西方石油 (OXY) 2007 Q2 法說會逐字稿

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  • Operator

  • Good morning.

  • My name is Vanessa and I'll be your conference operator today.

  • At this time I would like to welcome everyone to the Occidental Petroleum Second Quarter earnings Conference Call.

  • All lines have been placed on mute to prevent any background noise.

  • After the speaker's remarks, there will be a question and answer period.

  • (OPERATOR INSTRUCTIONS)

  • It is now my pleasure to turn the floor over to your host, Mr.

  • Christopher Stavros.

  • Sir, you may begin your conference.

  • - IR

  • Thank you, Vanessa and good morning, everyone.

  • I'd like to welcome you to Occidental Second Quarter 2007 earnings Conference Call.

  • Joining us on the call from Los Angeles this morning are Dr.

  • Ray Irani, OXY's Chairman, President and CEO; Steve Chazen, Senior Executive Vice President and CFO; and John Morgan, President of Occidental Oil & Gas Western Hemisphere.

  • In a moment I'll turn the call over to Dr.

  • Irani, who will provide comments on the Dolphin Project as well as some opportunities in the Middle East region that we are looking at currently.

  • Steve Chazen will then review in detail our Second Quarter and first half 2007 financial results to be followed by a question and answer session.

  • Conference Call presentation slides which refer to Steve's remarks can be downloaded off of our website.

  • I'll now turn the call over to Dr.

  • Irani.

  • Dr.

  • Irani, please go ahead.

  • - Chairman, President, CEO

  • Thank you, Chris.

  • Good morning, and thank you all for joining us.

  • As you know, we announced two weeks ago that the giant Dolphin Project was fully operational and is delivering natural gas from Dolphin wells in Qatar's North Field to customers in the United Arab Emirate.

  • As one of the largest energy initiatives ever undertaken in the Middle East, this unique project would have a significant impact on the development of the region, and we expect it to be a steady contributor to OXY's financial performance over the next 25 years.

  • When this project was in its formative stages some five or six years ago, some industry observers expressed doubt that it could be completed on time and on budget because of huge cost overrun and lengthy construction delays typically incurred by other mega energy projects.

  • In the case of Dolphin, we're exceptionally pleased that it's on target to deliver the projected production of 2 billion cubic feet per day of gas with minimal variance in the project's budget and construction schedule.

  • This is a remarkable achievement for a project of this size and scope.

  • Let me take a minute or two to give you an overview over the project to date.

  • More than 20 wells were drilled to a depth of between 10,000 and 12,000 feet in the North Field's Khuff zone, which is one of the world's largest natural gas Reservoirs.

  • These wells produce not only natural gas but also associated natural gas liquids.

  • The liquids are separated from the gas stream at Dolphin's newly completed 500 acre gas processing plant at Ras Laffan in Qatar.

  • The dry gas is then transported through a 48 inch, 230 mile long subsea pipeline completed last year to the Taweelah receiving facility in the United Arab Emirate.

  • The gas then supplies plants in the UAE and in the near future, Oman.

  • Regional authorities are forecasting substantial additional growth in demand for natural gas, and Dolphin's gas grid is uniquely positioned to serve this expanding market.

  • We expect Dolphin gas production to ramp up throughout the balance of this year and reach approximately 2 billion cubic feet per day by early next year.

  • Ethane production from the project will be sold to Qatar under a long term contract while the other liquids will be sold in international markets.

  • As a result of OXY's 24.5% interest in Dolphin, we expect our net share of production to ramp up to an average of 60,000 to 65,000 barrels of oil equivalent per day and remain in that range for the foreseeable future.

  • Total cost of the Dolphin Project is expected to be approximately $4.8 billion, including investments in the existing UAE Eastern gas distribution system and related pipelines.

  • OXY's investment in the Dolphin Project is approximately $1.2 billion, of which investments of $361 million were made last year and approximately $218 million are expected this year.

  • We also expect the return on capital employed on Dolphin to be excellent, continuing at a very attractive level for the next 25 years.

  • Let me shift briefly to our ongoing efforts to add major new growth projects in the Middle East region.

  • I alluded to some of those opportunities last quarter, and while it remains premature to discuss the individual status of those negotiations, I'm pleased to report that we have not encountered any unforeseen obstacles to hinder our efforts.

  • Our discussions are proceeding as expected and I remain confident that formal announcements will be made prior to year-end.

  • Since our continuing involvement in the projects to develop natural gas reserves in Abu Dhabi has received considerable attention in the industry press, I will comment specifically on that opportunity.

  • OXY is honored to have been selected and is one of the finalists for these giant gas projects.

  • As you know, they involve development of trillions of cubic feet of natural gas and associated liquids at the Shah and Bab fields as well as multi-billion dollar capital investments.

  • We look forward to the final decision on participation in these projects later in the year.

  • Finally, I would like to update you on our production outlook for this year.

  • As you will hear shortly from Steve Chazen, our worldwide oil & gas production for the first six months averaged 587,000 barrels of oil equivalent per day.

  • Following our various asset trades and acquisitions in 2007, together with the ramp up of the Dolphin Project, we expect the net effect to result in a 2007 year-end exit rate in the range of 630,000 to 650,000 barrels of oil equivalent a day.

  • With our focus on the continued strengthening of our core areas in an environment of robust energy prices, we expect 2007 to be another excellent year for OXY.

  • I'll now turn the call over to Steve Chazen.

  • - CFO, SEVP

  • Thank you, Ray.

  • Net income for the quarter was $1.412 billion or $1.68 per diluted share, compared to $860 million or $0.99 per diluted share in the second quarter of last year.

  • 2007 second quarter net income includes $419 million of after-tax gains, $0.50 per diluted share from the sale of non-core assets, comprised of the following.

  • $181 million gain from the sale of 18.6 million shares of our investment in Lyondell.

  • The remaining 2.4 million shares were sold in early July.

  • A $116 million gain from the sale of Pakistan assets and a gain of $107 million from the swap of Horn Mountain assets with BP, and a $15 million gain from the sale of domestic mineral interest.

  • The end of the Second Quarter, we sold Pakistan and exchanged the Gulf of Mexico Horn Mountain assets with BP for producing properties in the Permian Basin and oil pipelines.

  • The results of these operations were reported as discontinued operations in our Second Quarter 10-Q filing with the SEC.

  • Second Quarter 2007 also includes $44 million after-tax income, $0.06 a share, from Pakistan and Horn Mountain operations and others.

  • Here is a segment breakdown from the Second Quarter.

  • Oil & gas Second Quarter 2007 results excluding Horn Mountain and Pakistan operations were $1.682 billion.

  • After excluding these gains from the sale from domestic mineral interest, the Second Quarter 2007 results were $1.656 billion, compared to $1.857 billion for the Second Quarter of last year.

  • The following accounted for the decline in oil & gas earnings between these quarters: Lower worldwide oil & gas realization -- oil price realizations, offset by higher gas realizations, felt in the decrease in $66 million of earnings over the same period last year.

  • The average price of West Texas intermediate oil for the Second Quarter was $65.05 per barrel, which is $5.65 per barrel lower than last years $70.70.

  • Occidental's average realized price for 2007 Second Quarter was $2.55 lower than the comparable period last year.

  • The differentials in the Second Quarter narrowed mainly in the Middle East and domestically at Elk Hills.

  • The NYMEX gas price for the quarter was $7.56 compared to $7.26 for the Second Quarter of 2006.

  • OXY's domestic realized price for the quarter was $7.07, up from $6.23 the Second Quarter last year.

  • Worldwide oil & gas production for the quarter averaged 583,000 barrels of oil equivalent per day compared to 609,000 the Second Quarter of last year.

  • The Second Quarter production, excluding volumes from the Russian unoperated asset sale in January, the Horn Mountain Swap and the Pakistan sale in June, was 558,000 Second Quarter of 2007 compared to 551,000 the same basis for last year.

  • Our guidance for the Second Quarter was in the range of 585,000 to 600,000 barrels a day.

  • We were slightly under this range due to the impact of product prices that reduced our volumes per production sharing contracts in the Middle East by approximately 3,000 barrels a day.

  • In this product price range for the current quarter, each dollar per barrel change in the price of oil impacts production by 600 barrels a day.

  • We also had some weather related downtime in the Permian and processing plant maintenance in Libya during the quarter.

  • Exploration expense of $93 million in the quarter was lower than our previous guidance of $110 million.

  • The second quarter 2007 expense was $43 million higher in the Second Quarter of last year, the increase coming from the Middle East and North Africa.

  • Oil & gas production costs for the first half of 2007 were $12.30 a barrel, compared to last year's $11.70.

  • The increases were a result of higher field operating and maintenance expenses.

  • Chemical segment earnings for the Second Quarter of 2007 of $158 million was in line with our First Quarter Conference Call guidance.

  • Chemicals earned $251 million in last year's Second Quarter.

  • The primary factor that accounted for the quarter to quarter difference was lower chlorovinyl margins due to lower demand.

  • Net interest expense including debt retirement charges was a net $1 million during the Second Quarter of 2007 compared to $33 million expense last year.

  • The worldwide effective tax rate excluding the impact of asset sales and other significant items was 46% for the Second Quarter of 2007, 3 percentage points lower than our guidance.

  • The lower rate reflects a change in the mix with more income coming from U.S.

  • sources and higher tax foreign sources especially to lower exploration expenses outside the United States.

  • Now, let me briefly turn to OXY's performance during the first six months.

  • Net income was $2.624 billion or $3.11 per diluted share for the first six months compared with $2.091 billion or $2.42 per diluted share for the same period last year.

  • In addition to the asset sales recorded in the Second Quarter, the six months of 2007 also includes income of $387 million net of tax for the following: $412 million gain from the sale of our Russian investment, $112 million gain for litigation settlements, $107 million charge for cash tender offers for various debt issues and a $30 million provision for a plant closure.

  • Worldwide oil & gas production for six months averaged 587,000 barrels a day compared to 601,000 for six months of last year.

  • After excluding Russia, Pakistan and Horn Mountain, 559,000 barrels the first six months of 2007 was a 3% increase over the 542,000 barrels a day for the same period last year.

  • Capital spending was $85O million for the quarter and $1.63 billion for the first six months.

  • We expect total capital spending for the year to be in the range of $3.4 billion to $3.5 billion.

  • Cash flow from operations for the six months was approximately $2.9 billion.

  • We received total proceeds of $485 million from the sale of our interest of our Russian joint venture, $55 million from the sales of domestic mineral interest and $600 million from the sale of our 19 million shares of Lyondell.

  • We used $1.6 billion of the Company's cash flow to fund Capital Expenditures, $500 million for acquisitions, $1.1 billion to repurchase debt, and and $370 million to pay dividends.

  • In addition, we spent $550 million to repurchase 11.2 million common shares at an average price of $49.84 per share.

  • These net outlays reduced our $1.6 billion cash balance at the end of last year by $100 million to $1.5 billion at June 30th.

  • Debt was $2 billion at the end of June with non-current debt of $1.7 billion.

  • The weighted average basic shares outstanding for the six months were $839.3 million and the weighted average diluted shares outstanding were $843.2 million.

  • At June 30th, there were 835.1 million basic shares outstanding and the fully diluted share amount was approximately 839 million.

  • Our debt-to-capitalization ratio was 9% down from 13% at the end of last year.

  • Over the first half of the year, Occidental's annual return on equity was 26% and our annualized return on capital employed was 24%.

  • As we look ahead to the current quarter, we expect oil & gas production to be in the range of 585,000 to 590,000 BOE a day during the quarter.

  • The increase includes 17,000 BOE a day from Dolphin, 7,000 BOE a day from the Permian assets acquired in the BP swap and 4,000 BOE a day for the announced acquisition of Qatar assets from Anadarco.

  • These increases were partially offset by the sale of Pakistan and the swap of Horn Mountain, which reduced Third Quarter production by 25,000 barrels a day compared to the Second Quarter.

  • Dolphin expected to contribute $10 million to pre-tax income during the third quarter start up.

  • Third Quarter income reflects lower start up gas sales and pipeline tariff volumes, not anticipating liftings of NGL's initial inventories build up.

  • Additionally the third quarter will have start up expenses in full operating costs including interest on the pipeline operations, which is capitalized during construction.

  • Income will increase sharply as production ramps up to capacity.

  • We expect oil & gas production year-end exit rate to be in the range of 630,000 to 650,000 barrels a day.

  • This increase includes 47,000 to 65,000 BOE a day from Dolphin, 7,000 BOE from the Permian assets acquired in the BP swap and 6,000 BOE a day from the announced acquisition of Qatar assets from Anadarco.

  • With regard to prices, $1 per barrel change in oil prices impacts oil & gas quarterly earnings by about $40 million before income taxes, a swing of $0.50 per million BTU in gas prices and a $24 million impact on quarterly earnings before income taxes.

  • The NYMEX gas price of Second Quarter was $7.56 per thousand cubic feet.

  • Additionally, we expect exploration expense to be about $95 million for seismic and drilling for our Libyan, South American exploration programs.

  • We expect chemical segment earnings to be in the range of $160 million to $175 million compared to to the $158 million in the Second Quarter.

  • We expect interest expense to be about $12 million in the third quarter.

  • The increase in the Second Quarter reflects the loss of capitalized interest in the Dolphin Project.

  • We expect our combined worldwide tax rate in the third quarter to increase to about 47% due to increases in foreign exploration.

  • Our Second Quarter and six-month U.S.

  • and foreign tax rates are included in the Investor Relations supplemental schedule.

  • Copies of the Press Release announcing our Second Quarter results and the Investor Relations supplemental schedules are available on our website at www.OXY.Com or through the SEC's Edgar system.

  • We're now ready to take your questions.

  • Operator

  • (OPERATOR INSTRUCTIONS) Your first question is coming from Doug Leggate from Citigroup.

  • - Analyst

  • Thanks, good morning, Steve.

  • A couple of things, Steve, real quick -- Dolphin coming on stream.

  • If we take your reserve entitlement that you've talked about -- I think it's roughly 300 million barrels equivalent on the CapEx share -- $4 DD&A, should we expect the unit depreciation start to slide back over the balance of this year and next?

  • - CFO, SEVP

  • Almost.

  • The pipeline part of the capital won't be depreciated at the same rate as the reserves.

  • It will depreciate at a much lower rate because the pipeline goes on really for 30 years, so the depreciation will be somewhat lower than you're indicating.

  • - Analyst

  • Okay, but either way, it looks like the unit rate is going to start to come down a bit as a whole?

  • - CFO, SEVP

  • Oh, yes, for sure.

  • - Analyst

  • The only other one I'll have is -- Dr.

  • Irani kindly gave some more optimistic noises on the outlook for new projects in the Middle East, but could I maybe approach that issue slightly differently?

  • You talked about $3.4 billion of CapEx this year.

  • What should we be thinking about in the event [Ex] the Emirates gas project?

  • In other words, outside the Bab and Shah, what should we be thinking about as a reasonable kind of level of capital expenditure should you succeed in the project you're pursuing outside of the Emirates?

  • - CFO, SEVP

  • Somewhere in a little over $4 billion I would guess.

  • - Analyst

  • Is it annualized run rate?

  • - CFO, SEVP

  • Yes.

  • It probably won't make that next year.

  • It will probably ramp up into next year, so if you looked at the run rate a year from now, it's probably going to be in that range.

  • - Analyst

  • Well, I guess a final one is if we used --

  • - CFO, SEVP

  • Remembering the Mukhaizna steps down some and Dolphin is done, so there's more if you want to call it other growth in that number, you might guess.

  • - Analyst

  • You probably guessed where I'm going next and it's really a final one for me as well -- clearly, with practically zero net debt or very close to zero net debt and that kind of CapEx run rate, it still leaves you with an awful lot of head room for buybacks.

  • Guidance there, Steve?

  • - CFO, SEVP

  • It does leave a lot of room.

  • And we continue to, as I think Ray said in the release on the dividends, the share buybacks are an important part of our strategy for improving returns to shareholders.

  • - Analyst

  • All right I'll leave it there.

  • Thanks.

  • Operator

  • Thank you.

  • Your next question is coming from Robert Morris from Banc of America.

  • - Analyst

  • Good morning.

  • - CFO, SEVP

  • Good morning.

  • - Analyst

  • A couple quick questions, Steve.

  • On the last quarter you mentioned that oil field service costs seem to be flattening out and indicated that it would probably be about flat for the year, but it looks like here in the Second Quarter that they are continuing to increase.

  • Can you just shed a little bit of light on that?

  • - CFO, SEVP

  • I think a fair amount of that is in Argentina where we've had some real -- not with the wells but with the production equipment.

  • The production equipment was sort of rusty and we're going to have to replace some of it so there's been a fair amount of expense money spent in Argentina trying to get the equipment in the shape that meets our standard, so I think that's probably a lot of the growth.

  • There's been some growth but other than that, not much.

  • - Analyst

  • Now is that work behind you or is that going to continue for the second half of the year?

  • - CFO, SEVP

  • I think it will continue.

  • - Analyst

  • Okay.

  • Second quick question, Libya -- I know you've got a big exploration [slight] the last time the onshore wells weren't material enough to discuss, but I know you had potentially significant -- at least, the first of three offshore wells that should have been at TD by now.

  • Can you tell us the results of that?

  • - CFO, SEVP

  • The two offshore wells are dry.

  • - Analyst

  • Okay.

  • - CFO, SEVP

  • They had some modest gas shows, but you need a fair-size discovery there to make it worthwhile.

  • - Analyst

  • And then just last quick question.

  • Hedging.

  • You guys been active in putting on some commodity price hedging given the level we've seen here recently?

  • - CFO, SEVP

  • No.

  • - Analyst

  • No additional hedges?

  • - CFO, SEVP

  • No.

  • - Analyst

  • Okay, great.

  • Thank you.

  • - CFO, SEVP

  • Hello?

  • - IR

  • Operator?

  • - Chairman, President, CEO

  • Hello?

  • Hello, Chris?

  • - IR

  • Yes, I'm here.

  • - Chairman, President, CEO

  • Is the Operator there?

  • - IR

  • Operator?

  • - Chairman, President, CEO

  • Hello?

  • - CFO, SEVP

  • Chris?

  • - IR

  • Yeah, Steve?

  • - Chairman, President, CEO

  • Are you trying to get us reconnected, I hope?

  • Operator

  • I'm sorry.

  • The next question is coming from John Herrlin.

  • - CFO, SEVP

  • Okay.

  • - Analyst

  • Yeah, hi.

  • - CFO, SEVP

  • Hi, John.

  • - Analyst

  • By our calculations, you have $1.5 billion to $2 billion in free cash in the second half.

  • You already said that you'd address returning cash to shareholders.

  • What about on the acquisition side, Steve?

  • What are you seeing in terms of properties?

  • Are you seeing anything, and if you have a choice would you take some of the free cash and do more bolt-on or larger size acquisitions or prefer buybacks?

  • - CFO, SEVP

  • Well, it just depends, I guess.

  • We see more small bolt-ons especially in California, and so we would expect California looks pretty good right now.

  • No, we don't plan any large scale acquisitions if that's the question.

  • $6 gas hasn't really changed the expectations much.

  • So and as we generate more cash, we'll repurchase more shares.

  • - Analyst

  • Okay, that's it for me.

  • Thanks.

  • - CFO, SEVP

  • Thank you, John.

  • Operator

  • Your next question is from Arjun Murti from Goldman Sachs.

  • - Analyst

  • Thank you.

  • I think you answered the Libya offshore exploration question.

  • Any other meaningful exploration wells we should be thinking about for the remainder of this year?

  • - CFO, SEVP

  • Libya continues.

  • We're drilling a fair number of wells in Libya, so --

  • - Analyst

  • Primarily onshore, Steve?

  • - CFO, SEVP

  • Well there's two more offshore ones.

  • - Analyst

  • Okay.

  • - CFO, SEVP

  • One that's drilling and one after that, so that program -- we'll know where we are at the end of the year or sooner.

  • The onshore ones, there's a fair number of probably smaller impact but still decent size opportunities in Libya, so Libya should come in for -- you should hear results from Libya every quarter for the rest of this year.

  • - Analyst

  • That's great.

  • Was it a year ago or maybe two years you ago you and BP had a Press Release about using CO2 from I think Carson to [flat] Elk Hills.

  • Any update on the status of that project?

  • - Chairman, President, CEO

  • Yes.

  • We continue to work on that and as a matter of fact I had a telephone discussion with the new CEO where he expressed their continued interest and I confirmed our continued interest.

  • As you know, Arjun, this is a longer term project than normal but both companies are still interested pursuing that program.

  • - Analyst

  • That's terrific.

  • Thank you, Dr.

  • Irani.

  • Operator

  • Thank you.

  • Your next question is coming from Ron Oster.

  • - Analyst

  • On the growth initiatives in the progress in Argentina and Oman, and then secondly if you could, is there, can you quantify the start up expenses you expect to be included in the third quarter for Dolphin?

  • - CFO, SEVP

  • I didn't hear the first question.

  • You broke up.

  • - Chairman, President, CEO

  • Let me try that, Steve.

  • First question about a growth opportunity in Argentina and Oman -- Argentina, as Steve indicated, some of the equipment we got with the Vintage acquisition were less in good shape than we would like, so we spent effort to get them back into line and we expect to ramp up the production to start being very meaningful, so we expect by the end of the year to be telling you increased production numbers in Argentina and more in the years to come.

  • With regards to Oman, the Mukhaizna project is moving along on schedule and we do expect that we would exit the year in Mukhaizna at a production level gross in the 30,000 to 35,000 barrels a day.

  • You may recall when we took this project over, it was producing 8,500 barrels a day so that's progress.

  • In addition, we continue to look at other operating measures in Oman, and we're optimistic about future programs there.

  • With regards to cost, Steve, you want to handle that?

  • - CFO, SEVP

  • The $10 million net is net of all of the cost, if that's your question.

  • - Analyst

  • $10 million net will be included in the third quarter?

  • - CFO, SEVP

  • Right, but that's net of all of the costs, so it's -- income will be whatever and the costs will take it down to about $10 million.

  • - Analyst

  • Okay.

  • Thank you.

  • - Chairman, President, CEO

  • But as Steve said, the profits will be moving up sharply in quarters to come as we go past the start up phase.

  • Operator

  • Thank you.

  • Your next question is coming from Paul Sankey from Deutsche Bank.

  • - Analyst

  • Can you hear me?

  • - CFO, SEVP

  • Yes.

  • - Analyst

  • Good.

  • Just thinking about your long term growth outlook question -- a question for Dr.

  • Irani.

  • I recall back at the '06 Analyst meeting you had a range of 2010 of 700,000 to 785,000 barrels a day of production with a stretch target you said at the time of 1 million barrels a day.

  • And obviously there's been moving parts on both sides of that.

  • Could you give us some thoughts about how realistic, for example, that 1 million barrels a day stretch target is now with what's happened over the past year?

  • - Chairman, President, CEO

  • I don't think it's unrealistic.

  • Since we talked, we've changed our portfolio, but the number of opportunities we see available to us has grown since we gave you that target.

  • So with more projects in the pipeline, it's probably more realistic than then.

  • However, time will tell.

  • With regards to the production targets, we think those are very realistic.

  • - Analyst

  • So essentially sticking with the range of 700,000 to 785,000 that you --

  • - CFO, SEVP

  • Yes.

  • - Analyst

  • Even with the 50 or so thousand disposals that you've made?

  • - Chairman, President, CEO

  • Correct.

  • - CFO, SEVP

  • Disposals were in the table, remember?

  • - Analyst

  • Yes.

  • I was just kind of resetting it if you want.

  • Steve, very specifically on Argentina, how much growth are you expecting to see this year and next from those assets?

  • - CFO, SEVP

  • Probably next year will be the 50,000 barrel a day area.

  • - Analyst

  • And going back to the famous buyback question, you have spoken in the past about.

  • About wanting to or having to maintain a stronger Balance Sheet given that you want to compete in the Middle East with much bigger companies.

  • What would be your debt-to-cap?

  • Would you take debt up somewhat in order to help us with buyback as well or what's your thinking there?

  • - CFO, SEVP

  • We don't think of debt as debt-to-cap as much as debt per barrel, since start-up cost is not real meaningful in this, so a debt to $1 to $2 a barrel is probably a decent range, prove reserves.

  • - Analyst

  • And just on the way of trading the buyback, I guess it's a notably low number for the quarter, but that doesn't mean that you're not going to step in if we continue to see weakness of the kind that we're seeing today.

  • - CFO, SEVP

  • As I think I've told you, we buy on down days and we can't buy today unfortunately, but we buy on down days.

  • And the last quarter, there was significantly more up days than down days and the First Quarter there was significantly more down days than up days, so probably accounts for the bulk of the change, you see?

  • - Analyst

  • I've got you.

  • And very finally for me, the $4 billion that you're talking about of CapEx going forward, what's the range on that, if you want?

  • Is there potential for that to come in as $5 billion or do you think that's a level that you would be stretched by?

  • - CFO, SEVP

  • I think we would be frightened to death at $5 billion.

  • - Analyst

  • Right, I've got you.

  • Thanks, gentlemen.

  • Operator

  • Thank you.

  • Your next question is coming from Pavel Molchanov from Raymond James.

  • - Analyst

  • Hi, good morning.

  • Could you clarify one thing regarding Dolphin?

  • You mentioned 2 BCF a day growth number for year-end and yet the 47,000 to 65,000 net range implies a growth number of more like 1.5 [B's] a day.

  • Just if you could reconcile those two?

  • - Chairman, President, CEO

  • No, the 2 BCF is there.

  • I think the range really depends on oil prices, frankly more than anything else.

  • - CFO, SEVP

  • There's a production sharing contract that overlays this with the government at Qatar, and so that's what accounts for your difference.

  • - Analyst

  • So the 24.5% -- that's the working interest but that may not be net revenue, is that right?

  • - CFO, SEVP

  • That's right.

  • - Analyst

  • Okay, thank you.

  • Operator

  • Thank you.

  • Your next question is coming from Robert Morris from Banc of America.

  • - Analyst

  • I already asked my question, thanks.

  • Operator

  • I do apologize for the previous technical difficulty.

  • It has now been corrected.

  • (OPERATOR INSTRUCTIONS) There appears to be no further questions at this time.

  • I would now like to turn the floor back to Mr.

  • Christopher Stavros for any closing comments.

  • - IR

  • Well, thank you very much, everyone for joining us this morning and have a good rest of the day.

  • We're available in New York should you have any further questions.

  • Thank you.

  • Operator

  • This concludes today's Conference Call.

  • You may now disconnect.