Murphy Oil Corp (MUR) 2008 Q1 法說會逐字稿

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Murphy Oil Corporation first quarter earnings release conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded Thursday, May 1st, 2008.

I would now like to turn the conference over to Claiborne Deming, President and Chief Executive Officer of Murphy Oil Corporation. Please go ahead, sir.

Thank you and good afternoon. I am joined today by Kevin Fitzgerald, Senior VP and Chief Financial Officer, John Eckert, VP and Controller, Mindy West, VP and Treasurer, and Dory Stiles, Manager of Investor Relations.

I will turn it over to Dory at this time.

Thanks, Claiborne. Welcome everyone and thank you for joining us. Today's call will follow our usual format. Kevin will begin by providing a review of first quarter 2008 results. Claiborne will 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 such, no assurances can be given that these events will occur, or that projections will be attained. A variety of factors exist that may cause actual results to differ. Many of these have been identified in Murphy's January 1997 Form 8-K filed with the SEC.

I will now turn the call over to Kevin for this comments.

Thanks, Dory. Net income in the first quarter of '08 was $409 million, that is $2.14 per diluted share. That compares to net income in the first quarter of '07 of $110.6 million, $0.58 per diluted share. The 2008 quarter was favorably impacted by higher crude oil sales prices and volumes, partially offset by much tighter margins in the Downstream part of the business. The 2008 quarter included an almost $40 million gain, or approximately $0.20 a share, related to the sale of all of the Berkana Energy shares that we held in Canada.

Looking at income by segment, E&P first quarter of '08, the net income was $428 million, compared to net income in the first quarter of '07 of $88.8 million. Higher E&P earnings for 2008 were attributable to both higher oil and natural gas sales volumes, and higher realized prices when compared to 2007.

Crude oil, condensate, and gas liquids production for the current quarter averaged approximately 113,300 barrels per day, compared to approximately 84,600 a day for the corresponding 2007 quarter. The increase was attributable to production from the Kikeh field in Malaysia which came onstream last August, partially offset by declines in the Gulf of Mexico, Western Canada, and at the West Patricia field in Malaysia.

Natural gas volumes of 69 million cubic feet per day in the first quarter of '08, compared to 61 million cubic feet a day in '07. Most of this increase was due to production at the Mondo NW field in the Gulf of Mexico, which came on in July of last year, and that was partially offset by a reduction in Canada, due to the previously mentioned sale of the Berkana shares.

The downstream segment in the first quarter of '08 we had net income of 10.2 million, compared to 35.7 million of net income in the first quarter of '07. Downstream results were significantly weaker in the U.S., due to poor refining margins resulting from higher crude prices.

However, results in the U.K. were improved over the first quarter of '07, largely due to our now having 100% ownership Milford Haven Wales refinery, compared to 30% that we owned in the first quarter of '07. As you recall, that transaction was effective last December 1st.

In the Corporate segment, we had a net burden in the first quarter of '08 of 29.2 million, compared to a burden of 13.9 million in the first quarter of '07. The higher cost in the '08 quarter were a result of higher foreign exchange losses, due to the weak U.S. dollar, higher stock-based and other incentive compensation, and higher net interest expenses. At the end of the first quarter 2008, our long-term debt amounted to 1.7 billion, or approximately 24% of total capital employed.

With that I will turn it over to Claiborne.

Thanks, Kevin. I will spend a few minutes on each of our major businesses, to give you a feel for where we are and more importantly, where we are going.

I will start with E&P. Having new production come onstream in the current pricing environment is obviously a tremendous benefit. Kikeh is the main driver of our production growth, with seven wells producing 66,000 barrels a day, from the field located in Block K offshore south of Malaysia. Additional wells are currently being backset, with the next group scheduled to come onstream by mid-year. By the end of the year, production will reach the plateau rate of 120,000 barrels per day. The field continues to perform as modeled.

Meanwhile, development work continues elsewhere. In Sarawak, Malaysia, Phase I of our natural gas project remains on-track for first quarter 2009 start-up. By the way, as our realized price is tied to LNG landed prices in Japan and Korea, the recent run-up will directly benefit the economics of this investment. Ground preparation has been completed for our on-shore receiving plant adjacent to the Bintulu LNG facility, which will ultimately process the gas.

Both Thunder Hawk and the Gulf of Mexico, and Azurite offshore Republic of Congo, remain on-track for first production in the second quarter of 2009. Formal ministry approval has been reached, for the sale of part of our working interest in the Azurite field. As you are aware, we retained a 50% working interest in operatorship. At Kakap, our other oil discovery in Block K Malaysia, batch drilling is now under way for this recently sanctioned development, scheduled to commence production in late 2012.

Production at Tupper, our [Montany] tight sands gas resource play in British Columbia, is scheduled to begin in the fourth quarter of this year. As additional phases of the development progress, production is expected to rise to 350 million cubic feet per day over the next several years. The gas plant and pipeline approvals have been obtained, and plant construction is well under way. We have drilled nine wells to date, and results thus far have been within our expected range. As an update to the proposed Lloydminster divestiture mentioned on last quarter's call, we have signed a sales agreement with another company with proceeds totaling C$141 million. The transaction is expected to close by early June.

In the Gulf of Mexico, Northwest Mondo remains shut-in due to a problem at the independent sub host facility. We now estimate that we will average 130,000-barrel equivalents a day for the year, and not 135,000. Due to a combination of higher than budgeted oil prices that decreased our entitlement in West Patricia and Syncrude, unbudgeted first quarter downtime at Syncrude, and a delay in the start-up of Kikeh gas production to later in the year caused by the late arrival of a pipe lay vessel.

Turning to Exploration, in June we will resume drilling in the Gulf of Mexico, with a focus on lease sale acreage acquired in the eastern Gulf. Initially our wells will target natural gas in the Lloyd Ridge area. We start with a prospect named Sapphire in Lloyd Ridge 260A, targeting 100 to 150 BCF. Our interest is currently 100%. Following this wildcat, we will move to Diamond where we have a 62.5% interest in Lloyd Ridge 370, targeting a 400 to 500 BCF prospect. Depending upon success, we either stay at Diamond, or move to Emerald, a 150 BCF prospect in Lloyd Ridge 317.

All these prospects are clearly defined four-way dips with obvious amplitudes. We continue to evaluate the wide-azimuth data in Green Canyon, and may drill a prospect later this year. Around mid-year Malaysia we plan to spud a well on the [Buntal] prospect, which is located about 40 kilometers out board of Kikeh in Block K, and lies in 7,400 feet of water. Drilling at this large four-way dip structure will target the same package that we previously tested with our Kikeh 7 deep well that encountered hydrocarbons. The prospect has risk because this horizon doesn't yet produce in the area, but given the size and the amplitudes, it loosely chins the bar.

In March we successfully renewed our acreage in Block H Malaysia. We now have a 60% working interest in future exploration, while maintaining an 80% working interest in the Rotan and Biris discoveries. Two additional wells are budgeted for this year on this Block. Having re-evaluated and highgraded our prospect inventory in the MPS block offshore Republic of Congo, we are ready to move forward with the drilling of two exploration wells there later this year. We have signed up a rig, and we spud in October.

The sale of Azurite also included a carried interest in the two upcoming wells, so our interest is 50% and we operate, but our financial exposure will be much less. In the fourth quarter of this year, we will be drilling our first wildcat well offshore Australia in the Browse Basin. We have a 40% working interest, and serve as operator as we target a multi-TCF sized prospect on this promising block.

Turning to downstream, despite weak crack spreads and squeezed retail margins in the first quarter, as well as planned maintenance of both Milford Haven and Meraux, we turned in quite respectable results. In this environment, having an increased international presence, due to owning all of the Milford Haven Refinery is helping the bottom line, with a healthier refining margin there at present over the U.S.

Having this facility adds more diversification to our business, and most comparable independent refiners have. As noted, scheduled maintenance was completed during the first quarter, and Milford Haven is running now at 105,000 barrels per day.

In the U.S., Superior was squeezed during the first quarter, and up until we brought the plant down last week for scheduled turnaround. By the time we bring the plant back up in late May, the margin environment will likely be more favorable, as we enter both the driving and asphalt seasons. Meanwhile Meraux continues to operate well around 110,000 barrels per day, following planned maintenance during the first quarter.

As the price of retail gasoline goes up, one trend we are observing is that we enjoy more customers into our Murphy USA stations. Monthly fuel sale volume for the first quarter averaged 305,000 gallons per site, an 11% increase over the same quarter last year.

While fuel margins have been squeezed by steadily rising wholesale prices, the increased traffic has benefited non-fuel sales, which are up 28% over the 2007 first quarter. By providing gasoline at a very competitive price, we have been able to attract customers in overall tightened economic times. A more favorable margin environment will return, and we will be in a position to benefit. We currently have 974 stations in operation, with 13 more currently under construction, including seven of the larger Murphy Expresses, and numerous others in various stages of permitting.

As you can tell, there is a lot of activity under way, and on the near term horizon. Most importantly, we are soon to get back to exploratory drilling, with meaningful exposure to significant prospects. Expect to see us continue to explore, appraise, and act upon opportunities for value, adding growth, as we have done over the last year. I am confident that we will be successful.

I am now ready to take your questions.

Ladies and gentlemen, we will now begin the question-and-answer session. (OPERATOR INSTRUCTIONS). Our first question is from Ben Dell with Bernstein. Please go ahead.

Thank you. Hi, Claiborne.

Hi, Ben, how you doing?

Good, good. I had a couple of quick questions. Previously you had talked about the M&A environment, and looking at asset deals. Have you seen the market change, obviously with the run-up in crude, and do you now consider that something you are going to get priced out of, or is that something you are still actively looking at?

No, we are still looking at it, Ben. And typically our preference has been natural gas, because we are such an oily company, and we are certainly not fearful of going internationally and looking for natural gas assets. And those haven't quite responded the same as oil, because their price obviously hasn't run up quite as much.

But I think it is a difficult time to be finding good assets to buy. I think that is certainly undeniable. The types that we typically look for, we like to think that we are an advantaged buyer, either through superior knowledge, or on assets that others might not see current value in. So we are still looking.

My second question was on production. The second quarter guidance seemed relatively light. Can you give us some detail on where the real weakness is in that second quarter, and also with the Kikeh wells, how many wells will be coming onstream and their net contribution per well?

Sure. Dory is going to answer the second quarter compared to the first quarter production.

Ben, the main difference is there is not one thing that we can point to, but I can give you a list of several items that make up that difference between the second quarter and the first quarter. You have 3,000 barrels a day from the Gulf of Mexico, primarily, as Claiborne mentioned from Mondo Northwest being shut in. You have 3,000 BOEs per day of heavy oil, primarily we are in break-up period there, and with the Lloydminster property being sold later in the quarter, we lose some barrels there. 3,000 barrels in the U.K., primarily [Shahalian] maintenance later in the quarter. And 3,000 barrels offshore eastern Canada, primarily related to the Terra Nova shutdown for repairs in June. We gain about 4,000 barrels a day for Kikeh from the additional wells that will be coming on at the end of the quarter as well.

That is the second versus the first quarter, Ben. We have got seven wells on. We are a bit over 60,000 barrels a day. We are going to bring three on in June. We will get up to around 80,000 barrels a day. And then the balance of the wells, either come on in either one or two more traunches. We will have 14 at the end of the year for the 120. 120,000 barrels a day.

Great. Thank you.

Our next question comes from Arjun Murti with Goldman Sachs.

Any change to the capital spending budget this year?

Arjun, not materially. No, no. There is not.

So like a 2.4 kind of number, I think?

Yes, closer to 2, 8. 2, 8, Arjun. We are flipping through some numbers real quickly now.

Just under 2, 8.

There is nothing hugely, no, there is nothing hugely material. Okay. That is great. That is really it. Thank you.

Okay.

Our next question comes from Paul Cheng with Lehman Brothers. Go ahead.

Hey, guys.

Hey, Paul how are you doing?

Very good, thank you. Just have a quick one. Now that the associate gas from TK is going to be start-up?

Sometime this summer. It is a pipe laid vessel, which is coming out of shipyard, that we assumed would already be on location. It is not. And it is a bit fuzzy, but I would say this summer. Later in the summer at the latest, and perhaps earlier.

I see. Any update about, I think at one point talking about Superior for the expansion to 200,000 barrels per day. Any update there? And also just any change in your view on the overall downstream operation, given the weaknesses that we see in the margin, does it change, do you think this is still part of your core operations going forward, or that that has been changed in the view?

With respect to Superior, no change. We have certainly looked at lots of options there, because of the location of the plant obviously on the pipe. And close to market. And with the expansions going on in that basket.

But there is no update or anything that has occurred in the last three months that would change where we are there. And we currently have no firm plans at Superior. As far as whether downstream is core or not, I wouldn't let three months impact us much there. But certainly as I have said before, we leave all of our options open. It would be foolish for me to say otherwise.

And so it is an asset that we just added to, by adding the other 70% of Milford Haven, and buying the land under Wal-Mart. So it is stronger. It is firmer and the asset in the U.K., Milford Haven, is performing extremely well, operationally as well as financially. I am real glad that we own it right now. It is the highest returning plant, and asset we have in our downstream business, in fact. I wouldn't let the last three months change your mind, for an asset that you keep for literally decades.

When you talk about 130,000 barrels per day for this year, what is the contribution of Kikeh within that?

I am not looking at it, Mindy is saying about 55,000.

55,000. And you have indicated that the SK 309 and 311, the gas sales contract, or the project is on schedule, are we still talking about in the third quarter 2009, or later, more like fourth quarter now?

No, no, we had always said first quarter '09, Paul.

First quarter '09.

Yes.

That is still on schedule.

Yes, I don't see any delays there.

Okay. Very good, thank you.

Yes, sir.

Our next question comes from Ryan Todd with Deutsche Bank. Please go ahead.

Good afternoon, gentlemen.

Hello.

Question for you, I know you have a very active exploration stretch coming up here, which could materially change how you see things going forward, but can you comment on allocation of cash going forward, with extremely strong commodity prices, how you expect to use your cash?

Yes, Ryan, I think as I have said before, the highest and best employment of our capital and our cash, is developing a high margin oil and natural gas field, and so that is an option for us, I can clearly state that is where we will go. We have been working on a program here for a year and a half, and we have a program that we are going to start drilling in mid-year, so we need to see how that unfolds.

In the eastern Gulf prospects in particular are attractive, in terms of risk versus reward in terms of probabilities of success. And I will probably condemn them by saying that, but there are good-looking prospects with reasonable chances of success. Buntal is riskier but it is bigger. It is very large many and then we have the west African prospects that we farmed down a bit the risk that way, and as you know shot some additional seismic. So it is a pretty good-looking program.

I want to see how it drills out, before we make any alteration or change in how we allocate capital. I always say, having said that, I am an owner like you are an owner, and as owners we like to get paid, and we want to be paid on the stock. I am certainly aware of that. Something other than investing and producing oil and gas fields, or buying something very attractive on the downstream side shows up, then we would look at some other options.

What are your thoughts on a special, or is that less attractive?

If you look back at the history of Murphy we bought back stock from time to time, not much recently, and we steadily increase our dividend. We were dividend payers all the way back in the ugly '90s. When a lot of people either suspended or stopped, and we went all the way through.

I think if you look at the sweep of time for us, pretty steady increased dividend payers, and we are aware that cash flow is enhanced, and we are aware that shareholders have needs, and so we will certainly be mindful of that as our Board deliberates in the future, but we typically haven't had special dividends. We typically have not. You never say never. You never say because we haven't done it in the past, we won't do it in the future. I would more steer you to what has happened in that past in that regard.

Great. A couple quick things. Suriname, is that still on tap for 2009? Has anything changed as you have looked at seismic and prepared down there.

No, nothing has changed. We are looking to farm down there. Once we do, we will shoot 3D and we will drill a well next year. The plan is to definitely drill a well next year.

Okay. And finally, one last thing, on the full year volume guidance, I know obviously the second quarter operational issues and turnarounds are going to have a material impact on the full year guidance. How much of the downgrade from the 135 is PSC-oriented, as opposed to the issues from the second quarter?

About half. I am finger painting a little bit, but about half. We have increased royalty at Syncrude due to high prices. Then at West Pat, it is just increased government take, due to faster payout. There is also another element at West Pat, that I just didn't want to belabor in the remarks. That is we are spending a bit less capital than we had forecast in our budget, and so there is less overall cost, where we have a higher allocation out there in the pool. We get paid back faster and have less cost. Those two are about half.

The other piece is first quarter at Syncrude was a bit ugly, and we had an excursion into some units, and some pretty substantial unplanned downtime there, the plant is partially down now, but it is planned. But then it is supposed to up and running for the balance of the year. Kikeh gas, the delay there, I think we had it coming on second quarter, perhaps. It was material, because it is a pretty big number for us. So that is the other half.

Great. Thank you very much.

Our next question comes from Mark Gilman with Benchmark. Please go ahead.

Claiborne, good afternoon.

Hey, Mark, how are you doing?

Pretty good. You mentioned that, I think you said that you have drilled nine wells in the Montany so far. Give me a rough idea what kind of IPs you are seeing on those wells, and what the recovery rate expectations look like?

Mark, on the verticals, we are in the 2 to 3 million cubic feet a day range, and so far in the horizontals, and interestingly we are at about the same range, we have one that is out of that range, most are in the 2 to 3 million cubic feet a day in horizontals. They are right next to verticals, which are producing that same. So we have got a bit of work to do to learn how to frac a bit better. But it is within the range that we had anticipated, I think in our horizontals we said 3.2 or something like that million feet per day, to get the right amount of production that we would like. And the recovery factor, I think is 4 BCF a well, plus or minus.

What percentage of that is of the in place, do you expect?

Oh, gosh, Mark, I don't know if I know that offhand. We are talking about 2 TCF we anticipate. We plan to recover after royalty, and I think we are saying there are 5 or 6 TCF in place, somewhere around there. I am grabbing a little bit. I think that is roughly right.

I would have thought the recoveries were closer to 50% than that would imply.

Well, because of the royalty issue. You are saying if we get --

You are comparing net to gross in that?

Yes, I am saying our net will be somewhere around 2 TCF, and I think gas in place is around 5 or 6. So yes, it sounds like 40% is what I would say, 40 to 50%.

Okay. Claiborne, I was interested to see your participation on the central Gulf sale. I wonder, given the fact that this has not been a great area for you, if you could talk a little bit about what your thinking was, why the aggressive participation, and where your head is at, in terms of operator versus non-operator in those Miocene plays?

I will tell you what got our attention. First of all, we have a big position there. We have got about 35 or 40 leases primarily in the central to western part of the Grand Canyon, and we participated last year in one of these wide-azimuth surveys, and my term is that it is not a step change in clarity, or in the ability to map sub-salt, but it is a material, noticeable improvement.

And so we are able to see prospects better than we have if the past, and this particular prospect that we were high bidder on, in a recent conference I said my ancestors are turning over in their grave, my Murphy ancestors, for the high bidder lease sale, is something they typically hadn't done. But we were with a company that had a nearby field, and this was very similar to the nearby field. We could see it very clearly.

It had good seismic attributes and so the combination of those two, the wide-azimuth, and near a producing field that had a very close similarity to, gave us the confidence to bid. And if you noticed in last year's eastern Gulf sale, we bid pretty high per block as well. It certainly reflects a bit of a change in the sense of our bidding strategy, to spend a bit more, get the ones that we absolutely feel very good about, and make at least a concerted effort to get those, and this block that we got in the last lease sale certainly manifests that.

Just one more, if I could. Claiborne, I seem to recall Kikeh having been at about the 70 level at the time of the fourth quarter conference call, about three months ago. Pretty sure my recollection is correct. And I think you said that it is, what, 60-ish now?

Yes, the number I used was 66, Mark.

Okay. So it has fallen off a little bit and that is consistent with expectation from those wells?

Yes, I wouldn't read much into that. I mean, the field is producing as modeled, and there may have been a well that went down for a while for some reason, that may get us at 66. I don't think there is anything in particular, I don't think there are any worries there.

Okay. Thanks a lot, Claiborne.

Sure.

Our next question comes from Erik Mielke with Merrill Lynch.

Good afternoon, gentlemen.

Hello.

My question also relates to Kikeh, and trying to look into 2009. If oil prices stay at healthy levels, above $100 per barrel, what does that do for your entitlement in a 2009 scenario?

Well, certainly it brings, and that is an issue. It will bring payouts sooner than $70 oil will be. And we haven't modeled it yet, but it will certainly be earlier in the year, rather than later in the year that that would occur, if oil prices stay up at this particular level. And Tapas, which is what we benchmark off of, in particular has been a very competitively priced crude. When I say competitively, it has been a high priced crude. It is a good news story, we are making lots of money. On the down side, with any PSC you get paid out faster, and your take goes down. But financially, obviously we are whole.

Okay. And for Tupper, what sort of contribution do you think that could make to your 2009 production profile?

Gosh, I don't have that to hand, but we will exit the year around 70 million a day, plus or minus. Then we will just build up all next year. I don't have a number for you, but we will get you one.

Pretty steady increase?

Yes, our thought is to keep drilling and this is Tupper 1, then we have Tupper 2, 3 and 4 coming. We are going to do some exploratory work this year. I think we are going to drill eight or nine wells on those other assets. Then we will have a better sense of what we have there. We have a pretty good sense right now. We will just keep drilling now for the next actually six or seven years in that area.

And for Sarawak gas, you mentioned that you are getting prices linked to the Asian LNG prices. Is that on a pure net back parity, or a discounted price with a link to the moving prices?

We can't disclose price because of contractual reasons, but we have always said that we net back at the well head a percent of what landed LNG is, out of Dua, and that is a combination of both contract and spot.

Fine. And finally in the downstream segment, you have obviously been adding assets in the last couple of quarters. Looking forward and where your cash flows are, are you more likely to be adding than selling assets in the downstream business?

Well, the reason we bought the two that we bought is because, one, the land under Wal-Mart, and that is a wonderful asset, we made that asset even more wonderful and stronger, and as we say took risk out of it, and then in the U.K., it is a good macro market to be in, and we got a particularly attractive price. So both of them were a bit unique.

I don't think reflects necessarily a strategy of expanding widely. They just made current assets that we already have stronger assets. And so we tend to do deals like that, where we have a levered position, where we can pay what we think is an attractive price, and make what we have. If something came up that seemed particularly attractive, we might take a look at it, but we don't have a strategic desire or urge to grow that end of our business hugely.

You feel your existing downstream is a good match for your upstream?

I didn't say that. Our upstream business is certainly the larger part of our business, and the part of our business that does grow.

Our downstream business grows in the retail sector, where we have competitive advantage, and that we will feed capital to, and you will see us continue to grow that, because it is quite a healthy asset to own. But most of our capital right now, allocated towards the upstream side.

Great. Thanks for your time.

You are welcome.

Our next question comes from Gene Gillespie, Howard Weil.

Would you share with us the underlying assumptions implicit in your second quarter guidance, particularly as it relates to exploration expense, downstream?

Yes, I sure will. Dory will do it.

Gene, here are the assumptions we used in our guidance. Production of course you have 115,000 BOEs per day. Based on sales volume of 108,000 BOEs per day. Realized oil price in the range of between $95 and $99, that is a worldwide realized price. Natural gas worldwide realized gas price of $11.

Total exploration expense in the range of 60 to $70 million. Included in that range is $10 million exposure for dry hole cost, with mainly drilling at the Buntal well. The downstream segment we have 25 to $30 million built in, and corporate reflecting a loss of 23 million.

Okay. One last thing, Dory. Can you provide the impact that the supplemental tax cost your Malaysian realization in the first quarter?

Yes, sure can. About 35 million, Gene.

35 million. And that was a combination of Kikeh and West Pat?

That is correct.

Thank you very much.

(OPERATOR INSTRUCTIONS). Our next question is a follow-up from Mark Gilman. Please go ahead.

Claiborne, it almost seems, just based on the arithmetic, that you are or have at times been running Milford Haven at above name plate. Is that true?

I don't think so, Mark. I don't think so. It is 108,000-barrel a day plant.

So you don't think that there is room to --

I wouldn't say that. But to squeeze a few more barrels out of it?

Yes.

I won't say yes, and I won't say no. If there is, we will, because the market there is quite healthy. But I think we are running just about near capacity. It is a crude unit limit. Okay.

It also appeared from looking at some of the numbers as if you have started to buy gasoline in the U.K. for resale, somewhat more aggressively. Is that a change in thinking, or am I misinterpreting the numbers?

Well, I don't know what you are looking at but no, there's been no change in thinking there. The plant has got an oversized cracker. When we built the cracker, which is how we actually got our first 30% interest, it was oversized relative to the crude unit, and I don't know if that is instructive to what you are thinking or not.

Looking at the U.K. gasoline sales versus gasoline make.

I mean, I can't help you. I am sorry. I will do some homework, and see if there's anything, but there's nothing, no strategic, no strategy change. We have a commercial business. We have a wholesale business. And then we have got a retail business and we, as you might know, we bought 60 more sites 18 months ago, so they are in the mix but they were in the mix this time last year as well, I believe. But otherwise, there has not been a material change there.

If you could just refresh my memory, the associated gas volumes at Kikeh, what is that likely to be at plateau?

We are looking.

Initially 20 million cubic feet a day or so, ramping up to around --

120.

Yes, 120.

120, Mark.

Is that a net number or gross?

No, it is gross.

The 20 that I was starting to quote you was just the net number.

Okay. And the 120 is what?

That would have been the gross number.

That is gross? Okay. Thanks.

You are welcome.

Mr. Deming, at this time I am showing no further questions in the queue. Please continue.

Thanks very much. I look forward to seeing you on the road, and on the next conference call.

Ladies and gentlemen, this does conclude the Murphy Oil Corporation first quarter earnings release conference call. We would like to thank you for your participation, and you may now disconnect