Dawson Geophysical Company (DWSN) Q2 2013 Earnings Report, Transcript and Summary

Good morning and welcome to the Dawson Geophysical Second Quarter 2013 Results Investor Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over Steve Jumper, President and CEO. Please go ahead.

Thank you, Laura. Good morning and welcome to Dawson Geophysical Company’s fiscal second quarter earnings and operations conference call. As Laura said, my name is Steve Jumper, President and CEO of the company. Joining me on the call today are Christina Hagan, Executive Vice President and Chief Financial Officer and Ray Tobias, Executive Vice President and Chief Operating Officer. As in the past, today’s call will be presented in three segments following opening remarks, Chris will discuss our financial results. I will then return for very brief operations update, then open the call for questions. The call is scheduled for 30 minutes and as in the past, we will not provide any guidance. At this point, I will turn the control of the call over to Chris Hagan, our CFO.

Thank you, Steve. First, let me share our Safe Harbor provision. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, Dawson Geophysical Company cautions its statements made today in this conference call, which are forward-looking and which provide other than historical information, involve risks and uncertainties that may materially affect the company’s actual results of operations. These risks include, but are not limited to the volatility of oil and natural gas prices, dependent upon energy, industry spending, disruptions in the global economy, industry competition, delays, reductions or cancellations of service contracts, high fixed costs of operations, external factors affecting our crude such as weather interruptions, and inability to obtain land access rights of way, whether we enter into turnkey or term contracts, crew productivity, limited number of customers, credit risk related to our customers, the availability of capital resources and operational disruptions. A discussion of these and other factors, including risks and uncertainty is set forth in the Company’s Form 10-K for the fiscal year ended September 30, 2012. Dawson Geophysical Company disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future events or otherwise. During this conference call, we will make references to EBITDA, which is a non-GAAP financial measure. A reconciliation of the non-GAAP measure to the applicable GAAP measure can be found on our current earnings release, a copy of which is located on our website www.dawson3d.com. Our financial results, for the second quarter of fiscal 2013, ended March 31, 2013, revenues were $83.350 million compared to $85.546 million for the same quarter in fiscal 2012. The company reported net income for the second quarter of fiscal 2013 of $6.279 million compared to $5.589 million for the same quarter of fiscal 2012. Basic earnings per share for the second quarter of fiscal 2013 were $0.78 compared to $0.71 per share in the same quarter of fiscal 2012. Revenues for the six month period ended March 31, 2013 were $159.979 million compared to $177.928 million for the same period fiscal 2012. The company reported net income for the six months period 2013 of $9.207 million compared to $8.820 million in the same period of 2012. Basic earnings per share for the six months of fiscal 2013 were $1.15, compared to $1.11 per share in the same period of fiscal 2012. EBITDA for the six months of fiscal 2013 were $34.652 million compared to $28.548 million in the same period of fiscal 2012. Included in the six months 2012 results is $0.18 per share one-time tax benefit recognized in the December 31, 2012 quarter related to a merger agreement terminated in calendar 2011. Excluding the impact of the one-time tax benefit both net income and earnings per share increased to 24%. Revenues of third party reimbursable charges increased 14% in the second fiscal quarter of 2013 compared to the second fiscal quarter of 2012. These third party charges are related to company’s use of helicopter support services, specialized survey technologies and dynamite energy sources in areas of limited access. The company is reimbursed for these expenses by its clients. Capital expenditures in the second fiscal quarter of 2013 included replacement of an I/O RSR recording system on an existing crew with the purchase of a 12,000 Geospace GSX cable-less recording system in the first fiscal quarter of fiscal 2013 and deployment of a small channel count crew utilizing the Wireless Seismic RT 2000 recording system. Capital expenditures of $43.719 million have been made thus far in fiscal 2013. The company expects to maintain its previously announced capital budget of approximately $50 million for fiscal 2013 to include the purchase of additional cable-less recording equipment, energy source units as well as maintenance and operational capital requirements related to our Canadian operations.

Thank you, Chris. Just real quickly recap our fiscal second quarter highlights. It’s our best quarter in many aspects since fiscal 2009. As Chris mentioned, in the second quarter EBITDA for the quarter ended March 31 increased to $20 million compared to $17.5 million for the same period of fiscal 2012, an increase of 16%, an increase from $14.3 million in the first fiscal quarter of 2013 ended December 31. Net income for the quarter ended March 31, 2013 increased to $6.2 million or $0.78 per share attributable to common stock compared to $5.58 million or $0.71 per share attributable to common stock for the quarter ended March 31, 2012 and $2.9 million or $0.36 per share attributable to common stock in the quarter ended December 31, 2012. We reported revenues for the quarter ended March 31 of 2013 of $83.3 million as compared to $85.5 million in the second fiscal quarter of 2012. However, revenues net of third party reimbursable charges increased 14% in the second fiscal quarter of 2013 compared to the second fiscal quarter of 2012. We’re reporting approximately $67 million of working capital at March 31, 2013. We continue to maintain a balanced portfolio of projects namely in the Eagle Ford Shale of South Texas, Bakken Shale, North Dakota, Marcellus Shale of Pennsylvania, Mississippi Lime Region of Kansas and Oklahoma, we have projects in Texas Panhandle and the Permian Basin including Cline Shale, Avalon Shale, Bone Spring and Wolfcamp areas and we have recently been awarded a project in the State of Mississippi. In the first quarter of 2013, we deployed a small channel count crew utilizing the Wireless Seismic RT 2000 recording system and I would just make a note that the replacement of the I/O RSR recording system with 12,000 Geospace GSX cable-less recording system occurred in actually the first quarter of 2013. Small crew was put into service in the second quarter. We have secured contracts to perform surface microseismic surveys in West Texas and East Texas and have completed one in April and are active on one right now. We completed two such projects in 2012; prompted us to a hire a Manager of our Microseismic Operations, and we successfully completed first Canadian project. The second quarter and six month results reflect steady activity in the U.S. seismic data acquisition market. Net income, EBITDA and revenue, net of third party charges all exceeded year ago levels. Utilization rates increased, efficiencies improved and demand for our services in lower 48 remains steady during the second quarter. As mentioned, EBITDA for the second fiscal quarter of 2013 surged to $20 million, an increase of 16% from the second quarter of fiscal 2012, and net income grew to $6.3 million up from a $5.6 million in the same period a year ago, an increase of 12%. Visible growth opportunities remained particularly strong in the Permian Basin, Mississippi Lime, Oklahoma and Kansas, the Bakken Shale and the Eagle Ford. Our order book supports commitments for 14 crews into the fall of 2013 and request for proposals are steady. In Canada, we successfully completed our first multi-component 3D project. The Canadian crew, operating as Dawson Seismic Services worked approximately 25 days during the 2012-2013 winter season. We secured the necessary industry safety audits and performed at a high level of efficiency. While we’re pleased to have successfully entered the Canadian market, the winter season was not as robust as originally anticipated. Financial results for the Canadian operation had a slight negative effect on our overall second quarter and six month fiscal 2013 results. Dawson Seismic Services, our Canadian subsidiary anticipates operating one or two crews in the winter of 2013-2014. As mentioned in our press release, well our order book is sufficient to maintain operations for 14 crews in the fall of 2013, we anticipate reducing the number of large channel count crews to 13 during the third or fourth fiscal quarter by taking out of service an I/O RSR radio-based crew. The act will have a short term effect on utilization rates during the third or fourth fiscal quarters as crews are redeployed in the RSR is taken out of service. In addition, we anticipate utilization rates to be impacted on several crews early in the third quarter due to early completions and project readiness issues. We do however believe that we will be able to improve long-term utilization rates and meet client demands with 13 large channel count crews. Activity levels for the smaller channel count crew are expected to increase, keeping our overall crew count at 14. During the second fiscal quarter of 2013 we were awarded the surface- recorded microseismic, hydraulic fracture monitoring projects in West and East Texas utilizing a Geospace GSX recording system. We have completed one as I mentioned earlier and active on the second and we completed two like projects in 2012. Revenue net of third party charges increased 14% fueled by improved efficiencies, higher utilization rates and favorable contract terms for projects during the quarter including several early completion performance incentives. As Chris mentioned, our CapEx budgeted for fiscal 2013 at this point remains unchanged at $50 million. Our balance sheet remain strong with approximately $67 million of working capital, approximately $18 million cash and cash equivalence, approximately $13 million in short term investments and roughly $18 million of debt. In closing, improved efficiencies, processes and gains and productivity combined with favorable contract terms that are driving higher returns. Our company’s balance sheet remains strong. In summary, I’m confident that our commitment to our employees, our clients and our shareholders bring new opportunities for expansion and growth. And with that Laura, we’re ready to open the call up for questions.

Thank you. At this time we will begin the question-and-answer session. (Operator Instructions) And our first question is from Collin Gerry of Raymond James. Collin Gerry – Raymond James & Associates, Inc.: Good morning and congratulations on an excellent quarter.

Thanks Collin. You may need to speak up a little bit, I can barely hear you. Collin Gerry – Raymond James & Associates, Inc.: All right, let me try to fix that. Is that all the better?

That’s better. Collin Gerry – Raymond James & Associates, Inc.: Okay. So, my question is, you went through this in your prepared remarks, can you let me understand the dynamic a little bit more of taking down a larger crew, but it seems that the demand for the smaller crews is coming back up. What’s the driver there, are the shoots smaller, are you getting the equipment that much more efficient and do you see that switch continuing to progress through your fleet?

Collin, we have made reference in the past, even going back to, as far back as 2008 that there is two ways to measure I guess or put a metric on a seismic company, one is crew count, the other channel count. We’ve always said that there is a – crew count could come down over time and it did, we operated 16 crews in 2008, now we’re operating 14, yet our channel count is up from roughly low hundred thousands up to about a 180,000. And we have obviously had some equipment changes, we made some changes in the ARAM system in 2004, 2005, 2006 timeframe on the cable side, starting in 2010 and 2011, we started transitioning into Geospace GSR cable-less equipment and we’ve been steadily replacing both ARAM and RSR equipment with that Geospace equipment and moving like equipment off of ARAM and RSR crews to build channel count on existing platforms. And so, we’ve always talked about channel count, I mean, crew count could move from 13 to 15, even down to 12 and crews maybe split. And so, I don’t know that I would read a whole lot into a reduction in large channel count crew of 14 to 13 other than to say this, it continues to be difficult in the U.S. to maintain project readiness, we have spoken in the past about having mid-sized projects and as soon as we get an order book that’s filled with mid-sized projects we seem to move, fill them pretty quickly as what we call fillers and those projects kind of come and go and these resource plays are getting more and more unconventional, I should say, getting more and more of these projects that are getting larger in size. Couple that with the size that we have gained so much efficiency in both our cable systems and the cable-less systems and we’re operating at such a high level of productivity that project readiness for large crews continues to be an issue. And so, we believe that the RSR crews, while the data from those crews are certainly equivalent to any other platform we operate we fitted a system that I don’t want to say is limited in where you can operate it, but it certainly not as versatile and is flexible as the cable-less systems. And so you couple that with the fact that we’re getting these gains and efficiencies and it looks like long-term if we can take this may be less productive, more cost, higher cost operating RSR crew out of service, expand the channel count once again on the existing - this is legacy equipment, we’ve had it a long time, so we can move some of that equipment around to the other RSR crew, increases channel count. We think improved utilizations rates for the 13 big ones and that we’re seeing very small 2D and 3D projects that are starting to come back to life a little bit. And we think the wireless seismic crew is, sees some data real time, it’s a perfect niche for to work in that environment for us. It can do some microseismic surface recording and so it’s got a lot of flexibility. We believe we’re going to see continued demand for that project, for that crew. Now, we’re still going to have RSR and cable, I mean, ARAM equipment available should the market dictate and should we need to expand to a split and go back to a two mid-sized RSR crews, we’ll have that capability. But, for right now, we believe that to meet client demand, improve utilization rates and project readiness issues and continue to improve margin, we think going to 13 large and one small is the best option for now. And that could change with one or two contracts. So, that’s where we’re today. Collin Gerry – Raymond James & Associates, Inc.: So, it sounds like just flexing the or using the flexibility that you have in the system now; and I noticed in the press release and your prepared remarks that we’re talking more about microseismic. What is the long term business opportunity for you guys there? I mean, do you see it being as profitable and you able to deliver the same sort of, kind of market leadership in that space or is this something that is going to remain relatively small for the company?

I think for now it’s going to remain relatively small. There is several ways that people are doing microseismic work, there is surface recording from hydraulic fracture activities and then there is bore hole to bore hole reporting where you are getting, the company is getting adjacent bore hole and analyze the frac from the bore hole level. We’re not going to be in the bore hole level and we’re not going to be in the processing and/or the analytical end of the microseismic business. We’re really good at understanding recording systems and we’re really good at permitting and surveying surface locations, we’re really good at getting sensors on the ground and operating. It’s very similar to what we do day-to-day. Many times we’re in areas particularly when you’re utilizing something like the wireless seismic or the GSR, GSX equipment that you can, has a continuous recording capability and you can work for long periods of time without having to do resets and all those kinds of things and lot of times these occur while we’re active on a 3D anyway. So, it feels like just a natural step for us, it’s something we’ve been loosely involved with for about a year now and we’re seeing increased activity both from the surface side and the bore hole side and we’re isolated in one small part of that business segment. I think there is a lot that our industry has to understand much like we did with multi-component work; there is not enough information out there to really have a firm feel as to where this technology is going. But, we think it’s just real natural fit for us and something that we will have to wait and see how it builds and grows. Collin Gerry – Raymond James & Associates, Inc.: Last one from me. As we talk about slowing down the CapEx as you kind of may be move into 2014, yeah, you’re going to be in a position where you got that good problem to have or you’re building lot of cash especially if you can keep, putting up result in close to this. And, we just think about over 2, 4 or 6 quarter timeframe, I mean, how does Dawson and the board and senior management think about, where to deploy that cash, I mean, obviously organic growth is the first opportunity, but is there any sort of buyback or dividend or any sort of cash return to shareholders on the minds of you guys at this point?

That’s an excellent question, Collin. Obviously, day-to-day there are lot of things that are on our mind and if you look back coming out of the disasters time period of 2009, 2010, we had a very strong cash position on our balance sheet. And in that timeframe, we recognized that there were changes coming in this industry that the cable-less equipment was going to gain traction. And we ahead of really market conditions and the cash flow or EBITDA, we had a very aggressive capital spend, we spent money on vibrators and energy sources and put 73,000 channels of Geospace equipment to work, probably spin I don’t know $150 million. We’re starting to see those investments make a return now. And so, we felt like that it was ahead of its time so to speak, we felt like that we put that cash to work for the best interest of our clients and our company and our shareholders offer it. Obviously, we’re going to have to take hard look at where this technology moves, we anticipate a reduced capital spend in 2014 that could change, obviously with the change in market conditions, that could change with Canadian growth, that could change with microseismic growth, that could change with opportunities that could arise either organically or otherwise. And so, we’re going to continue to look at all those options, we’re a capital intensive cyclical business and the balance sheet is obviously something that we want to protect. We also wanted to pull the cap little wisely and so, I think there is always things that are under consideration, Collin. I would hesitate to comment any further on that at this point. Collin Gerry – Raymond James & Associates, Inc.: Sounds good, congrats again and I will turn it back.

Thanks Collin.

And our next question is from Rudy Hokanson of Barrington Research. Rudy A. Hokanson – Barrington Research Associates, Inc.: Thank you. If I could pursue the question on the microseismic, surface microseismic, Steve could you please maybe elaborate a little bit about what you think Dawson brings to that game that would attract customers that would want to come to Dawson other than your general reputation for being a solid executer of seismic. But, if there is something I just sense with the way that it was highlighted in the press release and little bit of a discussion that you now feel you have something unique specially if you’re hiring somebody to go out and market it rather than that you’re just going to enter the field as a commodity microseismic provider?

Rudy, we in our history, we have attempted to avoid being a commodity player at any level and so, there are issues that come to play in all lines of our business that go beyond just a cost point. So, I think surface microseismic recording is something that one where we provide similar services to many of the same E&P customers and so it’s a natural step for us to move into. I don’t want to get too far ahead of our sales with microseismic business line. We do have all the resources available in-house so from a surface permitting, from a – as I mentioned earlier surveying, actually making sure we’re in the right locations and we’ve real strong understanding and field of operations. We don’t have any intention to get into board hall or getting into analytics are processing where there would be tremendous investment in terms of R&D or capital investment. So, this is a low capital requirement for us. And we think we can offer these services to a wide variety of people, they’re people who do analytics and we think we can offer those surfaces to them. We do flexibility and equipment base, we have what we believe, we’ve two platforms that can record microseismic type recordings on a continuous basis both the GSR, GSX platform and the microseismic platform. We think there will be more of it looked at and tried in lower 48 in various basins. And there is a lot of horizontal wells that are going to be drilled overtime and we think that there is going to be a room for a lot of people in that line of business. And so, we’re going to move into it slowly, we hired a manager to help us understand and it’s gentleman with extensive experience in surface monitoring of hydraulic fracturing activities and he has worked all over the U.S. in different basins, he understands, would help us to understand best way to design and implement, really to go one step beyond just being able to do it, but to do it efficiently and understand that what you do in one basin from a technical standpoint may not be the same as in other basin. It’s a step that I think our industry is going to continue to make room, we’ve talked about this in the past and that’s being able to do more with seismic information other than just we’re not to drill. I think, it’s going to, it just another piece if you look at microseismic, if you look at multi-component recording, if you look at potential 4D time lapse monitoring, you look at all those different business lines and you look at identity, high resolution survey, I think eventually more and more of those tools become integrated with not just Geoscience guys but with the engineering departments where our industry is just going to have to help people understand more about what’s going on in that reservoir, we think that’s a good place for us to take a step in that direction. Rudy A. Hokanson – Barrington Research Associates, Inc.: Okay, thank you very much.

Thank you, Rudy.

And our next question comes from Georg Venturatos of Johnson Rice. Georg P. Venturatos – Johnson Rice & Co. LLC: Good morning guys.

Good morning, Georg. Georg P. Venturatos – Johnson Rice & Co. LLC: Hey Steve, we wanted to talk about the Canadian operations, obviously we got our first crew work in this year, wasn’t exactly the winter we were looking for. I know in the release you mentioned it was slight negative impact. Can you maybe talk about what you learned this past winter season that you’re going to take in the next season and obviously hopefully we get, maybe up to two crews next year, but just leveraging those learnings to obviously, be profitable next year?

Well, I think the, I don’t if we learned this, but I think, we knew going into the Canadian market that being what in essence is a new entry was going to be difficult. And we had high hopes, but we know being new to the market, we have a well recognized brand name, but we had not been outside the border of the lower 48. We knew that was going to be difficult, we didn’t anticipate the overall market conditions to not be as robust as they were last, maybe the 11, 12 winter season. At our presentation in a industry conference about two weeks where there were 40 to 45 crews working in the Canadian and 11, 12 winter season they were probably 30 or 35 working this year. So, coupled with our new entry into the market, there appear to be some softness and I think the people didn’t hit the softness as much as we did were companies that have been there for a while and had secured contracts much earlier than we got up and running. We probably got a little bit of a late start during our management team in place. I think, what we have learned is, we have a great management and we learn that we can operate in that environment. We did successfully, our crew while that was out for a short period of time operated at very high level of efficiency, very high level of professionalism. There were some industry required safety audit programs that you had to go through, we successfully got through those. Did have a slight negative impact, we anticipate that the 2013, 2014 season will be better. We’re having much earlier contact and lot of people that said, you get some experience and you get things behind you. We certainly like to have a conversation with you. So, we’re having more conversation and it’s never been our intention to get too large in Canada. We said all along that we’re going to be there for long term and we’re going to enter into it and take project that we can complete and do basic sets for lab and I think we did that and I think we understand the short season and we understand that probably moving equipment in and out of the U.S. as we had originally anticipated because of the short season or because of the limited season we had, we weren’t able to do that as efficiently as we hoped and didn’t see the softness in the U.S. market in the winter that we had anticipated. And so, we will have to make some capital investment going into the 2013, 2014 season and not extensive investment but build little more asset base up there. So, I think we continue to be optimistic about that market. Georg P. Venturatos – Johnson Rice & Co. LLC: Great. Now, it certainly seems like long term opportunity for you. Just a follow up on the comments you mentioned earlier, you’re seeing a little increased activity for smaller channel crew counts, is that basin specific in any way or you’re just kind of seeing that more broad base?

There are certain markets that I would rather not go into on the call, but certainly we’ve done some 2D work in the Marcellus and we’ve had some very small 3D request in mid continent region down into North Texas and we think there is some 2D opportunities in some other basins that quite honestly are just difficult to downsize the crew it get to. And so, this small crew got off to a great start, they have a little low in activity at the tail end of the second quarter. But, we’ve got things lined up for and we think that’s an equipment platform that we are starting off with 2,500 channels and will just have to see what its expandability is going to be here the next six months to year. But, we think it’s nice and it also a real strong capabilities to do, going back to the microseismic, it’s a real time continuous recording system, so it moves data real time and would have some opportunities to help us in that line of business as well. Georg P. Venturatos – Johnson Rice & Co. LLC: Great, congrats on a quarter and appreciate the answer, Steve.

Thanks Georg.

And our next question will come from Veny Aleksandrov of FIG Partners. Veny Aleksandrov – FIG Partners LLC: Good morning and congratulations.

Thank you, Veny. Veny Aleksandrov – FIG Partners LLC: My first question, it was a great quarter in terms of revenue, in terms of relation, efficiency, third party charges apparently, but if I am reading the numbers correct, there should be some cost control of that as well, pay attention to cost and even with Canada did vary remarkably on the margins. Is this something that you’re focused on, from the reconfiguration of the crews and can we expect this to continue?

We hope so, we talked back at the end of the first quarter conference call if you recall, I made the comment that I wouldn’t, I am always concerned about revenue, but I wasn’t overly concerned about revenue as much as our ability to control cost. And I think we have had some things in place that have helped us to do that, certainly we’re more efficient from not just the productivity level, but from a personnel hour management issue, I think, not just. Like with the cable-less system, you’re not waiting a couple of hours to get up and working, you’re working right off the bed, so fuel burns more efficient. We struggle a little bit with housing cost particularly in the Permian basin and I think we’ve done some things that have helped us address that. Certainly, one of the things that we’ve always dealt with that’s a high cost item, we talked about this in the past as cable repair issues and obviously, we had the reduction in them and with the increased amount of cable-less equipment, that is helping that cost. And in addition, now you can move your equipment basin to the areas where you’re less likely to have cable issues. So, I think there is not a one thing that working well. I think, our people are just executing well currently and we hope that continues. We’re going to have little bit of, as I mentioned softness in the utilization early in the third quarter, we think that’s going to recover quickly in the middle of the quarter and is beginning to recover again and certainly not as drastic as we had a year ago. But, I think that’s something that we’re always going to have deal with from a revenue side is, watching it and maintain that utilization rate. I think our people are just, it was really outstanding job of watching their cost and being as efficient put as a productive as they can possibly be on a daily basis. Veny Aleksandrov – FIG Partners LLC: Thank you. And my second question is on the microseismic forms and I know that you haven’t answer to this for a long time, we’ve talked about it, but just looking at what you guys are having, this is going on bring another lateral to your activity, not only about the microseismic you’re dealing with engineers and not so much seismic guys, it’s going to help you reach more clients and have additional clients, is this correct?

Well, we think so, we think, we will able to offer our services to expiration staff, to the E&P companies and we can offer our services to production staff at the E&P companies. We can also offer our services to other service companies. People who are in the analytical business that don’t have acquisition capabilities or people who are focused on board halls, so we think there is a lot of different ways that we can approach that business and like I said earlier, I think it just a one more step of our industry, not just our company but I think it’s one more step for our industry utilizing lot of different things, multi-component, time lines various pieces of our technology that quite honestly as an industry in the U.S. and the worldwide we think have room to improve and aid what we’re all in the business are doing and help our E&P clients find, evaluate and get solid description on these landlords where they be conventional or unconventional. So, I think, it’s just a natural progression for our industry and our science. Veny Aleksandrov – FIG Partners LLC: Thank you and congratulations again.

Thank you, Veny.

(Operator Instructions) And we have a follow up question from Rudy Hokanson of Barrington Research. Rudy A. Hokanson – Barrington Research Associates, Inc.: Yes. Steve, could you just speak a little about the mix of third party revenue and reimbursements if that expected to still stay in the range of 65% to 75% going forward, I mean, in terms of, in looking at the breakout of what would be third party and what would be direct?

Yes. Rudy that’s totally been our historical, and I’m going to rephrase that just to make sure that we don’t have any misunderstanding on the call. We have historically said that third party charges, reimbursable charges which are related to services that are necessary, but are not services that we provide. Those have historically been in the 25% to 35% range as a percentage of overall revenue. In 2010 and 2011 and particularly in the timeframe we operated in areas of limited access such as the heavy activity in the Marcellus down to the natural gas shale place, Eastern Oklahoma or Kansas, or through West Virginia that those charges its one point equal to about 50% of our revenue, more to 50% when you coupled with reduction and overall crew count and impact these third party charges. I think we will see that level as we stay in the Western U.S. stay in the 25% to 35%, it certainly can dip down below that from time to time. It can get above that on short term basis, much of that of whether it’s 25 or 35 can be timing issues related to win a project is prepped and actually completed. So, back east those were ongoing charges on every project so they carry through the projects in the Western U.S. where you need those services, they’re kind of hit and miss and so they may not line up exactly with crew completion on a timing basis. So, those are reported as they occur. But, I think we will continue to see things in that range certainly for the foreseeable future. Rudy A. Hokanson – Barrington Research Associates, Inc.: Okay, thank you very much.

Thanks, Rudy.

And this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you, Laura. Certainly would like to thank everyone for participating in our call, I want to thank our clients, our employees and our shareholders for the continued support and trust. Next week, May 26, we will be in attendance at the Barrington Research Conference in Chicago, we will be at the Intercom London on a guest conference on June 11 in London and at the end of June we will be Global Hunter Conference in Chicago. And I appreciate everybody listening in and look forward to speaking with you in 90 days. Thank you.

The conference is concluded, thank you for attending today’s presentation. You may now disconnect.