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Operator
[OPERATOR INSTRUCTIONS] Thank you, it is now my pleasure to turn the floor over to your host, Mr. Ken Huffman, sir, you may begin your conference.
- VP, IR
Thank you very much.
Good morning, everyone.
I'd like to welcome you to our second quarter conference call.
This morning, joining us will be Dr. Irani, our Chairman, President, and CEO; and Steve Chazen, Senior Executive Vice President and CFO.
They will have formal comments.
Following their comments, we will open the floor up to questions and John Morgan who is President of the Oil and Gas Western Hemisphere will join us at that time.
Dr. Irani?
- Chairman, CEO, President
Thank you.
Good morning.
And thank you for joining us.
As Steve will tell you in some detail shortly, our core earnings of $2.35 billion were the highest in the Company's history for a six-month period.
That's up 46% from the previous high set in the first half of 2005.
Our success in keeping production growing has allowed us to continue capturing the benefit of a strong energy price environment.
During the second quarter, worldwide production from continuing operations of 609,000 equivalent barrels per day was 18% higher than last year's second quarter results.
U.S.
Production of 365,000 equivalent barrels per day which accounted for 60% of the worldwide total was up 9% compared to last year's second quarter.
At our February analyst meeting, we emphasized our committment to creating top quartile total returns for our stockholders.
Since that time, we completed an analysis of our dividend policy and raised the dividend by 22% after concluding that the Company has the underlying financial strength to sustain the higher rate even at significantly lower energy prices.
We also implemented a two-for-one split of our common stock.
In addition, we expanded our share repurchase program to 40 million post-split shares.
This program is designed to enhance the value of the remaining shares.
We continue to make steady progress on all of our growth projects.
First, on Dolphin.
Key segments of the project including the export pipeline, steel platforms, wells, and achieving facilities remain on schedule for year-end.
The other segment, the gas processing plant may or may not be fully operational in that same time frame.
In any event, we continue to expect substantial production from the Dolphin project in 2007.
The Mohaisen development project in Oman, the growth plans for our Argentina operations, and our Libya exploration and producing activities are moving on schedule.
As I mentioned before, we are continuing to grow our base U.S. production.
We ended the quarter with $1.6 billion of cash on hand and we expect to continue generating a significant amount of free cash flow in the second half of the year to fund our growth and share repurchase initiatives.
With the strides we made in the first half of the year, together with continuing strong energy prices, and a strong economy, 2006 is shaping up as another outstanding year for both our Oil and Gas and chemical businesses.
I'll now turn this call over to Steve.
- CFO, Sr. EVP
Thank you, Ray.
Core earnings the second quarter of 1.2 billion or 2.77 per diluted share.
This represents an increase of 50% compared to last year's second quarter core earnings of 799 million or $1.96 per diluted share.
The core earnings for this year's second quarter exclude a $347 million after-tax charge for discontinued operations.
It includes impairment of Oxy's investment in Ecuador and income from Vintage properties held for sale.
The core earnings for the second quarter in 2005 excluded a $619 million tax benefit resulting from settlement with the IRS and an after-tax gain of $89 million in the sale of 11 million Lyondell shares.
Oil and gas segment earnings for the quarter were approximately 1.95 billion, a 52% increase compared to the to the 1.28 billion of core earnings to second quarter 2005.
Worldwide daily production for the quarter from continuing operations averaged 609,000 barrels of oil equivalent per day which was 18% higher than the 516,000 equivalent barrels we produced in the second quarter of last year.
The acquisition of Vintage Petroleum accounted for 62,000 equivalent barrels a day, the increase in production from Libya that began the third quarter last year added 27,000 barrels a day.
Exploration costs for the quarter were $50 million which is lower than our guidance last quarter.
Some seismic and drilling activity has been rescheduled for the second half of the year.
Oxy's realized oil price for the quarter was $60.67 per barrel compared to $46.27 the second quarter of 2005.
For the first half of the year, Oxy's realized oil price is 57.39 compared to last year's price of 44.39.
Oxy's realized price increased by $6.64 per barrel in the second quarter compared to the first quarter of 2006 while WTI increased by $7.22 a barrel in the same period.
The price differential between Oxy's realized price and WTI price narrowed in the second quarter to 86% of WTI compared to 85% first quarter.
The NYMEX gas price for the quarter was $7.26 per million BTU's compared to $6.80 of second quarter last year.
Oxy's average realized domestic gas price for the quarter was $6.24 per thousand cubic feet up from 6.18 the second quarter of 2005.
The guidance we gave you last quarter we said that our expected realized domestic price of $5.83 per thousand cubic feet would reduce segment income by by $120 million compared to this year's first quarter.
Since the actual realized price is higher than we expected the amount of reduction was approximately $110 million.
Oil and gas production costs the first six months were $11.14 per BOE compared to an average cost of $8.81 in 2005.
Included in the increase of 2.33 per BOE were utility costs of $0.15, gas plant costs of $0.14, ad valorem taxes of $0.31, and export taxes and tariffs of $0.39.
Export taxes for Argentine production alone accounted for $0.38 of the increase or 16% of the total increased.
The remaining cost change is a result of work overs, maintenance, and other costs.
Higher energy prices also reduced the volumes produced under our production sharing contracts which resulted in spreading the gross costs for the total production we operate over fewer net barrels.
Chemical earnings for the quarter were $250 million resulting from the Vulcan acquisition.
Price increases for the Chloralkali and PVC were offset by higher feedstock and energy costs.
Chemical earnings for the first six months were $498 million, up from 439 million in the comparable period last year.
Cash flow from operations for the first six months were approximately $3.1 billion which was 29% higher than the 2.4 billion we generated in the first half of 2005.
Net interest expense was $33 million for the quarter and $62 million for the first six months.
The worldwide effective tax rate for the second quarter was 42%, this was down from our previous forecast of 44% due a higher than expected domestic income which has a lower tax rate than foreign income.
During the quarter we spent a total of $748 million to repurchase 7.6 million common shares, an average price at $98.11.
Since we implemented the share repurchase program in late February, we have spent a total of $986 million to re purchase 10.2 million shares at an average price of $96.52 per share.
The weighted average basic shares outstanding for the first half of the year totaled 427.3 million and the weighted average diluted shares outstanding totaled 432.2 million.
At June 30, there were 426.6 million basic shares outstanding and the fully diluted shares numbered approximately 431.5 million.
Since the late January closing of the Vintage acquisition, the former Vintage properties for sale generated $66 million of cash from operations.
The end of the second quarter proceeds from the sale of Vintage assets were approximately $700 million and we expect the sale of additional 3 to $400 million of assets by the end of the current quarter.
Proved reserves associated with these assets were about 71 million barrels of oil equivalent on December 31, 2005.
The assets will therefore realize between 15 and $16 per proven barrel equivalent.
Turning to the balance sheet we reduced total debt at the end of the quarter to the pre-Vintage level of $3 billion compared to 3.6 billion at the end of the first quarter.
Stockholders equity at the end of the quarter was 18 billion, just 2.9 billion higher than the year-end 2005 level and about even with the end of the first quarter.
Our annualized return on equity in the first half of the year was 25% with annualized return on capital at 22%.
Second quarter cash flow from operations after-tax payments in excess of $1 billion was 1.1 billion.
We also received approximately 700 million from the sale of assets.
We used a cash flow to fund capital expenditures of 646 million, debt repayment of 640 million, stock repurchases totaling 748 million, and dividend payments of 156 million.
These outlays reduced our $2 billion cash balance the end of the first quarter to 1.6 billion at the end of the second quarter.
Capital spending was 646 million for the quarter and 1.24 billion for the first six months.
We expect capital spending for the year to be $3 billion while inflation and capital costs continues the increases within our original plan so our capital program remains at our original estimate.
As we look ahead to the third quarter, we expect third quarter production to be about the same as the second quarter.
Each dollar of barrel change in oil prices impacts oil and gas segment third quarter earnings by about $38 million before the impact of income taxes.
A swing of $0.25 per million BTU's in gas prices has a $12 million impact on quarterly segment earnings, a realized domestic gas price in the third quarter expect to be about $5.30 per thousand cubic feet.
That's about $0.94 less than the second quarter with a negative impact on segment earnings of about $50 million.
We expect exploration expense in the third quarter to be about $70 million.
In chemicals we expect third quarter earnings to be similar to the second quarter, the main variables are energy primarily natural gas prices and ethylene costs.
We expect to realize $7 million in dividend income during third quarter from our Lyondell shares.
We no longer record equity income from our Lyondell investment.
The third quarter net interest expenses expect to be approximately $16 million.
We also expect our worldwide tax rate to be 44%.
If you'd like a copy of the press release announcing our results along with the supplemental schedules you can find them on our website www.Oxy.Com or through the SEC's EDGAR system.
We're now ready to take your questions.
Operator
[OPERATOR INSTRUCTIONS] Our first question is coming from Jennifer Rowland from JP Morgan.
- Analyst
Thanks.
First a question on Bolivia.
If you could just give us a status update on your production there and whether or not you envision having Bolivia production as part of your portfolio going forward.
- EVP, President, Western Hemisphere
Bolivia, we produce gas there almost entirely and we produce about 3,000 BOE's per day there.
At the moment, production is continuing without any interference from the government.
Our operations relative to the other operators are small and we expect to continue operations for the foreseeable future.
We're really waiting for the government there to decide what they are going to do but we don't see it impacting us one way or the other very much as you can tell from the size of the operation.
- Analyst
Right.
Okay.
Also, on the Dolphin project, there had been some rumblings about a month ago about Saudi potentially trying to interfere with that project.
Wondering if you could just comment on where that stands?
- Chairman, CEO, President
Yes.
Laying of the pipeline is essentially complete, and based on the information available to us, we see no reason for any concern over the border issue between Saudi Arabia and the Emirates.
- Analyst
Okay and just one final one for me.
I notice the tax rate was a little bit lower this quarter than the 44% you had been guiding to.
Is there a reason for that variance?
- CFO, Sr. EVP
Yes.
When we plan the tax rate, it's a split between domestic and international and we had a stronger domestic income this quarter than we had planned, partially in chemicals and in the domestic business, so we wind up with a slightly lower rate.
The rate in the U.S. is, call it, 37% the rate outside the United States is in the mid-40's so that's really what controls it.
We make a best estimate we can but stronger domestic numbers give the lower rates.
- Analyst
Okay, great.
Thanks very much.
Operator
Thank you.
Our next question is coming from Doug Leggate from Citigroup.
- Analyst
Thank you, good morning folks.
A couple of things from me.
Steve, the share buyback program contrast against your cash flow the balance sheet outlook and so on.
Is that really the limit of what you're thinking right now or can you give us a little bit more insight as to what you really expect to build over the longer term?
- CFO, Sr. EVP
Well, I think when we were in New York the end of February, we indicated our Intermediate term objective was to reduce the share count to at least the pre-Vintage levels which would imply 30 million shares, the pre-split shares and so over time, if we have excess cash while we prefer to invest in the business at good returns if we have excess cash, we don't think the debt needs to come down much further so we would suggest that we're not going to pile the cash up, so I would think there would be more share repurchases going forward.
We're staging it to the visible, easily visible amount of cash we have.
With announcements, that is.
- Analyst
I guess a related question is reinvestment opportunities and I think to Dr. Irani, the last time that we met, there was some indication that maybe progress in the Middle East and Oman, specifically was perhaps moving a little quicker than we'd previously been led to believe in terms of additional projects.
Can you maybe just give an update on that and perhaps the opportunities in the Emirates?
- Chairman, CEO, President
Yes.
I think the projects which we have not talked about today are moving along well.
As Steve said though, however for this year, we do not expect our total capital to exceed $3 billion, so now you're trying to forecast next year's total spending.
My feeling is that we are going to be able to fund our growth project, do some asset acquisitions if they're available and be able to still purchase some additional stock.
To specifically say how many shares we may buy next half or next year depends on a bunch of moving parts, but our initial committment to purchase 30 million shares pre-split basis, to be able to buy back the shares issued for Vintage are still there.
It's just we can't at this point tell you when will that be completed.
- Analyst
I guess the final thing for me then is we have had some discussions with PDO and their understanding is that they are passing over additional projects to third parties.
Are you prepared to give us any update as to whether you might be involved in that?
- Chairman, CEO, President
We are looking at additional projects in Oman, active.
- Analyst
Okay, I'll leave it there.
Thank you very much.
Operator
Thank you.
Our next question is coming from Ron Oster from A.G. Edwards.
- Analyst
Good morning, thank you.
A couple questions on Libya.
Your current production was 27,000 barrels a day.
I was wondering if that was a -- that was up a bit from first Q. I was wondering if that was a good run rate going forward or if there was some impact of the timing of sales there in Libya.
- Chairman, CEO, President
I think part of it was timing on shipments.
We still expect the Libyan production for the year to average 24,000 barrels a day.
- Analyst
Okay, great.
And secondly, on the exploration front, I believe there's been a few drilling successes in Libya by some of your competitors.
I was wondering if that had any impact on your prospects there?
If it might have further validated some of your acreage positions in Libya.
- Chairman, CEO, President
I think that our progress on exploration drilling is going well.
At this point, if you measure our temperature versus three months ago, we are a bit more optimistic about the prospects for our exploration activities, but that's sort of a qualitative statement rather than anything specific.
- Analyst
Okay.
And can you just walk through the timing in Libya as well as any other drilling activities in the second half of the year and that's all I have.
Thank you.
- Chairman, CEO, President
Well, I think we continue to be optimistic.
At the present time, we have five seismic crews working.
The seismic programs are completed in four offshore blocks and three onshore blocks.
We expect to drill two to three onshore wells this year and the first well we'll start in September.
- Analyst
Great.
Thank you.
Operator
Thank you.
Our next question is coming from John Herrlin from Merrill Lynch.
- Analyst
Just a couple quick ones.
Steve, you had discussed LOE.
What was the amount of workover cost associated in the quarter?
- CFO, Sr. EVP
If you give me just a second to dig through the voluminous data that somebody gives me, I'll tell you.
Workovers were $1.16 of BOE, so that's 609 a day times 90 days times $1.16.
- Analyst
Do you see that amount of activity continuing?
- CFO, Sr. EVP
Yes.
The properties we bought last year and the Vintage properties this year, in order to get them up to levels that we expect will require continued work overwork and that's expensed rather than capitalized so we would expect to see that in, well it's never good.
We think this is a positive because it allows us to boost our production in those properties and that's what really it takes.
Those are older properties and there's a lot of workover and talking about six-month pay outs in these work overs.
- Analyst
Okay, great.
What was the PSE volume effect in the quarter?
- CFO, Sr. EVP
Well, it's probably about 5,000 barrels a day.
- Analyst
Okay.
And last one for me.
What are you seeing on the oil field services inflation side now?
Are you seeing stabilization or still some ramping there?
- CFO, Sr. EVP
In the workover in the expense area, the work over area, probably abetted by our increased program, there is still inflation there.
The capital seems to be all right, we don't see unexpected rate increases there, but in the workover area in the Permian especially, it's pretty tight, there's no -- doesn't seem to be any let up, but again, when you're talking about six-month pay outs, it's hard to be too difficult with them.
- Analyst
Okay, thank you.
- CFO, Sr. EVP
Thanks.
Operator
Thank you.
Our next question is coming from Pavel Molchanov for Raymond James.
- Analyst
Good morning.
Question about Russia.
I know it's a limited asset base for you, but given that some other Russian companies have had some problems with the government there, would you consider divestiture or any strategic review of your assets?
- Chairman, CEO, President
We have not had a problem with the government.
Our production continues well.
Maybe we're under the radar screen, but we haven't seen any kind of problems there.
- Analyst
Okay, thanks.
Operator
Thank you.
Our next question is coming from Nicky Decker from Bear Stearns.
- Analyst
Good morning.
- CFO, Sr. EVP
Good morning.
- Analyst
Just a follow-up on seismic and drilling.
You had indicated that some had been delayed into the second half, so what's behind that?
Is that availability?
- CFO, Sr. EVP
Probably overoptimistic forecasting by our exploration people.
Historically, they're optimistic about how fast they get things done.
I don't think -- there's nothing fundamental in it.
- Analyst
Got you.
- Chairman, CEO, President
Still a very good prospect.
- Analyst
Okay.
Is there an update on your claim filed against the government of Ecuador?
- Chairman, CEO, President
No update.
We remain optimistic, but we should be able to recover what was taken away from us.
Timing, of course, is tough to predict, but from a legal point of view, we feel very good about it.
- CFO, Sr. EVP
It's going to be quite awhile before you really hear anything.
You got to go file and they have to respond and I think it's going to be before you hear anything that sounds like progress, it's going to be awhile.
- Analyst
Okay.
Thank you.
Operator
Thank you.
Our next question is coming from Ben Dell from Sanford Bernstein.
- Analyst
Very well.
Just a couple of quick questions.
On the U.S.
Production side, your production has been fairly flat the last three quarters on the liquid side.
I was just wondering, can give an indication to how much you've actually ramped up drilling activity within that because obviously you're only oil wells in the U.S. are up significantly.
- EVP, President, Western Hemisphere
We're probably up about 20% on drilling year-over-year.
- Analyst
Okay.
- EVP, President, Western Hemisphere
But it's hard because there's always a mix impact too.
We drill some more shallow wells in some areas and deeper wells in others so it's hard to make a direct extrapolation of any particular amount of drilling, but if you just count the number of well bores we're putting down, it's up about 20% year-over-year.
- Analyst
And would you expect that to have more of a production impact into the third and fourth quarter?
- EVP, President, Western Hemisphere
Well, it's going to continue to offset decline, that's the first battle we have in mature properties, but we expect to see some continued improvement into the third and fourth quarter.
- Analyst
Great.
- CFO, Sr. EVP
We're also drilling some gas wells, properties we bought last year and had some gas opportunities so you'll see gas maybe a little better.
- Analyst
Okay.
And not to labor the point but on Totale's conference, they seemed a lot more cautious about the Dolphin project indicating mid '07 start up.
Do you know what they're seeing that you're not or vice versa?
- Chairman, CEO, President
Well, I think again, we have said earlier, we don't expect any meaningful production in 2006 and I said earlier, we continue to expect substantial production from the project 2007.
Now exactly which month it's going to be in 2007 that you have substantial production becomes a matter of looking at when do you complete the house in total, so definitely in different parts of the project are very much on schedule, including the pipeline; however the gas processing plant is the one that appears to be challenging and may not be fully operational by the end of the year.
- CFO, Sr. EVP
The gas is really needed in country in the summer and so I can't read Totale's mind obviously but never can read a Frenchman's mind, but that's when they are really going to need the gas.
It's hard to say exactly what question they were answering.
- Analyst
Okay.
Great.
Thank you very much.
Operator
Thank you. [OPERATOR INSTRUCTIONS] Our next question is coming from John Parry from JS Herold Incorporated.
- Analyst
Good morning, gentlemen.
Great quarter.
Enjoyed it.
Listen, on the premise that all barrels aren't created equal I wonder if I could just get a better sense of the Libyan barrels in terms of where they stack up in terms of return on capital and maybe in terms of absolute profitability, That's question one and question two just wonder if I could elicit a short comment about maybe your observations having been a shareholder with Lyondell about the recent refining negotiations that went on there.
- Chairman, CEO, President
Well, first let's address on Libya.
As we have said repeatedly, our returns on capital employed outside the United States historically and in the future are expected to be higher than domestic.
When you come to Libya, it is a little bit lower profits than the average for our international operations, but it's still a very good return.
With regards to Lyondell, Steve, do you want to comment?
- CFO, Sr. EVP
As you know, I'm a Director of Lyondell.
- Chairman, CEO, President
I'm not, that's why I'm leaving.
- CFO, Sr. EVP
I'm a Director of Lyondell and I've been reading with interest the stories about the refinery and I assume that when Lyondell has something to say they will say it.
So I don't really want to comment.
- Analyst
Okay.
Fair enough.
Thank you.
Operator
Thank you.
Our next question is coming from Steve Enger from Petrie Parkman.
- Analyst
A couple of unrelated things.
Can you give us an update on your LNG re-gas terminal in Texas.
Where does that stand and what are the key elements in the timeline over the next couple of years to watch?
- CFO, Sr. EVP
We're in the process of negotiating some gas supply agreements.
And once those are signed up, we'll commence construction.
We reasonably expect to begin construction this year.
- Analyst
Okay.
So you're optimistic obviously on the gas supply side?
- CFO, Sr. EVP
We are.
- Analyst
All right and sizing on that plant, Steve?
- CFO, Sr. EVP
It's a BCF a day.
- Analyst
No change there?
- CFO, Sr. EVP
Right.
No, I don't think we're going to -- I think the size for that area is pretty reasonable.
- Analyst
Okay.
And then I think there's been some bids and negotiations in Columbia, in particular on some large legacy fields, I think heavier Oil.
Can you tell us where that stands and have you guys made any progress from your end?
- EVP, President, Western Hemisphere
Assuming you're talking about their very very heavy Oil properties, we've looked at both of those and the two key ones that have made proposals we thought made sense so whether or not we're going to be in the final run, I'm not sure.
I saw an announcement yesterday that one privately held heavy oil property had been sold to a Chinese-Indian consortium, so we're trying to look for value opportunities and we're not going to necessarily win everything that comes up, but I think we're very happy with the government of Columbia at the moment and president Rebay's election is real encouraging.
- Analyst
What's your sense of the timing there as to when those decisions may be made.
Months, quarters?
- EVP, President, Western Hemisphere
Who knows.
Probably next administration, in terms of the people underneath the President, so I would suspect that the State assets it will probably drag into next year realistically.
- Analyst
Fair enough.
And lastly, on Nigeria, the discovery that you participated in offshore, what are the plans by the Operator and by the group and then secondly, how do you view that from the standpoint of Oxy's continued participation?
- CFO, Sr. EVP
I guess you'll have to ask the operator.
I'm sure they will be fairly forthcoming.
It's in the hands of the operator under Nigerian law, but discovery has been announced and a development plan will probably be filed in the next few months, and we'll see where we go from there on it.
- Analyst
Are there any near term delineation wells planned there, Steve?
- CFO, Sr. EVP
The Operator hasn't advised us yet.
- Analyst
Okay.
Is it fair to say that you're looking at strategic options for that position?
- CFO, Sr. EVP
We look for strategic options for every position.
- Analyst
Okay.
Thanks.
Operator
Thank you. [OPERATOR INSTRUCTIONS] Our next question is coming from Paul Sankey from Deutsche Bank.
- Analyst
Good afternoon, gentlemen.
On Ecuador, I understand that you have petitioned to have the assets returned to you as part of the arbitration ruling.
Does that mean that we could actually see you back in there in the future?
Thanks.
- Chairman, CEO, President
I don't think you want to assume that, but it's part of the legal filing, what we're saying is we had assets taken away from us and so we would like them to either be returned as such or be paid for that, and the arbitration court would rule according to our petition.
- Analyst
Okay.
So just points of interest and then another slightly obscure one for Steve.
Can you just talk a bit about how you trade your buyback?
I think it's an active program as far as I understand it and could you just talk a bit about how you handle the share price and whether or not -- the extent to which you're active essentially is traded for the stock?
- CFO, Sr. EVP
We don't sell any stock, so we're just buyers of the shares.
We look for irrational behavior by the market and weakness.
We are -- some limits under the laws so we can't obviously trade around our earnings and that sort of thing so we're basically buyers on weakness and when the stock is acting strongly, we'll stay out.
We're comfortable in this price range of course to buy.
- Analyst
Terrific.
Thanks, Steve.
Operator
Thank you.
Our next question is coming from Doug Lagett from Citigroup.
- Analyst
Guys, apologies for the follow-up.
I just had a quick one on Libya.
You didn't book the reserves last year other than what you produced.
Are you able to book the balance this year or can you just give us a quick update?
- CFO, Sr. EVP
Yes, we will.
- Analyst
Great.
Thank you.
Operator
Our next question is coming from Bernard Petri from Wall Street Access.
- Analyst
Steve, you realized $700 million on sales of Vintage properties in the quarter and you said you expect another 300 million in the current quarter.
Will that be the extent of it or will there be additional Vintage sales in the second half in the fourth quarter of this year?
- CFO, Sr. EVP
I think that I'm trying to indicate the total in the discussion there, so it's 700.
I said 3 to 400 million and then by holding them we've accrued another 70 million in cash.
So I'm trying to tell you the total whether -- what quarter it falls into, I'm not trying to be cute about it.
- Analyst
And on the subject of property transactions, maybe this is a question for John Morgan.
Are you seeing a result of some of the combinations that have gone on or are about to go on in the industry, I'm thinking about the Andadarko/Kerr transaction, the opportunity for additional purchases in some of your sweet spots like the Permian basin and what are you seeing in the way of property availability?
Are there things you would be interested in buying?
- CFO, Sr. EVP
There's always things we're interested buying!
- Analyst
Well, of course.
- Chairman, CEO, President
But as the combinations, one does expect properties to be available.
- CFO, Sr. EVP
I think that Anadarko isn't closed yet so I'd expect that they've announce the large total objective so there might be something there.
They have some properties in the Permian.
There might be some in California from other things that are around.
So it's a lumpy business and so I think -- I think it's highly likely that we'll acquire something in this year.
- Analyst
Well, the question I guess that I'm really asking is one of symmetry and pricing.
You've kind of talked, Steve, about the attractiveness of prices that you've received on the selling side and I'm wondering if that would apply also on the buying side.
In other words, it seems that there might be a disconnect if you're getting very, very good prices on the selling side, perhaps prices might be too high on the buying side.
How does that fit into your thinking?
- CFO, Sr. EVP
Yes, that's right.
So we're fairly cautious about what we pay.
Some areas of the country are not so popular with oil companies.
California is historically not a popular place for oil companies and so pricing tends to be a little better in California than say it might be in south Louisiana or something.
So yes, that's right, but the margins are historically wide now, and we look for properties and it why we build them, it isn't just to build production.
We look for properties where we can take the production from 1000 barrels a day to 2000 barrels a day.
We aren't actually interested just buying a decline curve and we try to provide our expertise, our narrow expertise in California, Permian, and elsewhere to those properties so we're not -- we're looking for the opportunities that people -- somebody else may not be able to achieve.
So it's obviously pricier than it was in 1999 but the margins are a little wider than they were in 1999 too.
- Chairman, CEO, President
We're always looking at adding value, not just taking somebody else's stuff, and managing it financially.
- Analyst
Right.
Could you also just on Dolphin just elaborate, Ray, just on the reasons for the delay in the gas processing plant?
- Chairman, CEO, President
I mean, there's no real reason.
The project has been on for years and it's a big gas plant and we expect to complete it.
It's just a matter of finishing the project and we do expect substantial production in 2007.
And as Steve said earlier, the demand is tremendous there for the gas, especially in the summer months and we do expect to be able to supply the gas for the season next year.
- Analyst
Thanks.
Operator
Thank you.
There appears to be no further questions at this time.
- VP, IR
I want to thank everyone for joining us today, this Friday, and we hope you have a wonderful weekend.
Thank you.
Operator
Thank you.
This concludes today's conference call.
You may now disconnect your lines at this time and have a wonderful day.