Good morning and thank you for joining us for RPC Inc’s Fourth Quarter and Year-End 2015 Financial Earnings Conference Call. Today’s call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Thank you, and good morning. Before we begin our call today, I want to remind you that in order to talk about our company, we’re going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I’d like to refer you to our press release issued today, along with our 2014 10-K and other public filings that outline those risks, all of which can be found on RPC’s website at www.rpc.net. In today’s earnings release and conference call, we’ll be referring to EBITDA, which is a non-GAAP measure of operating performance. RPC uses EBITDA as a measure of operating performance because it allows us to compare performance consistently over various time periods without regard to changes in our capital structure. We’re also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. Our press release today and our website provide a reconciliation of EBITDA to net income, which is the nearest GAAP financial measure. Please review that disclosure if you’re interested in seeing how we calculate it. If you have not received our press release for any reason, please visit our website at www.rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hubbell.

Thank you, Jim. This morning we issued our earnings press release for RPC’s fourth quarter of 2015. The devastating industry downturn that began at the end of 2014 continued through the fourth quarter of 2015. The U.S. domestic rig count declined 60% in 2015 and has declined an additional 9% since year end. The prices of oil and natural gas continued to decline by similar orders of magnitude. Our quarterly sequential revenue change was slightly better in the sequential rig count decline. In this environment of continued declining commodity prices, customers who are working or seeking lower completion costs, which greatly impacts already strained prices for our services. As we begin the first quarter of 2016, our customer plans continued to be revised, a situation, which gives us very limited short-term visibility for the demand of our services. Excuse me. I’m pleased to report at the end of 2015, RPC was debt free and made progress on several important initiatives. We refined our focus on equipment maintenance and refurbishment and are making operational efficiency improvements where possible. Our CFO, Ben Palmer, will now review our financial results in more detail after which I’ll have a few additional comments.

Thank you, Rick. The fourth quarter revenues decreased to $268.1 million compared to $632.2 million in the prior year. These lower revenues resulted from decreased activity levels and pricing. EBITDA for the fourth quarter decreased to $9 million compared to $187 million for the same period last year. Operating loss for the quarter was $57.4 million compared to an operating profit of a $125.6 million in the prior year. Our losses per share were $0.18 compared to diluted earnings per share of $0.36 in the prior year. Cost of revenues decreased from $390.5 million in the fourth quarter of the prior year to $217.4 million, due primarily to lower activity levels, supplier cost reductions, and lower labor cost, partially offset by higher service intensity. Cost of revenues as a percentage of revenues increased from 61.8% in the prior year to 81.1% in the fourth quarter of 2015. Selling, general and administrative expenses decreased from $50.4 million in the fourth quarter of the prior year to $36.6 million this year, due primarily to decreased employment costs. SG&A expenses as a percentage of revenue increased from 8% last year to 13.7% this year, this negative leverage resulting from lower revenues. Depreciation and amortization were $66.2 million during the fourth quarter of 2015, an increase of 7.4% compared to $61.6 million in the prior year. Depreciation and amortization increased due to assets placed in service over the last year. Net loss on disposition of assets was $5.3 million in the fourth quarter of 2015 compared to $4.2 million during the fourth quarter of 2014. Our Technical Services segment revenues for the quarter decreased 57.8% compared to the fourth quarter of the prior year. Operating loss was $45.4 million compared to an operating profit of $122.5 million in the prior year. Revenues and operating…

Thanks, Ben. During the quarter, we continue to focus on reducing costs, most notably in the 2015 RPC and 2015 RPC reduced its headcount 32%. While we constantly monitor our business and cost structure to ensure they are appropriately scaled, we stand ready to make additional actions if the industry conditions deteriorate even further. The strength of RPC’s balance sheet provides us with the ability to survive this downturn and maintain our equipment to our high standards. All those – this is certainly one of the toughest down cycles ever, RPC’s management has the experience to position the company to drive when market conditions improve. As we have said before, these are difficult times and their impact on RPC and its employees has been severe. We appreciate all of our employees hard work, contributions, and sacrifice. I’d like to thank you for joining us for the call this morning. And at this time, we’ll open up the lines for your questions.

Thank you. [Operator instructions] We’ll go first to Ole Slorer of Morgan Stanley.

Yes. Thank you very much, and yes, must be nice to be debt free in this environment that’s for sure.

Yes, it is Ole, that’s just pretty – little better.

Rick, I know just a comment in the press release, we’re assessing other opportunities to utilize sort of balance sheet. Could you expand a little bit about what do you mean by that?

No, just the fact that we have the ability to be able to do that. We’ve not identified anything and there is no active discussions about anything. But we remain open to any possibilities and with the balance sheet, there are – there could be several possibilities.

Yes, I would imagine. Could you help us a little bit with the operating environment as we enter 2016, I realize that making forecasts at the moment is a pretty pointless exercise. But how is your business and industry trending in the first quarter compared to the average of the fourth quarter, and with respect to prices and volumes and what do you think the trajectory will be through this quarter?

I would characterize it basically that I think fourth quarter was maybe slightly better than we were expecting end of the holidays, didn’t impact us as far as much. I think we were have been for sometime expecting the first quarter would be more difficult than the fourth quarter, and I believe it will be. We’re not seeing anything disastrous, but we did as – it is a bit more difficult. And that is not unlike a normal seasonal period for the business that people get off to a slow start at the beginning of the year and there’s also probably other factors impacting that at this point. So – but you’re right. In terms of visibility, we commented on that, it’s very difficult at this point in time. So we’re just having to watch the business day-to-today, and just like we said in our comments watch our cost structure in the business and adjust as we go along. But we clearly want to try to take advantage of our balance sheet whether that’s transactions or whether that’s just positioning ourselves again for the eventual upturn. So, but the trends, yes, very difficult to see any clear path forward at this point. Jim, any – anything to add…

If your customers are asking you to help them save the costs at this point, is there anything more you can do looking away from this pure pricing. Is there anything you can help them whether in terms of reorganizing your business or their business, or is that more or less all taken out at this point?

Ole, this is Jim. The one thing that has happened and maybe able to continue to happen is changing job designs. Customers have come to us and to talk about price reductions, we turn their conversation as quickly as we can to cost reductions and talk about job designs. So part of that is very doable with different proppants and different kinds of job designs. What we always seek or what we always seek, however, is more efficiency, and at lower activity levels, that’s very hard to accomplish, isn’t it? So if a customer has a small number of wells, it’s very hard for them to promise us or for us to think about doing a lot of things efficiently and therefore leveraging fixed costs. So the low activity levels now make those discussions increasingly difficult. So that’s a bad situation.

Understood. Thank you very much. I’ll hand it back.

Thank you.

Okay. Thanks, Ole.

Thank you. We’ll go next to Jim Wicklund of Credit Suisse.

Well, Ole asked all the good questions. I had underlined the same one, I guess, use your balance sheet. I’ll get you back, Ole. I guess, guys, this is an opportunity for introspection as well and we’re all thinking about what the industry is going to look like coming out of this recession? And people keep talking about how oil companies were changing their behavior and letting you help them with completion designs et cetera. Where do you think that an a Cudd should go or should be? What should be different in three years? And how Cudd approaches to market, RPC approaches to market? Then just keeping your current equipment fleet ready to go back and do the same thing. What else do you need or should you have or can you be able to do Schlumberger on this gig of more and more people at the well site? What’s RPC’s strategic vision for the future? And not that there’s anything wrong with waiting for things to come back, but you’ve got to look somewhat different right? How should that look?

Jim, we expected erudite and farsighted questions from you and have not been disappointed, that’s a great question, hard to know in this environment. One thing that we’ve harped on all of 2015 is increasing service intensity. And there’s some reasons for that, some relating to the current market, some relating though to better technology, which allows people to see better parts of the rock, and that allows people to space fracks differently, concentrate them more closely, and just a financial calculation to put more profit in the track. So we’re certainly looking at and would like to participate in the technology that helps customers do that. That would be something that could offer us a competitive advantage, if we’re able to do that, not only by just offering the service, but having it as part of a bigger package. That’s one thing that we’re looking at right now.

Yes, I agree that Jim was spot on. I think we – there are some things we’re looking at is, will it be transformative. The things that we’re looking at right now, I think, it certainly will be of a benefit. But if you would ask us three years from now, if we were to accomplish, those things would make us look completely different, I don’t know that it would. But it’s…

No, they wouldn’t be – it wouldn’t be completely different. But like Ole’s question, market expectation is that, you and other people, the decent balance sheet would just go by more pressure pumping assets, and you’ll get bigger. But I’m just not sure that bigger is all and just doing one thing is always not much better?

That’s right.

Okay. My follow-up, if I could. I appreciate, Ben, your comments on the working capital increase. But how, I mean, other than sending a widow out with a bunch of guns, everybody else is suffering through slower and slower pay customers. How did you guys do that? I mean, there’s got to be some strategy other than guys who just turned out everybody pay it on time?

Well, I think, it gets back a lot of the legacy things. I mean, we do have a credit process that we followed for years. And in the current environment, we certainly have adjusted that some and we’ll continue to review it and adjust it. So I think it starts there. I think it’s no good customer relationships and good customers. I think it’s trying to focus on billing and billing accuracy. We’ve had – we had some struggles, as everyone does. A lot of customer is trying go to EDI billing, which they aren’t always as helpful as we’d like them to be helping us get the bills into their system, so that they can be paid. So we had to spend a lot of time focusing on that. And I think a lot of it was just hard work and focus. We just said, hey, this is key. We’re going to pay our debt down. And one of the easiest ways to do that is to get our working capital down and AR was certainly a target for that. And I’m pleased to report that, yes, our DSO was actually lower today than it was a year ago. So that’s a testament not only the revenues come down, we collected our AR, but we also reduced our DSO.

If we concentrate on getting our billing out quicker after the job, we say…

Okay. But whatever you’re doing, it’s working, so keep it up. Okay, guys, thanks much.

Thanks, Jim. Thank you.

We’ll go next to Waqar Syed of Goldman Sachs.

Thank you very much. I didn’t get the CapEx number for 2016. Could you kind of repeat that?

Yes, it was – we said $60 million, and we believe at this point that would be more kind of back ended. So obviously there’s a lot of control over that number, but that’s what we’re kind of seeing right now, so obviously a very low number.

Okay, great. And secondly, you had some asset sales, could you provide us some color on what those were and what it – how much cash did you receive?

Not really, I think we had losses on disposition, so that was really more some write-offs or equipment that failed before the end of its depreciable life, that’s really what that was. We didn’t generate any appreciable amount of cash from selling the assets.

Okay. And then in Technical Services, your revenues were down 7.8%, so much less than the decline in rig count. Did your job – number of jobs that you performed also fell less than the rig count, or was it revenue per job actually picked up some because of rising service intensity?

It was less so service intensity on a sequential basis.

Yes, our service intensity did increase, Waqar, but not by a lot. So it was more job count that was – that declined by less than the rig count, that was the metric that drove that during the quarter.

Okay, okay, great. And then it also voluntarily you’ve reduced your borrowing capacity. What was the rationale there?

Just saved some money on loan fees.

And how, yes.

We can tell you that…

Does that affect your ability to make acquisitions or?

In and of itself, yes, but we feel that if there was an opportunity before us, we don’t do, we would have any trouble going borrowing.

Yes, we can go back up just as quickly as we went down.

Okay, that makes sense. And then could you provide us with some the percentage breakdown of the different business lines within that Technical Services?

Sure, Waqar, this is Jim, happy to do that. So what I’m going to give you is, percentages of consolidated RPC revenue for the fourth quarter of our major service lines that we usually discuss. So the first is pressure pumping, which was 54.6%. The second was Thru Tubing Solutions at 18.6% of consolidated revenues. Number three was coiled tubing, which was 8.3% of consolidated revenues for the quarter. Number four was our nitrogen service line, which was 3.7% consolidated revenues for the quarter. And the last one that we discussed in call separately was rental tools that was 3.2% of consolidated revenues for the fourth quarter.

Okay, great. Thank you very much. Appreciate the color.

Sure, Waqar.

Thank you. We’ll take our next question from Chase Mulvehill of SunTrust.

Hey, good morning, folks.

Hey, good morning.

Hey, Chase.

See, so I guess the first question, when you’re out in the market, you lose jobs. In general, what type of service companies do you lose work to, one or two you’re competing with mostly in the market? Is it smaller players, larger players, midsize players?

The answer is, yes, but it’s a smaller number of people. I mean, when we were doing our fourth quarter reviews recently, we heard about losing out on pricing to those providers who were bigger than us. And we also continue to see smaller people who are financially stressed, who are working to make $1 of EBITDA, because that’s what the banks are looking for. So we’ve actually seen it, we continue to see it from both the larger than the smaller people. I would say that pricing pressure from the much larger people has probably abated. We’ve also seen the bids coming in a little more tightly spaced than they have been. So those are, I guess, you would call them positives, but it’s still a very bleak landscape when it comes to pricing and oversupply in the competitive nature where we’re right now.

And so when you lose share from the large guys, are you seeing that they’re bundling more completion services together, or is it just absolute price?

We are not seeing the bundling at this point.

Okay, all right. And so I’m going to attempt to try to get some color around 1Q. Any color you can provide on 1Q revenues or EBITDA margins? I mean, obviously down, but would you expect it to be in line with the rig count, would you expect to outperform the rig count and then what about remaining positive EBITDA margins?

Yes, Chase. We anticipate positive EBITDA in the first quarter. Our – the customer plans we’ve heard out recently have been changing and many times been revised downward. A large E&P last night reported that their 2016 CapEx would be 60 – they were reducing that by 66% and made us a special situation. But we are currently as we speak being customer visions down, so customer visions lower. So that makes it difficult to predict. I would say that we will, I mean, our revenue probably is going to fall in line with the rig count whatever the sequential rig count decline is at this point.

Yes.

Which as Rick mentioned earlier is down 9% in the first three weeks of January.

All right.

We don’t know what the rest of the quarter holds, okay?

Right, okay. Last one, I’ll turn it back over and jump back in the queue. So for stage counts for you guys, what was stage countdown in the fourth quarter and for 2015?

I’m not sure I have that right in front of us, Chase.

It’s okay. I can circle back on that.

Okay. Yes, we may come back to you on that one.

Okay, okay. All right.

Your question.

Thank you. I will requeue.

Okay, thanks.

Thank you. We’ll go next to Marc Bianchi of Cowen.

Hey, good morning. I guess, just a follow-up on Chase’s comment or question around sort of the direction of margins into the first quarter. You had really impressive decrementals in the fourth quarter 5%, I think for Technical Services. Is there – can you talk to us about the pace of cost reductions that occurred maybe in the third quarter, in the fourth quarter that might have benefited you on a decremental basis in the fourth quarter? And then how do we think about that playing into the first quarter? Should be see an uptick in the decremental just because the benefit of cost is sort of fully absorbed?

Well, there’s a lot of calculus that goes into that. We clearly cost came down some third quarter, calls that come down some in the fourth quarter. We are not – at this level, we’re not currently looking at any significant additional decrease in costs unless we take specific action and that’s not planned at this very moment. We’re watching it very very closely. We’re certainly – we’re not going to – we will not stand by and incur negative cash flow for any sort of extended period of time. I think one of the opportunities to use our balance sheet is to make sure that we’re as staffed as we reasonably can be and still generating positive cash flow, because you can have all the equipment in the world, but if you don’t have the people to run it, you’re not going to be able to generate any revenue. So that’s one of our clear opportunities just to be quote unquote appropriately staffed, trying to generate cash, so that we’re ready to work immediately when things turn. So I think that’s one of the opportunities to strive for.

What level of quarterly revenue would you say that you’re currently staffed for, if you could be fully utilized with what your staffing is today? How much revenue do you think you’d be able to chase?

Well, we mentioned that 70%, about 70% of our hydraulic horsepower is currently staffed, that’s your comment relative to pressure pumping. Want to do, I guess, an extrapolation, but I’m not sure, I guess, maybe a reasonable question, but I’m not sure.

Yes.

We are not expecting to be fully utilized in the near-term with our equipment.

Sure, sure. Okay, maybe just one more as it relates to pricing, I know the general trend is of pricing heading lower. But I think there was some commentary during the fourth quarter perhaps from one of our competitors that there were some anecdotes of pricing increasing. Can you just talk to that? Have there been any green shoots that you’ve seen anywhere, or is that just sort of maybe some erroneous reporting that occurred?

Mark, this is Jim. I wouldn’t say that was erroneous. I would say that we just have not experienced any pricing increases. We have told customers that we’re not going to go any lower or to bring the equipment in, we’d have to do it at a higher price than we’re currently doing things. But that – there have been no actual financial results that would include our pricing for services.

Got it. Okay, thanks, Jim. I’ll turn it back.

All right. Thanks, Marc.

We’ll take our next question from Rob MacKenzie of IBERIA Capital.

Thanks, guys.

Thank you, Rob.

I guess, my question for you is, you’re probably the only service company. I know you’re the only service company that I follow that has not attempted to back out any unusual items from reported earnings. And I know there are costs associated with stacking equipment shutting down basis severing people. Have you attempted to quantify the margin impact that we might have seen here this year from that and or on the flip side when we start having – stop having severance costs, stop having $5.3 million a quarter and loss and disposition of assets, what were the positive impact of that be once the market starts to round the corner?

Yes, we’ve not carved those things out. We’ve not had in anyone quarter any significant items. For full-year 2015, I don’t really have that in front of me. I would say probably the number in the last couple of quarters, if one where it’s sort of a tight rope to walk. But there’s probably been $5 million to $10 million a quarter that we’ve recorded that might be considered unusual or out of the ordinary or whatever, but – so just really not that much to call a whole lot of attention to, but a relevant point that you asked.

Yes, Rob, when – in this environment, I’m not sure those items are unusual.

Well, that’s true.

Everyone is doing four quarters in a row, they become business as usual. So, it’s hard to say, and I know what you are thinking about is probably the future, and what might our income statement look like and you’ve got a – you need a base to forecast off of.

We’ve gone through for whatever this is worth. We sit here today and say, we don’t see anything else of any magnitude either that’s going to be anchored in the first quarter or going forward. But you always have to monitor and respond to what you see ahead of you. We have spent a lot of time in the last few months reviewing our fleets of equipment, making sure that we’re comfortable where they are? Where they’re going to be maintaining? Where they’re going to be staged? Again, how we’re staffed? What our strategies are in that regard, and we’re very comfortable with that. So obviously, we have reported any tremendous asset write-downs. So, we’re comfortable with where we are positioning right now, and as I said, we don’t see any large adjustments prospectively either.

Okay. So the loss and disposition of assets we’ve seen in the past couple of quarters, you don’t expect to recur here in the first or second quarter?

Well, we – if you look back several quarters, we generally do have loss on disposition due to components and so forth that’s available before the end of their depreciable life. So we have historically had some volume of that. But you’ve not seen in the last couple of quarters any tremendous amount of one-off asset write-offs because of the current environment.

Okay, that’s helpful. Jim, I wanted to come back to kind of the service intensity versus job count question a little bit, if I may.

Sure.

When I look at it on a year-over-year basis, revenue per rig in the U.S., I think, fourth quarter 2015 over fourth quarter 2014, you guys are up about 7% year-over-year. Halliburton actually comes out the exact same percentage up 7% for North America in terms of how they disclose. All that kind of 7% growth in revenue per rig for you, or however you want to look at. How would you say that that would have split on a year-over-year basis between service intensity versus job count?

It would all be service intensity, job count is down. So those kind of metrics, which thank you for pointing them out all relate to service intensity. And I will go back to an earlier question from, or I will work a little bit on earlier question from Chase at SunTrust. Our stage count during the fourth quarter sequentially increased a bit. It increased probably low to mid single-digits. Our service intensity and we measure that in terms of pounds of profit per stage not necessarily well, I know, some of our peers do it by well, but we turn that by pounds of proppant per frac stage increased as well. But by a smaller percentage in the fourth quarter, 1% or 2% compared to higher service intensity increases on a sequential basis in previous quarters. When we analyzed fourth quarter with volume at historically low levels, sometimes those questions – those – the answer to those questions is just a customer specific.

Right.

And we’ve had some good customers who were doing service intensive jobs designs and that’s what’s helping us. So it is and it’s – we’re trying to sort of quantify it last night. It’s – those kind of metrics when they are improving or increasing at RPC relate to service intensity.

Great. Thank you very much. I’ll turn it back.

Okay, Rob, thanks.

Thank you. We’ll take our next question from Michael LaMotte of Guggenheim.

Thanks. Good morning, guys.

Hey, Mike.

Just a few follow-ups, if I may. Can you help me reconcile 70% stacked equipment rate with headcount down 32%? It would seem to suggest that you’ve got some warm stacked capacity or at least the ability to put some equipment back to work relative quickly?

Sorry, I may – 70% of the equipment is staffed.

Oh, staffed. Okay, that makes a lot of sense, sorry.

Okay.

Thank you for clarifying that.

Thank you for letting us, sorry, it wasn’t clear. That’s the most important.

Okay. Yes muffled phone speaker here, at least, that’s what I’m going to blame it on. The job count question, I’m curious if customers are focusing at all on vendor liquidity whether the health of your competitors is actually translating into more work for you all?

Maybe, what we’ve heard anecdotally is that customers are looking at the length of their project. And if the length of a project extends beyond the expected solvency of the service provider, they will look at somebody who they think is stronger financially. However, though that sounds favorable, everybody is doing such short-term planning and short-term things right now that it’s hard to say that that’s translating into maybe better activity, but it’s certainly something that we’ve heard. So, again, that if duration of their project is long enough, they will use that as an items for consideration.

And we try to point it out as often as we can.

Any competitive advantage you can leverage, right?

Exactly.

Okay. And then if I look at gross margin over the last three quarters from Q1 of 2015 to 4Q of 2015, revenues came down almost 35%. But your gross margin as it’s been pointed out a few times on the call is remarkably flat. Can you try to break down a little bit just perhaps component wise the impact of deflation and things like sand your changes in cost structure. The – any pushback that you were able to get versus market pricing because of your service quality and anything else that might be contributing to that?

That is a great question. I’d love to have a bridge between one gross margin and the other, because as everybody knows pricing is down a lot.

Yes.

So we’ve certainly had raw materials cost decreases. We have credibly laid-off people. And then for the people who remain, we’ve done variable costs – variable compensation cost reductions as well. So those are the items driving that. We’ve really tried to utilize equipment as prudently as possible, meaning that, I mean, we want to keep things utilized and when we stack things, when we have to and I think long-term it helps us. It is very – it’s hard to segregate that.

Well, I can certainly say philosophically it looks like for an industry that is known to have high degree of fixed costs, it’s almost as if you are running the business as if there’s no such thing as fixed cost.

Yes, I think it just indicates I was about to say that, I think, our people have done a very good job of stair stepping the employment down as revenue was staging down. As I said earlier, just for the sake of our employees, but also I think the opportunity for the company is, I think as long as we can keep our – an amount of our equipment busy with our people and we can at least generate a little bit of cash flow better off we are going to be in the long run. We could go right now, go out and reduce our headcount significantly, immediately further. But I’m not sure that’s prudent. But, again, we’re not going to sustain negative cash flows for any extended period of time. So we’re trying to hold on again for the sake of our employees, but also the sake of the business and let us capture the upside, when things to turn much as I feel.

Okay. And then, Ben, you’ve talked about receivables and collections in the press release there was a broader comment about improving business processes. I’m wondering, if beyond the collections process, if there are other anecdotes that you could provide in terms of opportunities that you all have taken to improve the structural costs in the business?

Well, improve the structural cost, I think, we constantly focus on all of our aspects of our costs, the direct costs, which are more of the people that are focused on providing the services primarily at the well site and then we have our overhead costs. And I think we’ve historically focused very much on trying to keep that is under control as possible, keep it minimized where we can. So in some respect there’s not huge amounts of opportunity there. There’s a certain amount of infrastructure you need in place to run the business. So what we really have been focused on and I want to continue to stay focused on during these times is to try to improve some of our processes like collections, but also some of our systems and other processes that will allow us when things do come back that we’re not trying to make improvements in the middle of when activity picks back up, number one. And number two, that it will allow us to leverage our existing infrastructure that much more. There are a number of different opportunities and we are going to and evaluating those and prioritizing those opportunities. But now, it’s a good time in my opinion for us to be focused on those things. While we can, this is a good environment to make changes, make improvements, and again set us up. So we can leverage our existing infrastructure as much as possible. We’ve done a good job of that over the years and now I think it is a good time to have a further improvement or be able to capture that benefit even more to make sure that we can add a lot of business activity levels without having to add tremendously to our fixed infrastructure and overhead.

Great, makes a lot of sense. Last one hopefully quick cleanup that DNA for 2016 is fourth quarter run rate reasonable enough estimate for 2016?

So, yes, it’s probably…

Yes, it’s going to fall – yes, going to fall a little bit more than that.

Yes.

Be a little bit higher than fourth quarter annualized?

No, lower.

Lower, lower. Okay, that’s lower, okay.

Yes, it’s correct.

All right. Thanks, guys. I’ll turn it back.

Okay, Mike, thanks.

Thank you. We’ll take our next question from Brian Uhlmer of JMP Securities.

Hey, good morning, guys.

Good morning. Hey, Brian.

Hey, I had a quick question. You mentioned that customers coming to you and you are talking about changing the job description or how the job gets done. Have you seen a systematic move away from white sand or brown sand, does that what you’re talking about, or can you clarify that a little bit more?

Brian, this is Jim. I wouldn’t call that – I wouldn’t call it systematic. I think our operations people have said that that is one thing that’s happening and we can see that in a numbers a little bit. My understanding not a technical person brown sand being more angular and less consistent grain sizes. Some people use it and they use it for a long time. They’re doing well with it and continue to. I don’t think that is a huge secular shift, if you will, things like that or what’s happening, but I don’t think that’s big.

Great, thanks. And following up on that and I hope the one day we’ll try to erudite with my questions, I strive for that?

If you know what it means, it’s a good first step.

Well, I had to pick on Jim and ask him what it meant, but now I’ve got it down. It is the proppant side of the business something that you guys will consider longer-term as something important to be important for you, for Cudd and for the company?

No. Well, Brian I know you’re slightly new to story although you were very experienced and do know as well. We actually are in the proppant business. We have a sand mine that provides some percentage, a small percentage with some of our natural sand needs, that’s up in Wisconsin. So we’re…

Okay. And the – I guess, I worded that poorly. Would you consider the brown sand mines that are going – that are closed down recently and expanding in the Texas market, since you’re so Permian since you have such a Permian focus?

That is a great question. That is now on the list of things I have to consider right now. So I would say probably not.

The reasonable question.

Yes, it’s a very reasonable question.

Yes, that’s a very brilliant question actually.

Yes, erudite one more. Well, I mean when I was out there in the middle of you once again with one of your guys you were talking about how great the transload facility is, some of the guys that you’re using. And so trying to figure out that’s a good use of capital to compete with those guys, or do you think that they’re doing as good as the job as you can do and your preference is to stay with using them as third parties?

Probably would stay with third parties. We’ve learned a lot being in the sand business. We’ve learned that logistics are such a huge deal. Now what you just said was that they’re good logistics in the area, so that’s true.

So, I guess, it is a very reasonable question, and we have confirmed that the sand business is just as or more cyclical than other aspects of all concerns...

Perfect. Good point. Unrelated follow up, you mentioned your PR comments lot of folks in the industry about capacity going away are being poorly stacked. You talk a lot about your stacking procedures. I was curious if you have – if you agree with those numbers if you have some internal expectations I’ve heard some of the small cap saying up to 7 million horsepower going away, Halliburton saying $4 million to $6 million, I’m curious what your thoughts are on that currently?

Yes, Brian, I think our estimates will fall right in there. We know a lot of the anecdotes and we’ve seen first and a lot of things that you’ve seen and our peers have seen. It’s somewhere in that range. The – we will not know the answer until the industry is called back to active service and we will only then really know how much equipment can’t work. You know how this equipment degrades when it sits around. Some of what we’ve alluded today has been a fleet assessment process, but we make darned certain that we’re maintaining our stacked equipment both in compliance with warranties. And so if they can come back to work right away, and we do know that a lot of our peers are more aggressive to capitalize aren’t able to do that. So is that 4 million hydraulic horsepower that needs to go to the boneyard, or it is 7 million, it’s some number like that. Again, we don’t know until the North American U.S. land market for hydraulic horsepower demands something like 14 million, that’s when we will know unfortunately.

Perfect. And a last one-line clean-up. You mentioned some severance expense kind of being layered and you don’t call it out one time, is there possibly a few million. Does that imply the G&A run rate for next year will be down, and I don’t think I heard you got it, but if I did, I apologize?

We didn’t guide it. I’m not expecting any significant change in SG&A currently.

Your Q4 is the current run rate. Perfect. Thank you. Turn over.

Right. Thanks, Brian.

We’ll go next to Scott Gruber of Citigroup.

Yes, good morning, gentlemen.

Hey, Scott.

Turning back to the strategy question, you’ve now got your frac fleet to over 900,000 horsepower. I’m curious about scale benefits in the industry. Have you realized those with the current size of the fleet, or there other additional benefits to extending the fleet further, as you think about leverage on your suppliers, infrastructure benefits, logistics benefits. Are there any additional benefits above and beyond just leveraging your overhead that you would gain from additional growth in frack?

Scott, this is Jim. And so another very reasonable question. Let me try to address this way. First of all of our 930,000 hydraulic horsepower, it has not all been fully utilized, because the 930,000 as a result of about 28% fleet expansion that, Scott, that where we started taking delivery in the third quarter of 2014. So we haven’t realized the scale benefits of the 930,000 yet. I think another answer to the question is that going back in history when the natural gas shale plays first kicked off eight or 10 years ago, that was one step up where scale was important and we needed to say 50,000 hydraulic horsepower instead of 20,000. So that was one step up. Then the next step up was in the most recent cycle, where logistics were so important and you needed a big logistical infrastructure to do anything. And so, if you have a good logistical infrastructure going, you need a good fleet, a big fleet to go along with it. Those are the two step ups. I – we don’t see, because the business does remain fragmented certainly and how the customers look at things. I don’t see us needing a 1.5 million hydraulic horse power to compete effectively in the next up cycle. And there may be another something else around the corner that tells you do need that or we don’t see it right now.

Got it. And then just you may have mentioned it earlier, I think, I missed it. You said 70% of your equipment is staffed, how much is working today?

Well, it’s staffed, but again not working every day. So that’s just an indication of what our capabilities are at the current time with staffing relative to the amount of horsepower we have available.

But it would maybe work for that 70% equipment that’s staffed.

I’m sorry, I didn’t – can you repeat that?

Just to clarify, just the 70% of the equipment that’s staffed and marketed today is just experiencing intermittent work. So it’s tough to quantify a proportion of your fleet that’s actually active today, we should just take the 70%?

Right, you’re correct, correct. That’s correct.

Got it. Okay, thanks.

Thank you.

Thanks, Scott.

Thank you. We’ll take our next question from Thomas Curran of FBR Capital Markets.

Good morning, guys.

Hey, Tom.

Very thorough Q&A thus far. Returning to the opening line of questioning between Ole and Jim, one of the main themes there, when it comes to the potential acquisitions, you might be interested in on the transformative side. Have you, at least, been able to identify potential prospects out there that you would be interested in irrespective of valuation or whether they might ultimately want to sell whether it’s rock diagnostics or some other form of technology. Have you, at least, been able to identify potential private companies of interest or when it comes to you might do it on the transformative front. Is it instead increasing looking as if that would have to be an organic undertaking possibly even involving a move towards R&D?

Yes, good question.

Yes, Tom, good question. And in one of our meetings with our clients over here in 2015 you articulated that pretty well. There is nothing pending at this point. We’re – we’ve talked to some people who have ideas that’s very best way to say it. So that would probably indicate that if we’re successful in an endeavor like that, it would probably be on an organic startup rather than a business combination of some sort and that’s just…

And the whole R&D question. We do have R&D currently nothing significant. But we had some very nice successes especially in certain particular areas of our business. But to get into a big R&D effort around fracturing that would take a lot of thought on our part. Especially in the current environment, we try to crank up a critical mass in that particular area would to James point, I mean, we love historically organic growth has worked very well for us. I’d almost believe that we probably have to kick start that would some sort of acquisition or some sort of intact team or whatever theme or group of people that had some knowledge that we could bring in, it would be difficult to start it from the ground floor, but again good question. And something that we’re thinking about and working more on than we have in the past and looking for opportunities. I can’t say that I have with me or at my desk a list of 10 private companies that we’re currently targeting. But we’re trying to identify and are always open being opportunistic when opportunities arise.

Okay. And did you have any kind of opportunity to explore relationship with energy recovery when it comes to accessing your – their VorTeq hydraulic pumping system. And are you aware of – so that’s your first question. And based on what you have learned about it what are your expectations for it and are you aware of any other similar competing technologies that are out there currently or might soon be hitting the commercial arena?

Tom, this is Jim. The quick answer to those questions is no. And what little we even claim to know about that company and its process some of our technical guys have talked to us about it. I think a lot of people were trying variations on that. The basic idea of keeping the abrasive stuff out of the iron or as long as you can. But I don’t have any specific knowledge that’s useful about how it’s going or what obstacles they might have faced and what the path forward is. There are lot of variations on trying to do that. I’m not saying that in a way to denigrate the effort what’s going on there with energy recovery, but it seems like a great concept to our technical guys kind of all on that.

Okay. Last one from me. Jim, when it comes to the various internal efficiency in cost savings initiatives that are underway. Do you have any metrics you are focusing on that you could share with us any kind of targets as we move to 2016 ideally that maybe could be translated into a so-called target for margin. Are you looking to be able to realize an additional 200 or 300 basis points of margin regardless of what happens with utilization in pricing through those initiatives?

Yes, I would say, no, we don’t have any particular targets., I think from an SG&A infrastructure, system, and support standpoint what we would have to do is to be able to again take a lot more revenue and add little additional infrastructure cost that’s what we hope to achieve. And our SG&A has been as low as, I think, it was 8%, that’s pretty good. I would like it, if we can keep it in the single digits and a quote unquote normal environment or normal point in the cycle, I think that’s pretty good. I think it drive it down a lot lower than that would be difficult, but certainly that will be what we will strive for, keep it as low as we can. And I think the way to do that is improve our processes and be able to leverage what we have when things come back. Some of the – and so when we talk about some of these operational improvements, it’s more obvious probably infrastructure and back office, but certainly from a direct and service delivery standpoint that’s something too that we are looking at. But again reasonable question, but we don’t really have a target right now especially for 2016., 2016 is very fluid, very hard so to predict whether that would show up anywhere at this point in time. But clearly continuous improvement is something that we strive for and we expect that as we always do seeking improvements and processes that flow through the gross margin and operating margin and so, we haven’t quantified anything yet at this point.

Yes, Tom, some key operating statistics might evolve like crew efficiency metrics things of that nature. But back to a point Ben made earlier, we’re working on these things right now, because activity levels are so low. Efficiency improvements won’t be realized or necessarily measureable until activity levels improve, so.

Yes, that makes perfect sense. And those are fair answers. I appreciate the responses, guys. I’ll turn it back.

Sure. All right, Tom. Good talking to you.

We’ll take our next question from John Daniel of Simmons & Company.

Hey, guys.

Hey, John.

Hey, Jim, first of all on the horsepower. Can you just clarify, how much of the horsepower today is idle?

30% is stacked roughly.

30%?

Yes.

Got it. All right. Thank you. Want to come back to some modeling questions. You noted that revenue for Q1 would likely track in line of the rig count. And I believe you cited the rig count being down 9% already this quarter? If you look at the quarter-over-quarter average, the rig count is actually tracking down closely to 17%, 18%. I’m just curious more comfortable with revenue being down 9% or more in that quarter-over-quarter number should be high teens?

Probably in the mid to high teens John, high teens now, I don’t know if any –anymore customers have announced 66% CapEx cuts during this call. But I think that mid teens sequential decline is probably more reasonable.

Okay. And hopefully we don’t get many 60% announcements. But I think most of us on the side of the phone call are looking at the E&P sector probably you’re seeing declines on average of 40% to 50% year-over-year in capital spending. If that’s right, would you expect your revenue in 2016 to be down similar to that?

That is one factor that drives revenue and clearly it’s the biggest one. But if that happens, there are going to be fewer pressure pumping service providers than there were a month ago. So we’ll have – we’ll get some market share gains. And it’s the catalyst of drilling in your core areas and doing more with less continues then we’ll get some service intensity increases. That does not translate into year-over-year revenue increase by any stretch of the imagination. But that would be sort out, but for maybe different reasons a repeat of 2015 where our revenue declined by slightly less than industry activity levels. So I think there is that major catalyst that you just cited in that specter of continued CapEx declines with a few offsets for RPC. And that harkens back to our strong balance sheet that Rick and Ben have been talking about and as service intensity increase.

Okay. Just one it might put you on the spot a bit. But everyone talks about the horsepower going away and there’s lots of different assets out there, and you actually have seen some. But when you see a lot of the frac companies individually about how much of their horsepower truly goes away, the number is seeing a bit lower. So, I guess, my first question to you, how much of your horsepower do you expect will go away this year?

It’s a number close to zero. We – and so we’re joining the rest of everybody else saying, the pressure pumping fleet is going to attrite but not ours.

Yes.

We will as we’re going through this fleet assessment, we’re finding some older pumps that we’re going to let go off, but it’s not, because the industry is depressed. It’s because they’re just too old and not worth fixing anymore, but that will be a minimal number.

That’s where we’ll 935,000 down to 930,000 that we’re talking about. And we do have a few pumps not a large number, but we do have a few that need to be that sort of have ticked over into needing a refurb. We wouldn’t want to send them out to a jobs. So we’re, again, we’re planning what’s the timing of trying to refurb those pumps, and we’re right. But we’re not at this point in time saying we’re going to rush out and spend the money to bring them up to speed, but we’re not retiring and we’re not cutting them up, we’re not certainly not selling them, that’s not a significant number either. It’s not a significant number that are uncapable of working.

Okay. And I know you guys enjoy a different position than a lot of your peers. But – okay, the next one I’ve got is of the 930,000 horsepower you’ve got right now, and you guys did have a pretty aggressive new build program over the last couple of years. How much of your horsepower is brand-new that has yet to ever be deployed that’s just sitting waiting for the cycle to turn? Do you have any of that yet left?

Yes, yes. I think it was 120,000, 105,000 or so.

Yes, 125,000 of hydraulic horsepower has never been put in the field.

Okay, got it. And then the last one, follow-up to Uhlmer’s questions on the sand stuff you mentioned sort of a preference to doing more with third parties. Do you see yourself ever divesting your sand business?

Ever.

I mean, is there still the benefit of being vertically integrated, how about that?

Yes.

There is the benefit?

Yes, it’s probably a philosophical question. The short answer is no. But because it does have strategic benefit during good times.

Good, okay. Fair enough. I’ll turn it back over. Thanks for your time.

Right John. Thanks.

Thank you.

Thank you. We’ll take our next question from Ken Sill of Seaport Global Securities.

Thanks for taking my question whether it’s erudite or not.

We’re never going to live that one.

Yes now it’s good. It was good. Not everybody will use the word like that on a call, I appreciate it. We’ve beaten a lot of things to death. [Multiple Speakers] One particular question. Schlumberger is making a big deal of their BroadBand, and yet I look out there, I guess, it’s just the concepts of the diverter chemicals. Is that a capability that you guys have? Are there diverter chemicals out there that do essentially the same thing you have access to?

Are you talking about the tertiary recovery stuff, Ken, are you talking about?

Well, they’re using it. I mean, the concept is you pump down in your fluid something that will expand and block off the zones that have hydrocarbons in them. So that your frac goes to zones that haven’t been accretive – that haven’t been successfully treated yet. I guess, that’s the concept. it’s fibrous material that’s attracted hydrocarbons. I know Bakers says they can do it. Halliburton says they can do it and Schlumberger has branded it with the broadband tag. So that gives a new job that the use have been re-completing existing wells?

Yes. The short answer is yes. Yes, we have that ability small now, but we do have the ability.

Yes, I’ll have to talk about that one more offline. It’s just interesting when something gets branded. I’m trying to figure out if other companies can do it. Another question has been asked is you have got 70% of your crew staffed, which is a very good distinction. Are those guys working half the time, 60% of the time? Any rough idea how utilized the existing crews are?

Yes, 40% to 50% is probably a pretty good number, Ken.

Okay. And then going back to pricing, what I’ve heard from people is that you and all the other larger pressure pumpers I’ve talked to said look we’re not going to take any more work for below cash margin, there is no reason to do that. So what I’m hearing is that for new work kind of what you’ve said is for us to do something new or to bring things out of stack, the price is going to be higher. So it’s not necessarily that pricing has gotten better, it’s just that people have reached the point of we’re just not going to do it anymore. Has that point of indifference to not doing the work changed or is it consistently still you are not going to do anything at below cash break-even?

The equation can be a little more difficult, I mean, if a customer gives you 10 opportunities and you do all the designs. And it turns out that one of them has to be at a loss, but the other ones are good, you are going to take them all right. But in the aggregate it’s a contributor. So we would not, in the aggregate peruse work that was at a loss. I mean, that’s where we’ve been that’s where we continue to be. We would like to think that every time we price a job and execute a job, it turns out exactly likely priced and designed it, that didn’t happen. So never say never from that perspective. But clearly that has been our strategy, it continues to be our strategy that we are not going work for negative cash intentionally or an extended period of time. And that’s our strategy, that’s our intention, and we’re sticking to that well at the current time, we’re achieving that.

Well, and I guess, I’m encouraged by the fact that you say the bids are clustering, so it seems like everybody is coming to the same point of okay, this is where – the range where we think we can work and why would we cut from year? Okay, well, that that pretty much covers what I had. You guys are in a great position. Enjoy that. I have, I mean, when and if everything ever turnaround, it’s going to be fun to see what the incremental margins are on the way up, but thanks for taking the call.

Yes, we look forward to that. Thanks, Ken.

Thank you. We’ll take our next question from Matt Marietta of Stevens Financial.

Hey, guys. Thanks for continuing the call here beyond an hour and taking questions. I was hoping to get D&A breakdowns by segment if possible, if you have that handy?

Oh, Matt, we do not have that handy right now. We’d be happy to get that to you, I just don’t have the schedule in front of me. We’ll get that to you today.

Okay, not a problem. And I guess, this line of questions has been beaten, but going back to M&A and growth prospects and the balance sheet, I mean, given we’re stuck here in this downturn. I guess, the issue that I have is does it really make sense to buy and grow equipment in a structurally different North America land market? And will you guys be willing to buy or build equipment – idle equipment while your fleet and the overall business isn’t fully utilized, or is this notion, kind of your thought process more of a potential diversification strategy. So I’m really trying to understand the logic there. I think most of your shareholders would agree that the balance sheet is the reason many of them really exist?

Yes, I – we work really hard, it was our goal. We worked really hard to pay our debt off and we got this cash balance. I can’t imagine why we would want to buy unstaffed or negative cash flowing equipment or a company at this point in time and blow it on any amount of debt. That just doesn’t make sense for us not making it – make sense for somebody else, but not to us. So I think, yes, if there were an opportunity, my guess is if you were to put probabilities on it, it would be for the diversification of some type certainly technology differentiation or expansion, but much more that and trying to go out and buy additional hydraulic horsepower.

Okay, thanks. And final one for me. I know this – we’ve also asked this question, but to get really precise here, do you know how much on the attrition subject, how much horsepower that you are aware of that for certain has been cut up and permanently impaired versus equipment where pumps’ engines have been removed and resold to private investors at auction and considered equipment that’s attrition? What’s the differentiation there and are you aware of a certain number of equipment that has been cut and permanently impaired?

Matt, we don’t have a good number on that. We know some specific things and then we hear other anecdotes, it’s probably not a number that’s worth repeating it. But the bigger factor – there’s an entire spectrum of what’s happened over the past 13 months from companies that were cut up and the trucks went somewhere else, completely out of the oil field, all the way to private equity funded companies that became insolvent and another private equity company came in, bought the assets, hired back old management, started again. But I think the most frequently recurring value is just an idle fleet that’s sitting in the yard and it had fluid ends taken off of it. And we just don’t know, we truly don’t know.

There is obviously a big auction coming up in – all over Texas and then principally in West Texas. And it wouldn’t be surprising to see this equipment find a new hands at a much lower cost basis, right?

Right, right.

Unstaffed.

Unstaffed. Yes, so that’s correct.

Okay. Thank you.

All right. Thanks, Matt.

Thank you. We’ll take our next question from Byron Pope of Tudor, Pickering, Holt.

Good morning, guys. Very quick question, which I think I know the answer to, but I’ll ask it anyway. Just thinking about your historical commitment to the basins in the plays which you operate in, and if I seem to recall, it seems like roughly two-thirds of your frac horsepower has been in the Permian and in the Eagle Ford. But for the other markets that you serve, I didn’t hear anything on this call that suggested you are thinking about retrenching from any of those smaller plays, whether it be East Texas, East Oklahoma, Appalachia, or the Bakken, you are still committed to staying in those plays and servicing those plays for the next sub cycle, is that fair?

We – there are location or two where we have scale substantially back and we probably need to be located in the different place. But at the current, we’re committed to continuing to operate in the long-term and all of the basins that have been active up to this point. So we have not permanently exit any particular basin that we’ve been active with – active in up to this point.

Okay. Thanks, guys.

Thank you. We’ll return to Chase Mulvehill of SunTrust.

Oh, well, thanks for extending the call. I’ll be quick. So just to kind of follow-up quickly on the sand question, do you have an idea of what percentage of the sand that you pumped in the Permian is actually brown sand?

Reasonable question Chase. We actually don’t break it out that way in our discussions you and I have had. we’ve talked about resin coated natural ceramic. We do not have a brown sand breakout, don’t mind trying to share that with you.

Okay.

Let me see if I even can find it.

Okay. So and then are you seeing more people tail in with RCS or ceramics?

No. Yes, no.

Okay. All right. And on the cost of goods sold, can you help us just kind of understand how much of your fourth quarter cost of goods sold is labor, consumables, and kind of fixed infrastructure cost?

Yes, you can do that. So for – I’ll give you – the quote I’ll give you and therefore everybody else is percentage of total direct costs that are the various things. And so the largest one is materials and supplies, everybody knows that’s proppant and chemicals and all that sort of thing. That is in the 35% to 40% range of total operational costs. The next biggest is employment costs, which is in the 25% to 30% range, I’m giving ranges here. Below that comes maintenance and repair, which is in the 15% to 18% range.

Okay, all right. That’s very helpful. Thank you. And then last one and I’ll turn it back over. And so there’s a lot of – we hear about cash break-even, bidding, and for me it’s kind of a black box, trying to understand what people mean when they say cash flow break-even. So do you fully load SG&A in your bids when you are saying you won’t work below cash break-even?

There’s lot of different ways to cut that. If you look at our P&L, we’re generating consolidated EBITDA. So we do hope to cover SG&A as well.

Okay. So but when you bid at the field level right, you said you won’t bid below cash break-even, are you talking more or like at the gross margin level or the EBITDA level?

Actually neither, it’s sort of a EBITDA minus CapEx level.

Okay. EBITDA minus CapEx.

Yes, and so there’s another non-GAAP financial measure if anybody is listening by the time. And obviously, while maybe it’s not obvious to everyone. You don’t know the maintenance CapEx that you’re going to incur on a job today that you’re doing today, because that means that CapEx is going to come over later. So we have to make an estimate for that.

Okay, okay. All right. That’s helpful. Thank you.

Okay. Thanks, Chase.

Thank you. We’ll go to John Daniel of Simmons & Company.

Hey. Thanks for put us back in. Just two quick ones for me. Thoughts on potential share repurchases this year, and would you use your balance sheet?

Yes, that’s a possibility. And I think probably we need a little more clarity on the direction of the industry. We ended the year at $65 million in cash. We got some other sources of cash, tax refunds and such that are going to be coming in. So we’re very comfortable with our position. But I don’t know that we would think it would be prudent right now to run out and try to use up that cash and put us back in debt. We’re comfortable where we’re right now.

Okay. Fair enough. And then don’t know if you have these numbers handy, but what percent of your fleet is either Tier 4-compliant or dual fuel?

I don’t know John, a small percentage of it is dual fuel and that was done at customer request or that’s where customer prefer the small percentage. Tier-4 compliant, I won’t even has or guess and it’s a decent percentage probably all the new stuff as I don’t know that for sure, I can follow up on that and try to figure it out.

Okay. That’s all I got. Thanks, guys.

Thanks. And I’m informed that there are no more questions. So I’m going to take over the operators role right now. We’ve enjoyed the discussion, we appreciate the chance to talk to everybody and appreciate everyone’s interest during difficult time. So we’re going to say good bye for now. But look forward to talking to you a lot of you soon. Operator, you can take over and do your close, if you want.

Thank you. I would like to remind everyone that the conference call will be replayed on www.rpc.net within two hours following the completion of the call. This conclude today’s conference. Thank you for your participation. You may now disconnect.