Good afternoon, ladies and gentlemen, and welcome to the Murphy Oil Corporation Second Quarter 2013 Earnings Conference Call. Today's conference is being recorded. I would now like to turn the call over to Mr. Steven Cossé, President and Chief Executive Officer. Please go ahead, sir. Steven A. Cossé: Thank you, operator, and good afternoon, everyone. And thank you for joining us on our call today. With me here are Roger Jenkins, our Executive Vice President and Chief Operating Officer; Kevin Fitzgerald, our Executive Vice President and Chief Financial Officer; Andrew Clyde, who's a President and CEO of Murphy USA, Inc.; John Eckart, Senior Vice President and Controller; Mindy West, Vice President and Treasurer; Barry Jeffery, Director of Investor Relations; and Tammy Taylor, Assistant Manager, Investor Relations. Barry?

Thanks, Steve, and welcome, everyone. Today's call will follow our usual format. Kevin will begin by providing a review of second quarter 2013 results. Steve and Roger will then follow with an operational update, after which questions will be taken. Please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, see Murphy's 2012 Annual Report on Form 10-K filed with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements. I'll now turn the call over to Kevin.

Thanks, Barry. Net income for the second quarter of 2013 was $402.6 million or $2.12 per diluted share as compared to net income for the second quarter of 2012, $295.4 million or $1.52 per diluted share. For the 6 months ended June 30, 2013, we had net income of $763.2 million or $4 per diluted share, compared to net income for the first 6 months of last year of $585.5 million or $3.01 per diluted share. This year's second quarter included income from discontinued operations of $70.5 million or $0.37 per diluted share compared to income of $4.1 million or $0.02 per diluted share for the same period last year. For the 6-month period 2013 included an income from discontinued operations of $223.1 million or $1.17 per diluted share, compared to income of $12.8 million or $0.07 per diluted share in 2012. The increases in the 2013 income for discontinued operations resulted primarily from gains on the sales of all E&P properties in the U.K. From continuing operations, we had income in the second quarter of 2013, $332.1 million or $1.75 per diluted share compared to income from continuing ops the second quarter of 2012 of $291.3 million or $1.50 per diluted share. For the 6 months 2013, we had income from continuing operations of $540.1 million or $2.83 per diluted share, compared to $572.7 million for the 6 months of 2012 or $2.94 per diluted share. Improved results from continuing operations in the second quarter of 2013 as compared to 2012 is mostly attributable to growth of oil production in the Eagle Ford Shale area. Looking at income by segment. In E&P, we had income from continuing operations in the second quarter of $290.2 million compared to income from continuing operations, second quarter of last year of $226 million.…

Thank you, Steve. Hello, everyone. In our exploration and global offshore business, we continue to focus on 4 areas, the big water Gulf of Mexico, the Atlantic Margin, Southeast Asia and Australia. First, in Australia, in the Browse Basin, our partnership group is drilling the Dufresne-1 well where we hold a 20% working interest. The well is located approximately 35 kilometers west of the Bassett West well, which is expensed this quarter as noncommercial with over 20 feet of net gas pay. We're continuing with work to evaluate the large Bassett structure and anticipate results on the Dufresne well early in the fourth quarter. In Brunei, the partnership group plans to drill 2 prospects, offsetting a recently announced Kelidang discovery in the fourth quarter with results expected in quarter 1 of next year. The spud timing remains uncertain here and in most of our global operating areas, as a shortage of deep water and high-capacity jack-up rigs worldwide is pushing drilling schedules to the right. We've made progress and added acreage in Vietnam with the official signing of the shallow water Block 11-2 PSC at 60% working interest. We're now shooting seismic on the Block, and we hope this will lead to a well spud in 2014. We continue to work on increasing our footprint in Vietnam. In the Atlantic Margin, we spud our first deep water well in Cameroon yesterday. The Boning [ph] #1 well in the Elombo Block, should take approximately 45 to 60 days to drill, and is testing both the tertiary and Cretaceous age sand target with a predrill gross resource estimate in the range of 300 million barrels. The exploration well in the NTEM block is scheduled to be drilled with the same rig in early 2014 following a planned shipyard rig inspection. The predrill…

[Operator Instructions] We'll take our first question from Leo Mariani from RBC.

Just a question on the Eagle Ford. Sounds like it had a really big ramp up in the second quarter, I guess, talked about 39,000 barrels a day and change. Where is that production currently?

Production today is around 45,000 BOE per day and kind of near 90% oil range.

Okay. All right. And I guess, just in terms of your number of wells, what's the plan for total number of wells in 2013? And would you happen to have the number of wells you brought on in both the first and second quarter of '13?

Yes, I happen to have that, just one second. Brought on 49 wells in the first quarter, 48 in the second. We're going to be probably tailing down our current plan to have 41 in the third and 30 in the fourth because we've so efficient, we've out drilled ourselves, worked ourselves out of a job a little bit here, and we're trying to keep our capital in check and we have less wells coming on. And we kind of frontloaded our CapEx there, Leo.

Okay. And I guess, obviously, that's a pretty good program. I mean, I guess, is that potentially to accelerate next year at all? How should we think about that?

I think it should maintain it. I mean we have a strategy of being an E&P explorer and offshore and complementary onshore business, that we said many times, we're running about a $1.4 billion CapEx business here. I'd see that trying to keep that the same at this point. There's going to be -- I think 160 wells, Leo. Could be add up a little more than that, but it's around that number.

Okay. I guess Seal, looks like you guys saw a really nice increase in production at Seal during the quarter. Should we expect that to kind of continue to trend higher for the rest of the year or that might plateau a little bit?

Probably not. We had a fire in February and we've recovered very well from that. We're probably a little ahead of our plans. I would imagine with the breakup system, breakup being pretty rough in Canada this year, no drilling, we have no rigs today. And we don't have any rigs, usually dropped. It won't drop a whole lot, but I don't see the growth we had quarter 1 to quarter 2 continuing that out.

All right. So basically just watching your polymer pilot, and you stick with the steam pilot, and if you get results there, might you accelerate those at all next year? How are you guys thinking about it?

It's probably not. We have this $1.4 billion CapEx, trying to get ourselves into back to cash flow CapEx parity very -- really working that issue in our budget. When you compare -- while we're excited about the EOR opportunity, we do have a long-range vision of price there, and it's been a very volatile and very good at times. But Eagle Ford's a pretty hot running card to play right now for us in our capital allocation.

Okay. In terms of retail spin, I guess your board's meeting next week. I guess, my understanding was that you guys have sort of already approved that formally as a board, so it sounds like maybe you're just making decisions on the exact capital structure and amount of dividend to do, then back to the parent. Is that right? Am I missing anything? Steven A. Cossé: Well, we hadn't met. The board has not decided to actually do the spin. But we're moving in that direction. And I'd like to answer that question the middle of next week.

Okay, understood. Makes sense. And I guess in terms of RIN, you talked about $18 million of income benefit this quarter. I guess prices are still strong. I guess we should expect to see continued incremental income from that for the rest of the year. And I guess could you potentially highlight, roughly, what the cash flow impact is of the RINs?

Certainly, this is Andrew Clyde. We've been doing 12 million RINs a month and that's a consistent rate for our proprietary blending. We can buy more bulk barrels and blend more when the economics support it. But we'd look to continue to do around 12 million conservatively for the rest of the year.

Alright. And so, Andrew, that translates into sort of rough cash flow?

Not until I could predict RIN prices. So currently they're around $1, and we're selling ratably on a monthly basis. So we're blending and generating, capturing RINs of about 12 million a month and we'll be getting the market price on a ratable basis.

And we'll take our next question from Guy Baber with Simmons & Co. Guy A. Baber - Simmons & Company International, Research Division: I wanted to talk about production costs and your focus on margin improvement. But your U.S. production costs seem to hit their lowest per barrel level in about 2 years and the Malaysian production costs this quarter hit their lowest level in 3 years, I believe. So my question is was there anything unique to this quarter that caused the cost to be abnormally low? And then also could you maybe just elaborate on efforts to continue to reduce OpEx and what the per-barrel trajectory might be for some of your key assets in the U.S. and in Malaysia to the end of this year and into next year?

Okay. First, just some general comments on that. In offshore, probably up a little bit this quarter to the first and that number will probably be fairly consistent throughout the year. Big improvement in our Eagle Ford Shale. We're in the $15 range per BOE, which is a big improvement. That was due to the big ramp up and the building of facilities and more concentrating of the buildout of all of our equipment and less rental equipment. I would see that drifting down in pennies throughout the year, down into the 14 level in the fourth quarter. I don't see it making these continued giant improvements. Over in Malaysia, we did have a onetime credit. We sell condensate. Condensate are NGLs come off with the gas project in Malaysia at the Sarawak gas. And we've had been accruing a certain level of operating expenses in the long-term negotiation with our partner there, Petronas, and received a credit, a onetime credit for this quarter, bringing that down in that business slightly. And then in the next quarter in Malaysia, we'll be up. Again we have this Kikeh shut-in. And when you shut in Kikeh with a leased FPSO, you anticipate operating expenses to go up. So -- and then we'll get kind of back into where we are -- where we were at the first quarter in Malaysia toward the end of the year. Guy A. Baber - Simmons & Company International, Research Division: Okay. Very helpful. And then I was hoping you could also just touch on Gulf of Mexico volumes, really, how you see your base performing. But I noticed in some of the charts that you're not really building in any decline to the base in the Gulf of Mexico over the next couple of years. So just looking for some detail on how that base is forming now and what type of activity is going on right now for you to mitigate any declines you might see there.

Well, we have around a 15,000-barrel a day business, not having a very good year in the Gulf, quite frankly. Had some operational problems and rig delays here and there. About a 15,000-barrel a day business would be declining on base, but we have the Dalmatian project coming on next year. It's quite prolific, almost the same size of what we're producing today net. That's on schedule to come on in the first quarter. And later from there, we have the Medusa subsea development where we -- Medusa's one of our better fields and becoming one of the better margins in the company, a very nice field. It's still producing it's original wellbores. So we're unable to produce some success. We have upped the hole, if you will. We need to put in some subsea equivalent, working with our partners to gain that approval. And that should work into 15, kind of maintaining that Gulf of Mexico, and that toward the 20s kind of a business until we have a, hopefully, a discovery guy.

And we will take our next question from Blake Fernandez with Howard Weil.

I had a couple of questions for you. One is on the hedging strategy. I know historically you've had some gas hedges in place, but if I'm not mistaken, this is a bit new to have the oil hedges in place. I'm just curious, if you could talk a little bit about the strategy there? If this is a kind of a one-off call on commodity prices being elevated? Or if this is a function of the potential retail spin and the idea that you're going to have more volatile earnings stream going forward?

No, I don't believe that latter's the case. I think when you look -- I'm a benchmarker, Blake. I benchmark everything to my competitors' OpEx, DD&A, you name it. Primarily, most of our competitors are probably -- have hedged positions for 25% to 30% of their barrel of oil equivalent, especially on the oil side. We, of course, have been a very low debt player compared to our competitors in that type situation. But we have taken on some debt, on a net debt basis still very low. We do have some U.S. debt. We have a very good business in the Eagle Ford that we want to maintain our certain level of capital. We are working a strategy to hedge our forward sale, if you will, about this level of production. I don't see us going over 25%. And we saw an opportunity when the market shot up ahead of what we have in our budget and I took a small position there. I don't think of us as increasing it a whole lot. I don't think of us as becoming a big hedge player. I thought it was remiss to not have any hedge position at all in our business, protecting cash flow in the U.S. where we want to run with a $1 billion-plus budget if we can, because it's going very well for us.

Okay, fair enough. And then on the Eagle Ford, I guess I had maybe 2 separate questions. One, Roger, you said you're currently producing around 45,000 barrels a day. Could you remind us what your kind of "peak estimate" is? And then secondly, on M&A, I mean, it sounds like you're focused on about 25,000 acres. There's obviously some other packages out there being marketed. I'm just curious if you see an opportunity to maybe core up a bit. Obviously, prices are well above what you originally paid, but it seems like maybe you could build out some additional running room?

First on Eagle Ford. We had a pretty high rate today. It's a big complicated business, a lot of things running. We do have, running into some pad shut-ins where we shut in production to frac nearby wells, et cetera. So we're probably going to be in the low 40s and probably an increase in my mind of around 3,000-something BOE a quarter going forward for the next couple of quarters, Blake. People trick me on the daily question to get at the guidance all the time. I failed to answer that accurately. On your other question about Pearsall, we have a very good 1 well and a very mediocre second well. We're fitting in some wells. I think, for us to do a deal or to look to do that, we need a little more information. And so we've strategically picked 2 or 3 spots that we're going to drill between now and the first quarter of '14. I think that would be the time to have that kind of discussion.

Okay, the last question I had. I'm not sure if this would be Steve or someone else. But can you -- if I recall the working capital on Milford Haven was about $500 million. I was hoping if you could kind of confirm that it's still in that range? And then secondly, if you had any estimate at all what it may cost to actually just close that facility and walk away? Steven A. Cossé: Well that $500 million is -- remains still in the range. And, no, I really don't have any estimate what it would take to close it.

And we'll take our next question from Ray Deacon with Brean Capital.

Roger, I had a benchmarking question about the marketing side. I guess, if you look at the retail margin and the gasoline margin in the quarter, where do you think that would stack up relative to your peers'?

Hold up there, Ray. I'm an upstream guy, but I got a downstream guy right here with me.

Well, our margin on fuel for the quarter just ended was $0.156 per gallon. Most of our peers, I would say, we are taking a lower-price position on the street, day in and day out. That's where we target our customers in front of Walmart. So we would expect to have, on average, lower margins. That said, some of our competitors buy branded fuel, and pay -- have a higher cost of goods sold, where we're buying on the spot market and typically buying at a lower cost of goods. So you would have to go through to make those adjustments apples-to-apples, who's got the lower cost of goods sold. We're typically going to be in that space. But we're also going to have, on average, lower street prices to most of our public comps.

Got it. Got it. Great. And I guess, Roger, one more question, I guess, in terms of your thinking on 2014, a few months past the Analyst Meeting. I guess, has there been any shifting in your mind in terms of capital based on either seismic in Vietnam or, I guess, anything else or...

No, it's [indiscernible] is lumpy like any global explorer. Our CapEx that we had just for the upstream business should be the same as AGM, pretty close. We have to add on, of course, the corporate part of us being alone at that time, which our presentation didn't include. But a $400-million- to $500-million-a-year type exploration program among all the types of exploration, both seismic and wells, that's our goal. Quite frankly, it's tougher to deliver. A lot of rigs are late, a lot of rigs are going to the right, rigs we're waiting to receive from others. But in general, that's the goal and I see us headed in that same direction now.

[Operator Instructions] And we'll take our next question from Pavel Molchanov with Raymond James. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: First, on the comment you guys made about the board has not yet made a decision on the retail spin off. Is that just a formality at this point, or is there actually some viable course of action that you're contemplating besides a spin-off? Steven A. Cossé: Well, I don't want to characterize any board decision as sort of pro forma but ask again. Ask that question next week and I think we'll be prepared to answer it for you. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Okay, understood. On the Dufresne prospective, if I'm pronouncing that right, in Australia. Do you have a predrill estimate for that?

Yes, it's -- hang on one second. I got it right here in my notes. We've had it in our AGM. It should be the same, but it's 2 to 2.8 TCF gross, which should be 0.4 to 0.6 TCF for Murphy there. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Okay. And who's the operator there?

Total. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Total, okay.

And we'll take our next question from Guy Baber with Simmons & Co. Guy A. Baber - Simmons & Company International, Research Division: I wanted to ask about the Kakap-Gumusut full field development project. Pretty important for you all, for your 2014 target. Can you just provide a little bit more detail around confidence levels around start-up timing? And then also is that expected to ramp to peak capacity through the course of 2014? Any more color you could put on that will be helpful.

Yes, I feel better about it, Guy, because we -- the facility is offshore. And when you're in a deepwater development business, first step is getting them offshore. It's offshore. It's moored. The production risers are being installed. There's like 8 to 10, I forget the count, producing wells in the field. Two of which are flowing to our facility now. The wells are a common-type completion technology. We flowed them now for several months, almost a year. We have good success, some very high rates from the wells. The wells are very prolific. So to me, the start up before the end of the year is very much there. And Barry's got the guidance for '14 and I'll let him speak to that. But I feel good about the project coming forward. You can look on the horizon and see it today from our facility, which is good.

And, Guy, just going back to Analyst Day numbers, which I'll balance to here. Next year, we were showing at just a shade under 10,000 barrels a day our share, with '15 taking it up in the '14 range. So there's still a bit of growth into '15 from '14 as everything comes on.

And we'll take our next question from Evan Calio with Morgan Stanley.

Just a couple of quick ones for me. Any update on the potential return of the Syncrude upgrader from unplanned maintenance? I thought that should be back in early August.

It's supposed to be in August. And that's what we've been told and planning on that cautiously, I'll say. But that's what we planned. You're right.

Understood. I know you mentioned progress on U.K. asset sale yet. Any timing expectation, final sale there for 2013? I know that's been going on for awhile now. Steven A. Cossé: It's been going on for a great long time. And for that reason, I think I'm going to decline to give you an estimate. I think, if we have something to disclose, we'll -- you'll hear a great shout of great joy from -- all the way from here to wherever you are.

And I guess, additionally on that asset sale. I mean, do you think about those proceeds as a potential reload for the buyback? Or exit [ph] as you pull more into free cash flow neutrality?

Well, we certainly look at it. This is Kevin. Once that deal ends, we'll certainly look at what our options are, and all of those would be on the table. We'll just see exactly what the timing is and where we are at that point in time. You got to remember, I've got to bring that money back from overseas, so I could have some time depending on just how it all works out.

Well, great. Understood, understood. And lastly, on Cameroon, what is the -- what do you estimate the commercial threshold for that prospect is? I know, I think you mentioned the P50 was 300 million barrels?

I imagine [indiscernible] around 100 million in a rank one-off place like that should work. That's very careful delineation and not over delineate at that size to get your F&D too high. But it would be -- these wells are not expensive to drill like a Gulf well, so hopefully, it'll be that type of size in my mind.

[Operator Instructions] It appears there are no further questions at this time. Mr. Steven Cossé, I'd like to turn the conference back to you for any additional or closing remarks. Steven A. Cossé: Thank you. I'd just thank everyone one more time for participating in our call. We have particularly enjoyed this conference call, as we would with any good quarter as we recently reported. But stay tuned. We expect to have some announcements probably as early as next week. So again, I thank everyone for participating.

And that does conclude today's conference. We thank you for your participation.