Jul 24, 2007
TRANSCRIPT SPONSOR
Executives
Christopher G. Stavros - VP of IR Dr.
Ray R. Irani - Chairman, President and CEO Stephen I.
Chazen - Senior EVP and CFO
Analysts
Doug Leggate - Citigroup Robert Morris - Banc of America Securities John P. Herrlin - Merrill Lynch Arjun Murti - Goldman Sachs Ron Oster - A.G.
Edwards Paul Sankey - Deutsche Bank Paval Molchanov - Raymond James
Operator
Good morning. My name is Vanessa and I will be your conference operator today.
At this time I would 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 speakers' remark there will be a question and answer period. [Operator Instructions].
Thank you. It's now my pleasure to turn the phone over to your host Mr.
Christopher Stavros. Sir, you may begin you conference.
Christopher G. Stavros - Vice President of Investor Relations
Thank you Vanessa and good morning everyone. I would 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 and Gas Western Hemisphere.
In a moment, I will turn over the call to Dr. Irani who will provide some comments on the Dolphin Project as well 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 will now turn the call over to Dr. Irani.
Dr Irani please go ahead.
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
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 Emirates. As one of the largest energy initiatives ever undertaken in the Middle East, this unique project will 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 5, 6 years ago. From industry observers expressed doubt that it could be completed on time and on budget because of huge cost over run and lengthy construction delays typically incurred by other mega-energy projects.
In the case of Dolphin, we are exceptionally pleased that it is on target to deliver the projected production of 2 billion cubic feet per day of gas with minimum 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 Fields Khuff Zone, which is one of the world's largest natural gas reservoir.
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 in Ras Laffan in Qatar.
The dry gas is then transported through a 48-inch, 230 mile long subsea pipeline completed last year, to the Taweellah receiving facility in the United Arab Emirates. The gas then supplies plant 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 and 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 per 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.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
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 and the sale of non-core assets comprised of the following: $181 million 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, a gain of a $107 million from the swap of Horn Mountain assets with BP and $15 million gain from the sale of domestic mineral interest. At 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.
Results these operations will be reported as discontinued operations in our second quarter 10-Q filing with the SEC.The second quarter 2007 also includes $44 million after-tax income, $0.06 a share from Pakistan and Horn Mountain operations and other. Here's the segment breakdown for the second quarter.
Oil and gas second quarter 2007 results, excluding Horn Mountain and Pakistan operations were $1.682 billion. After excluding these gain from the sale of domestic mineral interests, 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 and gas earnings between these quarters
Lower worldwide oil price realizations offset by higher gas realizations resulted in a decrease of $66 million of earnings over the same period last year. The average price of West Texas Intermediate oil for the second quarter 2007 was $65.05 per barrel which was $5.65 per barrel lower than the last year's $70.70.
Occidental's average realized price for the 2007 second quarter was $2.55 lower than in 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 for the second quarter of last year.
Worldwide oil and gas production for the quarter averaged 583,000 barrels of oil equivalent per day, compared to 609,000 in the second quarter of last year. The second quarter production excluding volumes from the Russian non-operated asset sale in January, the Horn Mountain swap and the Pakistan sale in June was 558,000 in the second quarter 2007, compared to 551,000 in the same basis for the 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 for 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 of 2007 expense was $43 million higher than the second quarter of last year, the increase coming from the Middle East and North Africa.
Oil and 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 chloro-vinyl margins due to lower demand. Net interest expense, excluding 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 taxed foreign sources, especially the lower exploration expenses outside the United States. Now, let me briefly turn to Oxy's performance during the first 6 months.
Net income was $2.624 billion or $3.11 per diluted share for the first 6 months, compared with $2.091 billion or $242 per diluted share for the same period last year. In addition to the asset sales recorded in the second quarter, the 6 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 form litigation settlements, $107 million charge for cash tender offers for various debt issues and a $30 million provision for a plant closure.
Worldwide oil and gas production for six months averaged 587,000 barrels a day, compared to 601,000 for the six months of last year after excluding Russia, Pakistan and Horn Mountain 559,000 barrels for first six months of 2007 was a 3% increase over the 542,000 barrel a days for the same period last year. Capital spending was $850 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 have received total proceeds of $485 million from sale of our interest in the Russian joint venture, $55 million from the sale of domestic mineral ventures 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 $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 30.
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 30, 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, Occidentals' annual return on equity was 26% and our annualized return on capital employed was 24%. As we look ahead in the current quarter, we expect oil and 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 Anadarko. These increases will be 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 is 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.
We're not anticipating liftings of NGLs initial inventories build up. Additionally, the third quarter will have start up expenses and 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 and 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 Anadarko. With regard to prices of dollar per barrel change in oil prices impacts oil and gas quarterly earnings by about $40 million before income taxes.
A swing of $0.50 per million BTU in gas prices has a $24 million impact on quarterly earnings before income taxes. The NYMEX gas prices for the 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 our earnings to be in the range of $160 million to $175 million, compared to $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 increased 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 Relation Supplemental Schedules are available on our website www.oxy.com or through the SEC's EDGAR system.
We are now ready to take your questions.
Question And Answer
Operator
[Operator Instructions]. Your first is question coming from Doug Leggate from Citigroup.
Doug Leggate - Citigroup
Thanks. Good morning Steve.
You got one out there. Couple of things Steve real quick, Dolphin coming on stream if we take your reserve entitlement that you talked about I think it is roughly 200 million barrels equivalent on the CapEx share of $4 DD&A is that...
should we expect the depreciation... unit depreciation for the stock to slide back over the balance of this year or next?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
The almost... the pipeline part of the capital won't be depreciated at the same rate as the reserves we depreciated a much lower rate because the pipeline goes on really for 30 years.
So, the depreciation will be somewhat lower than you have been indicating.
Doug Leggate - Citigroup
Okay. Either way it was...
the unit rates are going to start to come down a bit to the weaker level.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah for sure.
Doug Leggate - Citigroup
I don't know if you have this... Dr.
Irani, Ray can we get some I guess some more optimistic noises on the... 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 projects, in other words I will just add the Bab and Shah what should we be thinking about as a reasonable kind of level of capital expenditure, should you succeed in the projects that you're pursuing outside of the Emirates?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Somewhere in... a little over $4 billion I would guess.
Doug Leggate - Citigroup
Is an annualized run rate?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah. We probably won't make that next year.
We have to probably ramp up in the next year, so if you looked at the run rate a year from now it probably going to be in that range.
Doug Leggate - Citigroup
Well I guess the final one than is it, if we used our ...
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Remembering the high steps down some in Dolphin is done so there is more if you want to call it other growth in that number you might guess.
Doug Leggate - Citigroup
So you probably guess that I am going next one and is really a final one from me is well clearly but practically zero net debt or very close to zero net debt and that kind of CapEx run rate still leaves you with enough lot of headroom for buyback side guidance there, Steve?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah it does leave a lot of room and we continue to focus as we... I think Ray said in the release on the dividends the share buybacks are important part of our strategy for improving returns to shareholders.
Doug Leggate - Citigroup
All right. I will leave it there and thanks.
Operator
Thank you. Your next question is coming from Robert Morris from Banc of America.
Robert Morris - Banc of America Securities
Good morning.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Good Morning.
Robert Morris - Banc of America Securities
Couple of quick questions, Steve. On the last quarter you mentioned that oil field service cost seem to be planning out and indicated that it will probably 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?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
I think fair amount of that's in Argentina where we had some real... not with the well but with the production equipment.
The production equipment there was sort of rusty. So, we are going to replace some of it.
So, it's been a fair amount of expense money spent in Argentina trying to get the equipment in a shape that's meets our standard. So, I think that is probably a lot of the growth.
There has been some growth but other than that, not much.
Robert Morris - Banc of America Securities
Now, is that work behind you or is that going to continue for the second half of the year?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
I think it will continue.
Robert Morris - Banc of America Securities
Okay. Second quick question, maybe...
I know you have got a big expiration slide 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 entity by now. Can you tell us the results of that?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
The two offshore wells are dry.
Robert Morris - Banc of America Securities
Okay.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Now, they shed some mildest gas shows, but not with... you need a fair size of discovery there to make it worthwhile.
Robert Morris - Banc of America Securities
Okay. And then just last quick question, hedging, you guys have been active in putting on some commodity price hedging given the level that we have seen here recently?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
No.
Robert Morris - Banc of America Securities
No additional hedges?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
No.
Robert Morris - Banc of America Securities
Okay, great. Thank you.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Hello.
Christopher G. Stavros - Vice President of Investor Relations
Operator.
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
Hello, Chris?
Christopher G. Stavros - Vice President of Investor Relations
Yes, I am here.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah,operator there?
Christopher G. Stavros - Vice President of Investor Relations
Operator?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Hello, Chris?
Christopher G. Stavros - Vice President of Investor Relations
Yes, Steve.
Operator
I am sorry. Next question is coming from John Herrlin.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Okay.
John P. Herrlin - Merrill Lynch
Yeah, hi.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Hi John.
John P. Herrlin - Merrill Lynch
Fair calculations you have a $1.5 billion that's $2 billion in free cash in the second half. You already said that you had addressed returning cash to the shareholders, what about on the acquisitions 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-ons or larger sized acquisitions or prefer buybacks?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Well, this depends I guess. We see more small bolt-on 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.
The $6 gas hasn't really changed the expectations much. So, and if...
as we generate more cash, we'll repurchase more shares.
John P. Herrlin - Merrill Lynch
Okay. That's it for me.
Thanks.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Thank you, John.
Operator
Your next question is from Arjun Murti from Goldman Sachs.
Arjun Murti - Goldman Sachs
Thank you. I think you answered the Libya offshore exploration question and any other meaningful exploration wells we should be thinking about for the remainder of this year?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Libya continues, we are drilling a fair number wells in Libya, so --.
Arjun Murti - Goldman Sachs
Primarily onshore Steve?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yes, well there is two more offshore ones.
Arjun Murti - Goldman Sachs
Okay.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
One that's drilling and one after that. So, that program will, we'll know where we are at the end of the year or sooner.
Now onshore ones, there is a fair number of probably smaller impact but still decent size opportunities in Libya. So, Libya out of comment for the...
you will hear results from Libya every quarter for rest of this year.
Arjun Murti - Goldman Sachs
That's great. With a year ago or maybe even two years ago you and BP had a press release about using Tier 2 from I think Carson to flat Elk Hill, any update on the status of that project?
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
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 and normal but both companies are still interested in pursuing that program.
Arjun Murti - Goldman Sachs
That's what I think. Thank you Dr.
Irani.
Operator
: Thank you. Your next question is coming from Ron Oster.
Ron Oster - A.G. Edwards
On the gross initiatives and 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?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
I didn't hear the first question.
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
Let me try that Steve. First question about the growth opportunities with Argentina and Oman, Argentina as Steve indicated some of the equipments we got with the Vintage acquisition were less in good shape than we would like.
So, we spent effort to get them back in July 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 at least production numbers in Argentina and more than they used 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 progressed. In addition, we continue to look at other opportunities in Oman and we are opportunistic about future programs there.
With regards to cost, Steve do you want to handle that?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah. The $10 million net is net of all the cost, if that's your question.
Ron Oster - A.G. Edwards
10 million net will be included in the third quarter?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Right. But that's net of all the cost.
So its income will be whatever in the cost, we will take it down to about $10 million.
Ron Oster - A.G. Edwards
Okay. Thank you.
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
But as Steve said the profits will be moving up sharply in quarters to come as we go past the start up dates.
Operator
Thank you. Your next question is coming from Paul Sankey from Deutsche Bank.
Paul Sankey - Deutsche Bank
Can you hear me?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Yeah
Paul Sankey - Deutsche Bank
Good. Just thinking about your long-term growth outlook, a question for Dr.
Irani. The call 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 stretched target, you said at the time of million barrels a day.
Obviously it's been moving part from the sides of that. Could you give us some thoughts about how realistic for example that million barrels a day stretched target is now with what happened over the prior --?
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
I don't think it's unrealistic. Since we talked, we have changed our portfolio but the number of opportunities we see available to us is grown since we gave you that target.
So, with more projects in the pipeline, it's probably more realistic than them. However time will tell.
With regards to the production targets, we think those are very realistic.
Paul Sankey - Deutsche Bank
But essentially you are sticking with the range of 700 to 785 that you have that even with the 50,000 or so thousand of disposals that you have made?
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
Correct.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Disposals were in the table remember?
Paul Sankey - Deutsche Bank
Yeah. Okay, I was just kind of resetting it if you want?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Feel free.
Paul Sankey - Deutsche Bank
Specifically on Argentina, how much growth you are expecting to see this year and next from those assets?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
Probably next year we'll be in the 50,000 barrel a day area.
Paul Sankey - Deutsche Bank
And going back to the same as buyback question, you've spoken and talked about wanting to 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 that to up somewhat in order to help us with buyback as well or what you are thinking there?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
We don't think debt as debt-to-cap is more as much as debt per barrel. Since historic cost in that were meaningfulness in this.
So, a debt of $1 to $2 a barrel is probably a decent range per reserves.
Paul Sankey - Deutsche Bank
And just on the way of trading the buyback, I guess you'll kind of step... it's a notably low number for the quarter but that doesn't mean that you are not going to step in if we continue to see weakness the kind of we think today?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
As I think, I have told you, we buy on down days and it became buy to day unfortunately, but we buy on down days and last quarter there was significantly more up days and down days in the first quarter were significantly more down days and up days. So probably accounts for bulk of a change you see.
Paul Sankey - Deutsche Bank
I have got. And then very finally from me, the $4 billion that you are talking about the CapEx going forward, what's the range on that if you want to minus the potential for that's coming as a 5 or do you think that's the level that you would stretched by?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
I think we would be frightened to death that's why.
Paul Sankey - Deutsche Bank
Right. I have got you.
Thanks gentlemen.
Operator
Thank you. Your next question is coming from Paval Molchanov from Raymond James.
Paval Molchanov - Raymond James
Hi. Good morning.
Could you clarify one thing regarding Dolphin, you mentioned two Bcf a day gross number for year-end and yet 47 to 65 net range implies a gross number of more like 1.5 piece a day. Just if you can reconcile those two?
Dr. Ray R. Irani - Chairman, President and Chief Executive Officer
No the two Bcf is there. I think the range really depends on oil prices frankly more than anything else.
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
It's a production sharing contract overlays this with the government at Qatar. And so that's what counts for your difference.
Paval Molchanov - Raymond James
So, the 24.5% that's the working interest but that may not be net revenue is that right?
Stephen I. Chazen - Senior Executive Vice President and Chief Financial Officer
That's right.
Paval Molchanov - Raymond James
Okay. Thank you.
Operator
Thank you. Your next question is coming from Robert Morris from Banc of America.
Robert Morris - Banc of America Securities
I already asked my question. Thanks.
Operator
I do apologize for the previous technical difficulty. It has now been corrected.
[Operators instructions]. There appears to be no further questions at this time.
I will now like to turn the floor back to Mr. Christopher Stavros for any closing comments.
Christopher G. Stavros - Vice President of Investor Relations
Well, thank you very much everyone for joining us this morning and have a good rest of the day. We are available in New York, should you have any further questions.
Thank you.
Operator
This concludes today's conference call. You may now disconnect.