Question-and-Answer Session
Operator
(Operator Instructions) Our first question is from Arjun Murti of Goldman Sachs.
Arjun Murti - Goldman Sachs
Thank you. Thanks for the project update. I was wondering if you could provide a similar update on some of your exploration plans, I guess in particular the status of some of the key lower tertiary projects, Jack in particular, St. Malo. If you could provide an update on exploration in general but most notably the lower tertiary, that would be helpful. Thank you.
Steve J. Crowe
Well, we’re looking at Jack and St. Malo presently. We have another well that will be completed later in the year. We’re giving consideration as to whether or not we can tie back those two projects, Jack and St. Malo, one of which came from Unocal and one of which is a legacy Chevron one, and consider developing the two of them in tandem. We’ll have more to say about the progress of the lower tertiary as we get a little deeper in the year and can probably give you a more definitive update on our next conference call.
Arjun, did you have a follow-up question?
Arjun Murti - Goldman Sachs
Are those expected to be sanctioned this year, and does the fact that you are considering a joint development speak to any disappointment or update in terms of the resource potential of either or both together?
Steve J. Crowe
I think the consideration of joining those two projects together really speaks to the opportunity to reduce costs in the current environment and produce them in tandem as a more efficient way of developing the resource.
Arjun Murti - Goldman Sachs
It’s an efficiency consideration?
Steve J. Crowe
Primarily.
Arjun Murti - Goldman Sachs
And I’m sorry, do you think we’ll be expecting a sanction decision this year or is that an ’09 or later kind of a thing?
Steve J. Crowe
That will be outside of 2008.
Arjun Murti - Goldman Sachs
Thank you very much.
Operator
Our next question is from Neil McMahon of Sanford Bernstein.
Neil McMahon - Sanford C. Bernstein
Just really on some of the numbers in today’s call that Jim ran through on the variance analysis; looking at the OpEx reduction both in the U.S. but more importantly in international, which is a bit strange, given higher royalties and an inflation environment. I was wondering to what extent -- well, first of all really why that OpEx reduction took place from the first quarter to second quarter, and in particular related to what’s going on in Kazakhstan with some of your partners in the Karachaganak field seeing increased charges associated with changes in the fiscal terms in that country.
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