think you guys had production, which was if we were a bit higher than that just wanted to get if my numbers are right.

By roughly I don't know 15%.

Earlier in 'twenty one in terms of presentation. So just wanted to get a sense of what's going on there maybe there have been some delays in bringing the wells online and can you talk about to that the shape of the production build in in 'twenty two.

I'm guessing, it's probably pretty back half weighted with the big ramp in the second half.

I'll, let Eric go ahead with that.

Don't have that presentation handy that you focused on this morning, Leo I'm, sorry, but we feel we're executing pretty well there and we've had the highest Ips we've ever had in the highest Ips and public data in that in that area.

Go ahead, Eric with further color on that yes. So for 2022, we have a program to bring online 20, new wells, which will offset our base decline and add significant volumes through the year, our new wells will contribute in the 18% to 19000 Boe.

For the annual average so the exit rate will be quite strong.

Production growth will happen in the second quarter and third quarter as the wells come online about half in the second quarter half in the third quarter. So we're pretty excited about the asset and how it's performing the rates. We've been achieving are really strong and our base decline has been shallow we're pretty confident that we have a nice program.

In 2022.

Got it Okay and then lastly, just on Capex you. Obviously have this kind of three year outlook you can provide from 'twenty two through 'twenty four.

I guess clearly 22 is the high number let's just call it around 70 or whatever.

So looking it at 23% and 24 to get to the 650, it looks like you've got to be kind of in the high fives.

680, and in Capex in 'twenty three 'twenty four does that sound about right around 600 next year.

Is there any material difference in 'twenty, three and 'twenty four capex or is it about the same as you all look at it.

Thank you Leo for that question on our tight budgeting here, which were quite proud of.

Next year, what you said in the low six hundreds it is accurate to our plan and 24 should be a bit lower.

As we were able to execute this.

Full year of King's key in St Malo coming on and so it's gonna accounted dropped 806, hundreds high fours and move on from there.

Okay. Thanks, guys.

Thank you appreciate it.

Yes.

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

I appreciate everyone, calling in on our call today, if you need any further information please contact Kelly or Megan and our IR team and we look forward to speaking to you at Denver next quarter. Thank you I appreciate it goodbye.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a great day.