ladies and gentlemen, and welcome to the Murphy Conference Call. I would like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.
Good morning, everyone, and thank you for joining us on our call today. With me are Roger Jenkins, President and Chief Executive Officer David Looney, Executive Vice President and Chief Financial Officer and Mike McFadden, Executive Vice President, Offshore. Before we get started, I'd like to remind you that a slide deck summarizing the highlights of this Gulf of Mexico transaction, which we will be discussing today, has been posted to the Investor Relations section of our website. So I encourage you to review as you listen to this webcast, Slide 2. Additionally, please keep in mind that some of the comments made during this call will be considered forward looking statements as defined in the Private Securities Litigation Reform Act of 1995.
As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, see Murphy's 2018 Annual Report on Form 10 ks on file with the SEC. Murphy takes no duty to publicly update or revise any forward looking statements. I will now turn the call over to Roger Jenkins.
Thank you, Kelly. Good morning. Thank you for taking the time to join us in our call this morning. We look forward to discussing our latest acquisition and how it strategically fits into our multiyear transformation. Requiring 7 producing fields and 4 near term development projects and 26 Deepwater Gulf Mexico blocks from a joint venture between LLOG Exploration Offshore and LLOG Bluewater Holdings.
We'll be increasing our ownership in oil weighted producing assets in the Gulf and fields that we have further fields that we feel have further upside, which will also be immediately accretive to our company. These new assets will be solely owned and operated by Murphy and will be held outside our MP GOM portfolio. Murphy will pay $1,375,000,000 cash with appropriate closing adjustments. We'll fund this through a combination of cash on hand along withdrawing on our revolving credit facility. We could have up to a $200,000,000 contingent payment if revenue thresholds from certain development projects are exceeded by 2022.
There are also additional contingent payment of up to $50,000,000 that is tied to 1st oil being achieved at certain development projects by 2023. These assets are currently producing 38,000 barrels equivalent per day, driving an attractive acquisition metric of $36,200 per flowing barrel equivalent. The probable reserves are also purchased at an attractive price of just over $11 per barrel oil equivalent. On Slide 4, the addition of these newly operated assets complements our current Gulf of Mexico portfolio and further leverages our deepwater execution expertise. These assets are primarily located in traditional Plosocene and Miocene geologic formations.
All the fields produced from high quality sands that are from well defined pre and sub salt amplitudes with significant production history and or have direct analogs. On Slide 5, reserves. Based on our current annualized production upon closing, the acquisition is expected to add between 3,200,035,000 barrels equivalent of production, bringing our annualized net production in the Gulf to over 85,000 barrels equivalent per day for 2019, of which about 66% will be operated by Murphy as compared to 49% prior to this transaction. We expect to add near 66,000,000 barrels of equivalent of proven reserves, of which 73% is oil. This increases our corporate reserves by over 10% to over 750,000,000 barrels oil equivalent after taking into account the sale of the Malaysia assets.
It is important to note with the sale of our Malaysia assets, we divested 129,000,000 barrels equivalent of proved reserves. And with this recent acquisition, we're gaining 66,000,000 barrels of oil equivalent of proven for a difference of 63,000,000 barrels of oil equivalent, primarily almost all of the 63,000,000 barrels of oil equivalent reserve loss is attributable to natural gas. Slide 6. This high margin Gulf of Mexico acquisition ties directly to our strategy. This increases our operatorship, our oil concentration, our oil production, our oil reserves, all with very positive financial advantages.
Plus, we're able to execute this all cash transaction and maintain our strong balance sheet. These assets will also be added with very low general and administrative expenses. We're also gaining complementary assets near some of our exploration prospects in our Samurai field development. Slide 7. The timing of this deal will lead to an adjustment in the use of proceeds that we previously disclosed around our recent Malaysia divestiture.
We're prioritizing the use of the proceeds from the $2,100,000,000 divestiture to buying back shares, paying off our revolving credit facility and acquiring these Gulf of Mexico assets. I'm also pleased to announce that consistent with our long term history of returning capital to shareholders, we're committed to executing our recently announced $500,000,000 share repurchase program. We plan to execute the first $300,000,000 tranche in 2019, and we will execute the remaining $200,000,000 between now and the authorization expiration of December of 2020. With the addition of these assets to our portfolio, we now expect to generate approximately $2,300,000,000 of free cash flow between 2019 2023. Furthermore, over the next 5 years, we expect to return nearly $780,000,000 to shareholders through compelling dividend in addition to our current $500,000,000 repurchase plans.
Finally, we should generate more than $1,400,000,000 of free cash flow after dividends with our current long range plan using $55 per barrel WTI pricing. Slide 8. Let's take a step back and look at the major transformation of our company that's taking place over the past few months. We divested our Malaysia assets for $2,100,000,000 This has been one of the most successful assets in Mercy history, generating 1,000,000,000 of dollars of cash flow. However, it's time to monetize Malaysia as over the next few years, production is becoming gassier, which is causing margins to decline.
Our in country taxes are subject to a 38% cash tax with production sharing contract terms becoming less favorable. We're also able to fully monetize our full 2P resource risk free. Meanwhile, back in the Western Hemisphere, we're able to strike a deal with Petrobras in the Gulf of Mexico at a very attractive deal metrics. This strategic Olway transaction allowed Murphy access to world class assets such as Saint Malo and Lucius. Combine this with our latest acquisition, we're able to benefit from meaningful synergies and generate significant free cash flow.
We're also able to repatriate primarily all of the proceeds in the Malaysian divestiture to our tax advantaged United States regime. These three deals together are very accretive and significantly increase shareholder value. Slide 9. I'm very proud of the deal metrics that we have been able to generate in these three transactions. Alone, each of these transactions is very meaningful.
And now putting them together are extremely powerful for Murphy and our shareholders. We're able to divest Malaysia at 4.4x2019 EBITDA and turnaround and acquire assets at an average of 2.6x2019 EBITDA. On a per barrel metric, we're able to sell for $45,000 per flowing and buy for a combined $28,000 per flowing equivalent in assets that are heavily oil weighted with lower operating expenses. On a reserve basis, we're able to fully monetize our 2P for $11.13 per barrel equivalent and assets becoming gassier and acquire for $10.59 per equivalent and assets becoming oilier, all very impressive metrics, especially considering we're selling 2P with 40% oil weight and buying 2P with 82% oil weight. Combining the Gulf of Mexico transactions along with the divestiture of Malaysia, we're swapping assets with 58% oil production by volume to assets with 77% oil production by volume, all while focusing on Western Hemisphere assets are expected to deliver overall lower cost and higher margins per barrel oil equivalent.
I'm sure you will all agree these are real value creating actions. Let's review some of the quantitative evidence of the increased strength of Murphy's portfolio on Slide 10. First, the quality of reserves and margins generates a higher EBITDA per barrel, over 20% higher, in fact. 2nd, we're able to amass a meaningful scale in the Gulf as one of the top 5 producers in the play. Thirdly, we're able to drive upside and significantly greater free cash from our increasing oil weighted 2P oil reserves.
In summary, Murphy is able to deliver significant better quality, scale and upside from our newly transformed portfolio. Slide 11. I'm very excited for our Gulf of Mexico assets in the long term. Over the next 5 years, we anticipate we'll be able to spend an average of about $300,000,000 per year to generate approximately $675,000,000 of free cash flow on an average per year basis, driving EBITDA per barrel of oil equivalent to near $35 per barrel while maintaining production of 83,000 to 85,000 equivalents per year. Each year has specific plans that are associated with development rig programs moving our Samurai discovery into development mode also.
We'll also be in execution mode with several opportunities in the near term on the acquired assets with 3 fields to produce by year end 2020 and sustainable Khaleesi, Maumont fields to be executed and Oakley produced in late 2022 early 2022 rather, excuse me. Slide 12. Let's review where we see Murphy going over the next 5 years. Recently, we updated our 5 year long term plan of our company involving the sale of Malaysia and the growth of our Eagle Ford assets. Now with the LLOG transaction, we have an even stronger plan.
Graphically, we can see our full set of plans coming to fruition where our 2 accretive Gulf of Mexico transactions more than replaced Malaysia with higher amounts of production, all significantly oil weighted. We maintain our spending plans in the Eagle Ford Shale that offers growth in addition to these transactions, leading to a truly transformed Murphy in 2023, with again our oil CAGR being generally generated primarily from our Western Hemisphere operating assets. Slide 13. Today's announcement is a continuation of our repositioning into the Western Hemisphere with accretive oil weighted assets. Our team have hit a home run in the signing of the 2 Gulf of Mexico transactions and the selling of our Malaysia business all in 7 months.
The combined metrics of the 2 Gulf of Mexico transactions with the sale of Malaysia is absolutely incredible on every single metric. We've completely reshaped our long term oil growth ability, all of the continuation of rewarding shareholders with a significant repurchase and long standing dividend policy. We'll also be able to maintain financial flexibility long term with a keen focus on our balance sheet. This is a truly perfect situation for us and cannot be more pleased and excited. I want to thank our business development team led by Dan and Chera and thank David Looney, our Chief Financial Officer, for his leadership and our transformation.
In addition, I want to thank our subsurface, operational and financial teams as well as our outstanding law department and advisors for all the long hours and work needed to complete these significant transactions. It feels really good to see our strategic plans that I wanted come together at this time. With that, I'd like to open the phone lines for your questions. Thank you.
Thank you, Mr. Jenkins. And your first question will be from Arun Jayaram at JPMorgan. Please go ahead.
Good morning, Roger. I was wondering if you could give us a sense of kind of the valuation relative to the PV-ten on a P1 or P2 basis. Could you give us some thoughts on that?
Well, I mean, clearly, first, what we do here is we take a very talented long term strong subsurface team and we go through the 2P and make a real review of that closely. And then we then of course take our oil price deck and operate and get a free cash flow analysis of that. We don't normally share the NAV of that, but it would be fairly good and in the $500,000,000 range.
Say that again?
In the $500,000,000 range.
So the $500,000,000 above what you paid, is that
That's the NAV of the transaction. Yes, sir.
Okay. Got it. Got it. That's helpful. Couple other quick questions.
Got it.
Just a couple of other quick ones is, can you give us a sense, you highlight several development assets on Slide 4, a little bit of what you believe kind of the net production will be from those 4 fields?
Yes. Hang on one second. I'll move to that. We have 4 big projects, 3 of which are smaller and 1 major. Kally Oak is a 28% 28.5% working interest that's going to be tied back to a nearby facility.
It's around a 20,000,000 barrel 2P type of a thing. It's going to flow in Q2 of 2020. It's already completed, in fact. And the come on rate of that, let me turn to that. Hang on with me one second.
I have everything but that number. Hang on a second. Okay. It's going to flow between 5,000,7,000 barrels a day gross and we have a 28.5 percent working interest. The next is Orsay, 31% working interest.
It is a 2P of around 20,000,000 to 25,000,000 barrels. This will be put online hopefully mid 2020. And we have it coming online near, hang on one second, probably again in the 5000 to 6000 barrel range gross. We have another project called Nearly Headless Mick. I'm not a reader of these type novels.
I understand that's from Harry Potter, I believe. 26.8 percent working interest to 2P of around 16,000,000 barrels. It will be tied back very near to a facility that's owned by our new thing that we purchased And it's going to come on again in the 5000 to 6000 barrels a day gross number. These are 3 single subsea developments. The major prize in this purchase is Khaleesi, Mormon.
This is 2 separate fields discovered by LLOG, north of 150,000,000 barrel type project 2P. This is very near to Samurai, about 4 miles away, and we hope to have great synergy from Samurai tying back to this facility. Also have an option to bring this to front runner or take on the plans that this company had prior. This is a 34% working interest flow in 2022, 6 well penetrations, great set of subsurface data. And in the 40,000 day gross production range, We hope that we can optimize that and very, very pleased about that field.
That's one of the main reasons that production is able to stay flat through the years as we have. That's the reason we were interested in these assets as we have new assets to develop and not just picking up declining assets, we're able to have a strong asset base and then add new fields to the base.
Great. That's super helpful. Roger, my last question, I was wondering if you could give us a little bit of color on your anticipated free cash flow in 2020. And does the $325,000,000 in annualized CapEx include any ARO spending?
We're not really going disclose our free cash flow in 2020. We're trying to get through the Q1 of 2019 right now. The ARO of this deal is incredible. I think, David, you're with me around $40,000,000 of ARO. So again, we're swapping out of ARO in Malaysia, picking up slightly less than that with Petrobras and our very low ARO and ARO is not even on our radar for this type of asset.
Great. Thanks a lot.
Thank you.
Thank you. Next question will be from Roger Read at Wells Fargo. Please go ahead.
Good morning. Congratulations, Roger.
Thank you.
I'm just glad to actually be around for the day you announce one of these transactions. Quick question for you here. Transaction looks fine, understand the metrics there. A little wanting to go down the path on the share repos. And I know that was tied to the Malaysia sale in terms of the proceeds, but you're pivoting on the debt retirement.
You're highlighting that you can make some acquisitions at valuations below where your stock's trading. I'm just wondering what the thought process was on not pivoting away from the share repo completely. Also from the standpoint of just sort of a if you were shrinking the company with Malaysia, it would have made sense to shrink the share base. But now we're essentially more than replacing the part of Malaysia. So on a per share basis, what the thought process was and how that calculation was made.
I just think it just sets us apart as a company that really focuses on rewarding shareholders. This share repurchases, in my mind, we sold a historic loan asset, incredible metrics, fully monetized everything beyond 2P actually, and to give some of that back to shareholders in an upfront way I thought was the best way to handle this and so did our Board. And also the reason this is so meaningful and so critical for shareholders is that we didn't make a big deal out of it today. It's been 3 years since the collapse of 2016. We did not issue equity then.
So when you buy equity now after a great monetization of a historic asset in Malaysia, turn around and basically replace it with metrics far better and then do a share repurchase, we really feel that we've done the best we can rewarding shareholders. And as to the debt, we naturally want to keep our revolver undrawn in these type of arrangements. But since our EBITDA is so strong and our debt to EBITDA metrics are so stellar with this arrangement, we felt that we could pivot toward just revolver and really want to again highlight the great reward we have for shareholders, including a significant dividend. And without issuing equity in 2016 and turn around and buy it again. We also had a repurchase, a major repurchase back a few years ago, all again without issuing equity.
So we'll be taking out a large percent of the company over the last decade, which I think sets us apart in shareholder value creation. That's why we did it.
Appreciate that. One thing I would be interested in following up on Slide 11, the overall outlook until 2023 based on obviously a couple of specific developments and all that. We talked back late November at a little deepwater event. Tiebacks were obviously a very critical element of growing the Gulf of Mexico going forward. There was an announcement about 2 weeks ago of an acquisition in the Gulf and one of the things highlighted there was this 30 mile radius and tie back to existing platforms.
You're really not talking about that here, but that's got to be in your back pocket. I was just sort of curious if we looked at 20 3, are you locked down on what you do? Or should we think about expansion opportunities beyond what's highlighted here in the presentation from the tieback side?
Well, this project will come with as it's currently outlined, they have a significant facility located in Mississippi Canyon. This facility is right on top of our Hoth Park project that we have a discovery on. We're going to be drilling a well there later this year. We see that as a go to there. Another facility of which in the current plans to be built on top of Samurai.
So we do have major synergy with those 2 projects that are in the forefront. Then there will be other additional things we're working at and working on in the same right area. And so we don't have 2 major facilities plus our Medusa plus our front runner to take back tiebacks to. And I've never been one to single all that out. I mean, in the Gulf of Mexico, there's massive infrastructure everywhere basically, except the ultra deepwater tertiary.
So you can tie back to someone or yourself all the time. Lucius is a field, for example, takes in tie backs from other areas, which we're a non op partner. So basically this is a tie back company we're buying and then it fits in with some of our exploration areas and they too have like I just mentioned Arun here I stumbled through that I had every number but the production here on these assets, but they're all tied back as well. So this really is a tieback project. They're building looking to we're looking to build a new facility at Samurai, which they're tying back to, we're tying back to.
3 of the next wells through next year tied back to facilities, either they own or someone else, primarily they being the company we're buying. So I really feel it's a tieback acquisition. We just don't brag and throw around the tieback word all the time. We're here to make money with it and we'll make money how we need to make it.
I appreciate that. And then kind of the final question along those lines, the comment in the press release about operating production going up to 66 percent. I know you've talked a lot of times in the past about when you're in control, you don't have to deal with the 3rd party outages and all that. Should we think of that 66% number is pretty stable going forward? Or is that something that goes up as you think about moving this acquisition forward
or moving the whole next go forward?
That's what today's production is what we will operate and that's what we'll be operating those fields and I don't see it significantly changing unless we do other deals to make it higher.
All right. Appreciate it. Thank you.
Thank you. Appreciate it.
Thank you. And next question will be from Pawel Mollno at Raymond James. Please go ahead.
At the time of the Malaysian sale, you commented that you would clearly be on the lookout for bolt on acquisitions. And obviously, you announced the big one today. Beyond this $1,400,000,000 deal, are you still looking to add assets in your existing North American operating areas or is this it for the time being?
No, it's really never over for me. We've done a lot of deals in 5 years if you look a lot of significant deals on all kinds of different types of businesses. I emailed off the list to David the other day of things I want to look at again. So it never ends for me. If we're able to with that, we have an outstanding subsurface team, both onshore and offshore.
And when we find a situation where we can run through the 2P and able to buy that 2P and make value or sell something else for more than we have in it for its value and buy something to create additional value again. We'll continue to do it. And you're going to be continuing to look at these things to help our business because all our deals have been so accretive. It's incredibly so if you really look at the numbers and look into it. So it never really ends on that front.
I'll never be someone to say it's over. We'll keep going, keep working, keep working to improve our shareholder value every day.
Can I also ask about hedging? Are there any hedges that are coming into the company as part of this acquisition? And if not, will you be looking to hedge some of the incremental production given that you're obviously funding it from the balance sheet?
We did not inherit any of any kind, and we prefer to talk about our hedging stuff at our quarterly call, which is just a week away. So we'll get into all that at that time.
Okay. Very good. Appreciate it.
No, thank you.
Thank you. And at this time, Mr. Jenkins, we have no other questions. So I would like to turn the call back over to you, sir.
Okay. Thanks everyone for calling in on another deal. I think that's 3 quarters in a row. And thanks everyone for dialing in and we'll get back to our earnings work and we'll be talking to you soon and thanks for everything. Appreciate it.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.