VAALCO Energy, Inc. (EGY) Q2 2020 Earnings Report, Transcript and Summary

Good morning everyone. And welcome to the VAALCO Energy’s Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please also note, today’s event is being recorded. At this time I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Sir please go ahead.

Thank you, Jamie. Good morning, everyone, and welcome to VAALCO Energy's Second Quarter 2020 Conference Call. After I cover the forward-looking statements, Cary Bounds, our Chief Executive Officer, will review key highlights along with operational results. Liz Prochnow, our Chief Financial Officer, will then provide a more in-depth financial review. Cary will then return for some closing comments before we take your questions. [Operator Instructions] I'd like to point out that we posted an updated investor deck on our website this morning that has additional financial analysis, comparisons and guidance that should be helpful. With that, let me proceed with our forward-looking statement comments. During the course of this conference call, the company will be making forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. VAALCO disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release, the presentation posted on our website and the reports we filed with the SEC, including the Form 10-Q that was filed yesterday. Please note that this call is being recorded. Let me now turn the call over to Cary.

Thank you, Al. Good morning, everyone. And welcome to our second quarter 2020 earnings conference call. Before I discuss our results, I would like to reflect on the extraordinary challenges that we are facing as an industry and how VAALCO is decisively responding to these challenges. Thus far, VAALCO's operations have not been materially disrupted by the global COVID-19 pandemic. We have managed through the logistical challenges that we have faced since the outbreak and continue to put the safety of our employees, contractors and local stakeholders first. We’re minimizing high risk activities while actively screening and monitoring employees and contractors, including testing and quarantines with onsite medical supervision before going off shore. We have contingency plans in place in the event; we are directly impacted by the pandemic. While the current pricing environment remains volatile, it has recovered from the lows we saw in April in response to the lower pricing environment. We have deferred all material discretionary CapEx. This will allow us to focus on cash flow generation, while preparing for the right market conditions to begin planning the next drilling campaign at Etame. We released the Vantage drilling rig in early April after completing the 2019, 2020 drilling program as planned, on time, within budget and with no safety or environmental incidents. In addition, we have deferred our next drilling campaign until the global oil pricing environment stabilizes at higher levels. Despite this lower pricing environment, we remain confident in the long-term viability of our inventory of drilling opportunities at Etame. Another action that we have taken is managing operating costs to preserve our balance sheet and maximize cash flow. We've worked with our vendors and suppliers to implement cost cutting measures, as well as partnered with other operators to reduce costs by sharing services and equipment such as support vessels and helicopters. We temporarily reduced compensation for our directors, executives and certain non-executive employees. However, a portion of the cost reductions have been offset by higher costs brought on by the COVID-19 pandemic. Despite this uncertainty environment, we remain focused on operational excellence, which was demonstrated in our second quarter results. In the second quarter, we produced an average of 5,410 net barrels of oil per day, which was above the high end of our guidance range of 5,000 to 5,400 net barrels of water per day. The strong second quarter production was a result of better than expected performance from the new wells drilled in the 2019-2020 drilling campaign. The second quarter benefited from having three full months of production from all three of the new development wells drilled, which were the Etame 9H, Etame 11H and South East Etame 4H. We are also benefited from a full quarter of production from the three workovers where we restored production at the Etame 10H, Etame 4H and South East to Etame 2H wells. The second quarter production volumes from the new wells demonstrate a considerable impact that the drilling program has had on our overall production. Our 2019-2020 drilling program brought online three new horizontal development wells drilled two successful appraisal wellbores and completed three workovers. This increase in volume and proactive measures to manage costs has helped drive down our unit operating costs by 17%, compared to the first quarter and improve our breakeven margins, which we are now estimating to be $33.50 for 2023 free cash flow per barrel. As we've said before, approximately 90% of our costs are fixed and we can add production and improve margins with minimal increasing cost. In the second year, quarter, despite lower realized crude oil prices, we reported an adjusted EBITDAX acts of $10.1 million, an increase of $4.1 million compared to the first quarter due to higher sales volumes and higher realized gains in derivatives. While these results were strong we do see some temporary headwinds to our production in the third quarter. As previously announced in mid April of this year, the South Tchibala 2H well was shut in due to a downhole mechanical failure, not related to the electric submersible pump. Prior to going offline, the well was producing approximately 830 gross barrels of oil per day or 225 net barrels of oil per day. Given the nature of the mechanical failure, we may not be able to repair the well until the next drilling campaign when a rig is on location. In September, we will be performing our planned six-day, full field maintenance turnaround on the Nautipa FPSO and all four production platforms on the Etame license. Finally, to assist Gabon in meeting its OPEC production quota, the Minister of Hydrocarbons has requested that VAALCO temporarily curtail production at Etame through September 2020. Taking into account all of these factors, we expect our average production for the third quarter to be between 4,200 and 4,600 barrels of one per day net to VAALCO. In spite of these near term production constraints and because of the strong performance of our development wells in the first half of the year, for the full year 2020, we are raising the lower end of the guidance range we gave earlier this year from 4,400 to 4,700 barrels of oil per day net. The new full year 2020 production guidance is 4,700 to 5,000 barrels of oil per day net. Now, I would like to give you a quick update on our activity in Equatorial Guinea. In November, 2019, the Equatorial Guinea Ministry of Mines and Hydrocarbons approved VAALCO’s appointment as an operator for Block P. In the first quarter of 2020, VAALCO acquired additional working interest from Atlas Petroleum, thereby increasing our working interest from 31% to 43%. The cost for acquiring the additional Block P working interest is a future payment of $3.1 million that will only be made if there's commercial production from Block P. We are currently waiting on an amendment to our production sharing contract, reflecting our updated, participating interest, and naming us as operator. We are having ongoing farm-out discussions with Levene HydroCarbon Limited. Under the farm-out terms, Levene will potentially cover all or substantially all of VAALCO’s those costs to drill an exploratory well on Block P. Given the current pricing environment, we are evaluating the timing and budgeting for the development and exploration activities under a development and production area in Block P, including the approval of a development and production plan. The production sharing contract for Block P provides for a development and production period of 25 years from the date of approval of a development and production plan. We are optimistic that we will finalize the agreements with Levene and prepare for a drilling campaign that will commence in the next couple of years with minimal financial exposure to VAALCO. In summary, we are committed to maintaining business continuity. This is a challenging time in the energy industry, but we believe that we are well positioned with a strong debt-free balance sheet, $45 million in cash and a stable production base that is free cash flow positive at current prices. We believe these are advantage advantages for VAALCO and help provide stability in the near term and flexibility for the future. With that, I will turn the call over to Liz. Liz Prochnow Thank you, Cary. And good morning, everyone. Our second quarter 2020 net income of $0.6 million are a $0.01 per share reflected the impact of substantially lower realized crude oil prices, which was largely offset by higher sales volumes as a result of having four listings during the quarter. Earnings were also impacted by a deferred tax benefit, a $3.4 million. Adjusted net income, which excludes unrealized gains and losses on derivatives, deferred income tax and other operating expense was $5.3 million or $0.9 per share for the quarter. In addition to the impact of lower crude oil prices and higher sales signs volumes just mentioned, adjusted net income included realized gains at $6.5 million from the final settlement on our mature derivative contracts. Adjusted EBITDAX was $10.1 million in first quarter, which was lower than the same period in the prior year, primarily due to the lower realized crude oil prices. The impact of the lower crude oil price was partially offset by higher sales volumes, as well as higher realized gains on derivatives. Adjusted EBITDAX was higher than the first quarter of 2020, also primarily due to higher realized gains on derivatives. With respect to revenues, the lower realized crude oil prices between the first and second quarters at 2020 was largely offset by the impact of the higher sales volumes in the second quarter versus the first quarter Production for the second quarter at 5,410 net barrels of oil per day increased 48% from the second quarter of 2019, and 9% from the first quarter of 2020 due to the impact of the new wells coming online in late 2019 and early 2020 from our successful drilling and workover program. Sales volumes in the first and second quarters of 2020 were not closely correlated with production volumes because the 85,000 barrel lifting that was scheduled for late March 2020 was delayed until April 1, 2020 due to poor weather conditions. As a result, we had four lifting in the second quarter of 2020 totaling 631,000 barrels compared with two lifting’s totaling 294,000 barrels in the first quarter of 2020. In addition, volumes are available to lift increased in the second quarter of 2020 due to the higher production rate from the new wells. Our crude oil price realization fell sharply in the second quarter and 59% lower than the same period in 2019 and 52% lower than the first quarter of this year. Our derivative contracts were particularly valuable for us this past quarter, as they generated over $6.5 million in cash settlements. As of June 30, 2020 we don't have any derivative contracts in play, but we will continue to assess our needs to mitigate price risk and protect cash flow in the future. Turning to expenses. Total production expense excluding workovers for the second quarter of 2020 was $12.2 million or $19.31 per net barrel of oil sales. Total production expense excluding workovers was higher than either that for the second quarter of 2019 or the first quarter of 2020 as a result of the higher sales volumes. No workovers were performed during the quarter, and we don't anticipate any for the balance of 2020. While production expense included approximately 0.8 million in additional costs related to measures taken to response to the pandemic. We have been able to offset these increases through serious cost cutting measures as Kerry mentioned. On a per barrel basis at $19.31, we were below our guidance range for the quarter of $20 to $24 per net barrel. Our per barrel cost was less than that in the prior quarters due to the increase in production volumes from our successful drilling program, and the fact that about 90% of our production costs are fixed and don't rise with higher volumes. For the full-year 2020 we are tightening the range of our production expense excluding workovers to $37 million to $39 million. But because of the strong production performance, we are lowering our per barrel cost range to between $20 and $22 per net barrel of sale. For the third quarter of 2020, we expect our cost to be between $9 million and $10 million or $20 to $24 per net barrel sales, while lower crude oil prices has certainly had an effect on our financial results. From an operational standpoint, we have not been materially impacted by the worldwide COVID-19 pandemic. Our guidance excludes any potential future impacts that currently being experienced. And assumes that the OPEC mandate to curtail production is not increased or extended beyond September 20, 2020. DD&A for the second quarter of 2020 was $2.8 million or $4.44 per net barrel of oil sales, which was below the midpoint of our per barrel guidance range. The cost per barrel declined compared to the second quarter of 2019 and the first quarter of 2020 because of the reduction in depletable costs as a result of the impairment charge that was recorded in the first quarter of 2020 due to lower oil prices. We expect our DD&A to continue to be between $4 and $5 per net barrel for sales for the balance of the year. General and administrative expense for the second quarter 2020, excluding non-cash stock compensation expense was $2.3 million. The G&A decreased from both the second quarter of 2019 and the first quarter 2020 was primarily the result of lower professional fees, travel expenses and accounting and audit fees. For the full year 2020, we continue to forecast our cash G&A to be between $10 million and $12 million. Non-cash stock based compensation expense with $0.7 million during the three months ended June 30, 2020 substantially all of which is due to the change in the SARs liability as a result of changes in the company's stock price between March 31st and June 30th. For both the second quarter of 2019 and the first quarter of 2020, our stock price decrease, which resulted in benefit from changes in the SARs liability during those periods. Turning now to taxes. Second quarter 2020 income tax was a net benefit of $2.2 million. This was comprised of a $3.4 million deferred tax benefit and a current tax expense of $1.2 million. Foreign income taxes are attributable to Gabon and are settled by the government taking their in-kind. Current income tax expense of $1.2 million included a $0.9 million favorable oil price adjustment as a result of the change in value of the government's allocation between the time it was produced and the time it was taken in-kind. After excluding this impact, current income taxes were $2.1 million for the period. The deferred income tax benefit included a $4.1 million benefit to decrease valuation allowances on U.S. and Gabonese deferred tax assets. As detailed on Slide 26 in the presentation deck posted this morning on our website, we currently estimate the VAALCO’s operational breakeven in 2020 will be approximately $26.5 per net barrel of oil sales, and our free cash flow breakeven price will be approximately $35.50 per net barrel of oil sales. Keep in mind that our realized prices are benchmarked to crude oil prices. These breakeven prices have gone down this year due to higher production levels as well as lower costs. These estimates do not include any impact from hedges. In general terms, we expect that each $5 increase and realize oil prices increases our annual adjusted EBITDAX by approximately $8.5 million. This clearly shows our strong leverage to higher oil prices. As mentioned earlier, our guidance exclude any potential impacts not currently being experienced as a result of the COVID-19 pandemic. At June 30, 2020 we had an unrestricted cash balance of $44.8 million, which included $9.3 million of cash attributable to non-operating joint venture owner advances. This does not include an additional $13.4 million in short-term and long-term restricted cash, which is primarily related to deposits in Gabon for feature abandonment costs. Despite the challenges of lower prices, adjusted working capital at June 30, 2020 remain very strong and was substantially unchanged at $24.1 million compared to $25.8 million as of March 31st. We have fully funded our 2019/2020 drilling program at Etame from cash on hand and cash flow from operations, so those costs are behind us now. In the second quarter of 2020 net capital expenditures totaled $1.2 million on an accrual basis related to 2020. As Cary discussed, we have ceased or defer discretionary capital spending, and there are no remaining material non-discretionary capital expenditures for the balance of the year. Any capital expenditures made during the remainder of 2020 are expected to be funded by cash on hand and cash flow from operations. We intends to manage any future capital expenditure levels in view with existing and expected pricing environment. As has been the case since the second quarter of 2018, we’re carrying no debt. With this, I will now turn the call back over to Cary.

Thanks, Liz. While the current pricing environment remains volatile, it has improved from the lows we saw in April 2020 and we believe that the current crisis will enable us to generate positive cash flow at current production levels. Over the past several years, we have worked diligently to build a solid foundation for the future. We've taken action to strengthen VAALCO operationally and financially, including eliminating all debt and growing our production base, which will allow us to better navigate cyclical energy markets and leave us uniquely placed to consider growth opportunities. VAALCO does not have any material non-discretionary capital expenditure requirements on the near-term – on the near-term horizon, allowing us to focus on cash flow generation while preparing for the right market conditions to begin planning the next drilling campaign at Etame. VAALCO has a strong producing asset in Gabon with significant upside. We hoped to repeat the success of the 2019/2020 drilling program and continue adding reserves and production through the life of our account license in Gabon. With a debt free balance sheet, approximately $45 million in cash on hand at June 30, and a strong asset base at a time that is generating free cash flow at today's pricing, we have positioned VAALCO to weather near-term uncertainties. We expect that 2020 will continue to be a challenging year for our industry, but we are carefully managing our business with a focus on protecting our balance sheet and optimizing cash flow. Additionally, we will continue to evaluate opportunities that are consistent with our inorganic growth strategy, and we believe that we are well positioned to deliver long term growth in line with our strategic objectives. Before closing our call, I would like to welcome three new members, Cathy Stubbs, George Maxwell, and Bradley Radoff to our Board of Directors. We believe there many years of experience in the energy industry will be very valuable for us as we move forward with our plans to position VAALCO for continued success. Thank you. And with that operator, we are ready to take questions,

[Operator Instructions] And our first question today comes from Bill Dezellem from Tieton Capital. Please go ahead with your question.

Thank you. I'd like to actually start with your next drilling campaign with the current oil prices, how are you thinking about that relative to the way you would have thought about your drilling campaign? Had Brent back stayed when it was $60?

Well, okay. So, good to hear from you Bill. So your question is how are we thinking about our next drilling campaign in light of today's prices versus historically when prices were $60 or higher? Did I hear your question correctly?

That's correct, Cary.

Okay. Right, right. So we've run through the economics on our – on all the wells in our portfolio. And we would like to see – well the wells and the investments are economic in, at with lower prices in the low-forties. And so, right now it looks like the drilling wells would be economic, but what we want to see is not just prices reached the lower forties. We want to see stability in oil prices, and so that that's our thinking is. Well, it makes sense probably to drill these wells, if we see oil prices stabilizing in the lower forties and growing over time,

And with what you know today, when are you thinking that you may begin the next drilling campaign?

Well, we are – that's a discussion underway, internally in VAALCO and with our partners. And we cannot, logistically we can't start a drilling campaign immediately. It takes time to go out and find a drilling rig and purchase all of the equipment we would need for drilling campaign. So it's 12 to 18 months out at best, but we are talking to our partners about, when is the right time to start making these early investments ahead of a drilling campaign, again, which includes equipment that we need where there's long lead times for manufacturing. And then again, finding a drilling rig. So we're talking to our partners about what is the right time to start that process.

Great. Thank you. And then when was the last time that VAALCO was impacted by OPEC production cuts?

To my knowledge VAALCO has never been impacted by OPEC production cuts. In a couple of years ago, Gabon rejoined OPEC as they had left, and then a couple of years ago they rejoined and we were not impacted. In 2018, when OPEC was forcing some production cuts, it did not impact VAALCO at that point, and so this is really the first time that we've actually curtailed production in order to allow Gabon to meet their OPEC quota.

Absolutely. And then lastly, would you please talk through your view of your acquisition pipeline and how those opportunities are looking today relative to how they may have – how you may have viewed them in the past?

Well, a couple of things, the – I would say the pipeline is more active than we've seen in the past, which is obviously very positive for us. So we are looking at opportunities that fit us strategically. We do screen the opportunities. We look for opportunities that fit us strategically. And so I think there's a couple of things happening. Number one, it's our reputation as an operator. We've demonstrated, we can execute a drilling program for example on-time on-budget we've positioned ourselves well to whether through the current downturn in prices. And so we're actually an attractive buyer, I think, and I think that has helped generate some or increase the pipeline, I should say of opportunities that we're seeing. And then second, we are seeing companies that are rationalizing their portfolios in West Africa and choosing to divest of non-core assets. And that would fit us very well, assets that might not make sense for a large company, the assets are producing, they might have some development opportunities, but it just doesn't fit a large company, but that fits us very well. And so we are seeing some of those opportunities come our way. So I say the – in terms of the acquisition pipeline, it's as good – it's much better than it was before for those reasons.

In which you said that some of these opportunities would come to fruition and/or closure, earning you would either write a check or pass on those assets by the end of the year, or just for COVID and other reasons would discussions be slower than that?

It could happen by the end of the year. I'm not, I have nothing to announce right now, but I think that the industry has learned to work through and work together in spite of the challenges that we faced with the pandemic. So something could happen this year, I'm not – I'm not saying, Bill, that there's anything to announce, but yes, there's still time for something to happen this year.

Great. Thank you.

Okay. Thank you, Bill.

And our next question comes from Charlie Sharp from Canaccord. Please go ahead with your question.

Yes. Thank you very much for taking my question. I think the previous caller asked most of the, sort of big picture questions I would have. Just one detail, if I may. The listings that you made in Q2, the four listings, did you notice I'm sure you did is there was. But was there a change in the differential to Brent at those particularly low oil prices that were around in sort of April, May?

Yep. I'll take that, Charlie. The April 1st lifting was done by the government. So they might have a differential of grant because they value that at the TCO price, which is there in Gabon probably a slight change there. For the other lifting’s, those are going to be exactly the same differential of Brent because – because of the way our current lifting contract works.

Okay. Thank you.

And our next question comes from Jamie Wilen with Wilen Management. Please go ahead with your question.

Hi guys. First on the timing for the FPSO redo, is that related to the OPEC curtailment or is this coincidental?

Okay. And Jamie, good to hear from you. And so you're asking about the timing of the full field shut down for maintenance including the FPSO. Is that correct? And does it relate into the OPEC curtailment? The timing of the shutdown is late September, and the OPEC curtailment will lift, we hope by the end of September, but yes, the shutdown was included as part of our contribution to the reduction in our production volumes to help this Gabon meet their production quotas. But it was really just coincidental. But anyway, yes, but the timing of the shutdown is late September and it will help contribute to the curtailed production.

Okay. In terms of the $100,000 you spent on the COVID cost during the quarters, is that an ongoing or a onetime shot?

No, it's ongoing and we're finding ways to reduce that. And so those, the extra costs that we're burdened with because of the COVID-19 pandemic are related to the quarantines and the medical screening that I've talked about, where – when people – when our employees are headed off shore, we have to put them in quarantine for two weeks ahead of their offshore trip. And so we have to pay for housing for two weeks, and then we paid for the medical services to monitor them. And there's additional salaries that are paid. So those are the additional costs. But we're finding ways to reduce that 14-day period. Well, it was originally 14-day quarantine we think we've gotten it down to maybe a seven-day quarantine. So anyway, those costs will be ongoing, but we're looking for ways to reduce those.

One of your partners in Gabon is divesting some of their assets in the territory. Can you tell us what that means for us and other opportunities for us to purchase theirs? And have you had discussions with them?

Well, I cannot talk about any negotiations until we have something to announce. And so you are right, Sasol has announced that they are selling their upstream operations in West Africa. And presumably that will include Sasol’s interest in Etame. And so what I will say is of course, we are very pleased with the Etame assets. And if we – if possible, we would talk to Sasol about buying their interest, but of course at the right price. So, we're very happy with the Etame asset. We would consider buying more again at the right price. But I can't speak to any ongoing negotiations.

Okay. And in Equatorial Guinea, what is the long-term holdup for getting – moving from a memorandum of understanding to a final agreement? What is the process? It seems like everything's ready to go and you can straight into the terms? And then the second part of that is you were talking about a multi-year point in time before we began the drilling program, have we selected territories? And is there a price point at which that the oil prices would have to stabilize for you to being that process, once obviously all agreements are reached?

Okay, let me talk about the agreements that we're negotiating. And so the process we're going through is Levene and their technical team are conducting due diligence on our technical work. So all of our mapping and our cost estimates and so that process is ongoing. And in parallel, we're negotiating with their commercial people around the farm-out agreement. And so there's key terms in the farm-out agreement that need to be negotiated. And so that process is moving along not as quickly as I had hoped, but it is still moving along. And in terms of predicting when we will finalize agreements, that's very difficult for me to estimate. But it is – we are in progress and it is a high priority for us. So we're pushing this along as quickly as we can. And so those, I will report that the discussions are ongoing, the negotiations are ongoing, it's a high priority for us. I can't predict really when we will finalize those agreements. But in terms of what oil price is required to justify exploration on Block P, for Block P again, it's exploration, and then hopefully a combined development with the discovery that's already on the block Venus. And that will take several years until first production. And so we have to take a view on long-term oil pricing, not near turmoil pricing. And right now it makes sense, I would think that if there is a negative view on long-term oil pricing, when we make a decision to drill a well saying in 12 months, 18 months, that's the only way we would not make the decision, but I can't envision that the long-term view would be so negative that we wouldn't drill an exploration well.

Okay. Thanks for your excellent progress on managing the company to [indiscernible] our future growth. Thank you.

Alright, thank you, Jamie.

[Operator Instructions] Our next question comes from [indiscernible] from RBC. Please go ahead with your question.

Yes, hi, thanks. My question is obviously we're in a good position from the perspective that we don't have any debt right now. But to the extent that a couple of the things you are working on, either as it relates to an acquisition or a discretionary drilling campaign of whatever magnitude it may be. To the extent that that capital is going to be required, can you speak a little bit to some of the funding mechanisms to get that done at this time? Thanks.

Sure, sure. So let me take that in pieces. For the organic growth that we're targeting from Etame and drilling wells at Etame, we believe we can fund the drilling from cash on hand or cash from operations. So the only extra funding or external funding we might require is if we do – is if we execute on an acquisition. And so not only the purchase price, but potentially these acquisitions will require capital or drilling after we close the transaction. And so we, of course, look at what cash we have available to put towards an acquisition. And then we are in touch with the debt markets and looking at what the debt would cost. And then the other tool we have is of course equity. But I think I would – we want to raise funds in a way that makes sense. But anyway, we're considering for an acquisition using some of our cash on hand debt at a reasonable cost and then if we need to, possibly raising equity.

Okay. I mean, so obviously all avenues are open, but at this time you are sort of – I mean, I guess it depends on the acquisition. But you are not leaning one way or another towards a particular funding mechanism that you think is attractive from a general perspective, versus what else is available out there.

Right, no we're not necessarily leaning one way or the other. We're looking, I think, I would rank things in the order that I gave you for an acquisition. First we'll use cash on hand, but preserving of cash to fund our investments at Etame. And then second is debt. And then third is raising equity. But we're not leading, any one way. I think that's a fair statement.

Okay. Thank you.

And ladies and gentlemen at this time I’m showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

All right, well, I would like to thank everyone for participating in our call. And we look forward to speaking with you next quarter. Goodbye.

And ladies and gentlemen, with that, we'll conclude today's conference call. Thank you for attending. You may now disconnect your lines.