VAALCO Energy, Inc.
Q1 2013 Earnings Call Transcript

Published: 10 May 2013

[Operator:]

Ladies and gentlemen, thank you for standing-by. Welcome to the First Quarter 2013 Earnings Report. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, today’s conference call is being recorded. I would now like to turn the conference over CEO and Chairman of the Board, Robert Gerry. Please go ahead sir.

[Robert Gerry:]

Thank you, Gloria and good morning ladies and gentlemen and welcome to VAALCO’s first quarter 2013 conference call. I am joined this morning by Russell Scheirman, our President and Chief Operating Officer; and Gregory Hullinger our Chief Financial Officer. Please bear with me while I read our Safe Harbor statement. This conference call includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended. Forward-looking statements are those concerning VAALCO’s plans, expectations, and objectives for future drilling completion and other operations and activities. All statements included in this conference call that address activities, events or developments that VAALCO expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties many of which are beyond VAALCO’s control. These and other risks are further described in VAALCO’s annual report on Form 10-K for the year ended December 31, 2012, and other reports filed with the SEC which can be reviewed at www.sec.gov. Before turning the meeting over to Russell and Greg let me make a few comments. I fully expect that our shareholders are as frustrated as we are by the lack of drilling on our Angola block; we are frustrated and annoyed by the delays, especially when we are continually being told that it will happen soon. This last Tuesday, Russell and myself met with the oil minister of Angola and his advisors and we explained to him our frustration and bafflement, the lack of progress and what we proceed to be a simple transfer of 40% working interest held by Sonangol to our new partner. The minister listened attentively we thought to our discussion and upon our concluding remarks, he turned to his National Director of Petroleum, which we see right next to him and then in fact said to him, “Look into this from what VAALCO is telling us and get back to them quickly.” He told us, his ministry was design to help on problems such of this and thanked us for bringing it to his attention. We will see what happens after this. This is the first time that certainly myself has been in contact with the minister on a one-on-one basis, if you want. I think he understood our problem and hopefully we shall get some results. I hope they are quick results and this will shortly will vanish. As you will hear from Russell, we are in the midst of a six well workover and exploration drilling program in Gabon. We are also inching ever closer to a conclusion with Gabon on our onshore discovery and the renewal of our onshore exploration acreage. We have also recently met with the Oil Minister of Equatorial Guinea to discuss VAALCO for becoming the operator of Block P and we believe he is sympathetic to our cause and in favor of moving in that direction. I will now turn it over to Greg for the financial report and I think I will have some other comments at the conclusion of Russell’s report. Greg?

[Greg Hullinger:]

Thank you, Bobby and good morning everyone. Thank you for joining our call. I might mentioned that Houston is under a severe thunderstorm alert and we have got active and loud thunder occurring hopefully we don't have an interruption in our communication, but if it gets a little noisy, we are right next to the outside and it looks like it’s night time. With that let me take you through our financials for the quarter. VAALCO reported net income of $7.2 million in the first quarter of 2013 versus $9.0 million in the first quarter of 2012. Earnings per share for the current quarter on a diluted basis were $0.12 per share versus $0.15 per share for the first quarter of last year. Revenues were very similar; we were down 3% at $44.1 million versus $45.3 million in the same period last year. Here’s the recap of the main drivers for the quarter. Lifting for the quarter were 8% higher at 397,000 net barrels versus 368,000 net barrels. Talk about production for a moment, production for the quarter averaged 16,600 barrels of oil per day on a gross basis that compared to 21,100 BOPD on a gross basis in the year ago quarter. The decrease is partly attributable to the two Ebouri wells that were shut-in in mid 2012 due to the discovery of hydrogen sulphide; in a few minutes Russ will talk about the crude sweetening project underway at the Ebouri field. Also impacting production was the fact that we’ve had the rig on the Avouma platform for the entire quarter and the entire platform has been offline several times during the quarter due to rig operation and also for some power generation issues. So despite the higher lifting for the quarter, the average crude oil price was down 10% and a little over up $110 a barrel compared to a $121.55 for the first quarter a year ago. These two offsetting metric is the reason why revenues was very similar in both of the comparative quarters. Operating income of $21.5 million was down from the first quarter of 2012 number at $30.1 million due to a combination of higher production and exploration expenses incurred during the first quarter of 2013. Production expense was impacted by the cost incurred during the quarter on well recompletions where we are replacing the electric submersible pumps on two wells on our Avouma platform. The Avouma two-inch well has been completed, although we are not putting it back in production, I think as the rig moves off the platform. The second recompletion is currently underway on the South Tchibala 1H well. And of course earlier in the quarter we drilled a new development well the Avouma 3H well and those costs have been capitalized. Also impacting our production expense in the quarter were an increase in our FPSO cost; this is for the floating tanker. They were higher during the quarter primarily due to contract rate escalations for annual escalators that come and deploy on the contract and the majority of the increase is actually associated with higher compensation costs for the FPSO workers and higher compensation costs are result of the effort of the Oil Workers Union where they are endeavoring to raise the wage scale across this sector. We have been impacted somewhat over the past couple of years on the same initiative, although in the first quarter we didn't see much of an impact. Moving to exploration expense, exploration expense was $6.1 million and this was primarily the result of unsuccessful exploration wells in Montana and South Dakota and these were (inaudible) already talked about during our 10K back in March. In that 10K we indicated that the South Dakota well that we drilled was unsuccessful, that's the well that we drilled in the first quarter of 2013. So we wrote off $2.8 million in the first quarter associated with that effort and then we had additional dry-hole costs of $1.7 million that we incurred during the quarter with our final operations on the two exploration wells drilled last year on our Salt Lake property in Montana, and then the majority of the remainder of exploration expense is associated with seismic reprocessing and surveys in Gabon. Due to the expenditures associated with the drilling rig, and what we used for the Avouma 3H development well, the two well recompletions that were underway during the quarter and in addition the construction costs of the two new platforms that are being built in Louisiana for offshore Gabon. The cost account was considerably higher in the first quarter of 2013 compared to 2012. As such income tax of $14.2 million was 28% lower when compared to the first quarter of 2012 where we had income tax of $19.8 million. I will just point out that with several more wells to be drilled during the current program this year and with the platforms being constructed, we expect to have lower income taxes for the duration of 2013. Cash remained strong and our balance sheet is debt free. Cash plus restricted cash of $115.6 million at the end of first quarter of 2013 compared to cash and restricted cash of $142 million at the end of last year. The decrease is somewhat met by the timing of the lifting during the quarter. If you look at our balance sheet and you see our trade receivables show $24.5 million as of March 31 and the majority of that amount was paid timely during the first week of April 2013. By comparison our trade receivables at the end of December 2012 was $16.5 million lower at approximately $8 million. If we take that impact into account, cash is still very, very strong. With that as the key drivers and I'll be glad to answer any questions regarding the financials during the Q&A segment of the call and at this point let me turn it over to Russell Scheirman to give you an operational update.

[Russell Scheirman:]

Okay, thank you Greg. We were all - a lot of you who were on the call seven or eight weeks ago when we reported our year end results and so not a lot has changed. So for those of you who are on that call you may here some of the same things again. But I would like to spend the next few minutes updating you on the ongoing offshore Gabon drilling program, on the two new platforms that we are constructing for Etame and southeast Etame, a little bit about onshore project in Gabon, the Equatorial Guinea project and Angola. Offshore Gabon we are currently producing about 15,000 barrels per day with two wells shut in on the Avouma platform for work over. Those represent between 3000 and 4000 barrels a day of production that we have offline. We should have them back online in a week or so. We are underway with our drilling program. We successfully drilled the Avouma 3H development well. We encountered the Gamba formation about five meters high to the Avouma 2H well making it the highest well in the field. It expanded the size of the Avouma field by approximately 1.5 million to 2 million barrels. So we're very pleased with that well and it's currently producing on submersible pump. After the 3H well, we got on the South Tchibala 1H well. This is a well that had both pumps failed. We found that we had a casing restriction probably caused salt intrusion, that causes us to rethink how we're going to complete that well. So we suspended that well and moved over to the Avouma 2H well. That well was still producing but had one failed pump and we pulled both pumps and put two branded pumps in and that well is standing by, ready to be started up when we finished the South Tchibala 1H work over. We're back on this South Tchibala 1H well. We determine the casing restriction will not cause us a problem in terms of any kind of a leak. We've been able to test that. So we're running the two ESPs in that well and should have that work over done in a few days. At which point, we will then be in a position to move the rig off and restart both the South Tchibala 1H well and the Avouma 2H well. After completing the Avouma program, we're moving to Ebouri, where as I mentioned before, the first thing we will be drilling is a exploration well in a new ballpark on the southern portion of the Ebouri structure. We think it's about a 7 million barrel structure if it works, which would be about 1.7 million barrels net to VAALCO; if it's successful. There is also some deeper [dentile] on the order of 1 to 2 million barrels that we’ll test if we find oil in the Gamba. If the well is found to be oil bearing, we have everything we need to pull back and drill a horizontal lateral in to the Gamba and go ahead and complete the well as another Ebouri producer. We then have plans to replace the pumps in the Ebouri 2H well, which is the sole remaining well that’s producing at Ebouri. It’s a good well, it’s 3,000 barrel a day well, it has one failed pump and we’d like to get the second pump in there so that we will have the backup of two pumps again in the event, we should have a failure down the road. All-in-all we’ve had very good run life with our pumps, Avouma came on in 2006 and we have only had one well, where both pumps failed and Ebouri came on in 2007 and we just had the one pump fail in the 2H well, but we have been able to keep the well on production, with the second pump. So pretty pleased with the run life that we have been seeing on our ESPs. After we finish the platform drilling and work over campaign, we will then move to prospect call the [new] prospect, I think it's been rename the Avocado prospect, I can't remember the [Gambanese] word for avocado, but...

[Robert Gerry:]

Ovaca.

[Russell Scheirman:]

Ovaca is what we will be calling it going forward. This is a 38 million barrel Gamba prospect, it also has deeper potential in the (inaudible) formation, it will probably be the deepest well we drilled into Gabon to-date. We are planning on taking it to about 2600 meter which is close to basement. Rig then leaves goes on a tube well program for another operator and we have the option for them to redeliver us the rig, at the end of their tube well program for two more wells. We have been working with our partners to mature a couple of other exploration opportunities and I am pretty confident that we’ll drill at least one exploration well and may be two, during the fourth quarter of 2013. On the facility side, we have commenced the fabrication of the two new platforms at Gulf Island in Houma, Louisiana. As I’ve described [401] platform have been installed at the Etame field to add infield wells to more fully develop that field and we anticipate somewhere between three and five additional wells off the Etame platform to complete the development of that field. The second platform will develop the southeast Etame discovery that we made in 2011 and as well as an old discovery that was made by Gulf and Dentale back in the 80s called the North Tchibala field. The North Tchibala field also has a gas resource which will be useful later in the field life when we run short of gas and so at some point down the line we will drill a gas wells to top off our gas supply for running the FPSO. These platforms are schedule for installation and drilling in 2014; each platform represents about a $35 million investment for VAALCO plus the cost of the wells which run about $7.5 million net to VAALCO a piece. It’s about a $500 million overall project for both platforms and the wells that we are stewarding here, so it’s a major exercise for our company. We fully expect that when these two projects are up and running, we ought to be able to keep our production near to or above 20,000 barrels per day through 2016. Additionally Greg mentioned the two solid wells that we have to shut in at Ebouri. We had led a contract for front end engineering design for a facility to sweeten the Ebouri field, that project we expect to reach final investment decision later in this year with the facilities in place by 2016. Basically what it involves is another platform that we would set next to the Ebouri platform hopefully with a bridge interconnecting the two where we could then have the facilities we need to clean up the H2S and send clean oil to the FPSO. That's it for offshore Gabon. Onshore on the Mutamba we have an exploitation authorization on file with the government. We are waiting for approval on that. Once we get approval on that, we can move forward with the development plan for the discovery in conjunction with our partner Total. We would like to commence development activity in 2014 next year. We just have to get this pushed through which we are working on. We are also negotiating an extension on the exploration area. We have a deal in principal for our initial three-year exploration extension that we are discussing with Total to make sure they are on board and then decide whether or not to go forward, but we expect that we will. In Equatorial Guinea, we mentioned last meeting that we have a 31% interest in Block P. We signed the amendment to the production sharing contract at meeting last month which officially made VAALCO a party to the production sharing contract. We also met with them about drilling two wells there later this year. This is a block that has a 2007 discovery that Devon made known as the Venus discovery. It encountered a 300 foot well column and channel sand and there are other channels on the block that are larger than this one. So we plan a two well program to test two more channels to see if we can come up with some additional reserves and right size whatever facilities we need in order to drill Venus and hopefully some of the other channels that we see on the block. We have a couple opportunities for drilling rig, one is with another operator who is a partner of ours in Gabon. It’s active in Nigeria and they need a two well slot to kind of catch up on their equipment lead time items and other one is a rig that's actually working in Equatorial Guinea for another operator and we will be coming off in the later month or quarter early in the fourth quarter. So basically as Bobby said, we are attempting to sort out with GE Petrol the National oil Company VAALCO becoming the technical operator. We met with the oil minister. He is in support of that. They have elections coming up in about two weeks so everything kind of on hold while we get through their elections, their legislative elections, not presidential elections. So they are due to be over on the 26 May and a couple of weeks after that we will probably be over there to sit down with the Ministry and GE Petrol and see what we can work out. Finally in Angola, our current term on our exploration license was November 30, 2014. Bobby mentioned we met with the oil minister this week while they were here for OTC to express our frustration. We just don't understand it. The partner that we recommended is already an operator in Angola and maybe there's some baggage with that, but we don't understand if that really approved operator in Angola why there would be any issue for them to coming on partner. So we will see if the oil minister does this really good. But the plan there would be to drill a sub-salt prospect in about 400 feet of water and then to acquire seismic out of the deeper part of our block where our 2D seismic. We see some things that look very similar to what Cobalt recently drilled in the Kwanza Basin. So with that, Bobby I am going to turn it back to you.

[Robert Gerry:]

Thank you, gentlemen. I think that Gloria we probably should open up for questions now. I think we've covered most of this subject that we had in our minds. So I'll turn it back to you.

[Operator:]

(Operator Instructions) Our first question comes from the line of Leo Mariani with RBC. Please go ahead.

[Leo Mariani:]

You talked about being around 15,000 barrels a day right now with a couple of wells offline which would add to 2,000 to 3,000 barrels a day. I know you’ve got some other drilling. You guys also made the comment that you hoped to be at or above 20,000 barrels a day in 2016. Where do you guys think you will be on production kind of at the end of the year once the drilling program in ‘13 is done here?

[Russell Scheirman:]

Well, I guess the $64 question is going to be what happens on Ebouri. If Ebouri does not work, we would anticipate we go up a year in 17,000, 18,000 barrel a day range, probably close to the 17. If Ebouri works, we would be up in the 19,000, 20,000 barrel a day range.

[Leo Mariani:]

And I guess in terms of CapEx this year, is there any change to your CapEx budget given that it sounds like some of the drilling in [EGG] maybe slipping of anything budgeted for Angola, but obviously something that maybe getting push back as well?

[Russell Scheirman:]

Well, we had an either or situation budgeted. We were pretty sure we’re working and getting both drilled this year. We still think there is good chance we can get something done in EG if we can sort things out with GE patrol and the ministry on the operators shift., but no major change to the budget other than the potential for slippage above the exploration wells. The platforms are moving along pretty much on schedule and then our drilling program our six well program would perhaps one or two additional wells is moving right along, no huge cost overruns, but we have a cost overrun on the Tchibala 1H well when we encountered this casing restriction, but it's a million bucks or something, it's not I think huge.

[Leo Mariani:]

I guess on LOE, Greg you have talked about this a little bit, your LOE is kind of been going up in last few quarters, I know there is some work over cost in there. I am trying to get a sense of what that run rate LOE could be, like on $1 per barrel basis once your work over program is finished, we begin to second half of ‘13?

[Greg Hullinger:]

I don't have what the projection for the year Leo, I can come back to you with I projection on that. It will be somewhat higher because of the FPSO cost and then like I said once again the recompletion cost will see that ratchet down.

[Leo Mariani:]

Okay. I think it would be lower than the first quarter number here of $20?

[Greg Hullinger:]

It should be, yes. That’s heavily impacted by recompletion of.

[Leo Mariani:]

Okay. And then I guess any thoughts on first production at Mutamba and you guys are still working on the development plan there, but do you still expect to have production there in the second half of ‘14 of August?

[Russell Scheirman:]

That is what we are trying for.

[Operator:]

Next we will go to the line of [Benjamin Cooper with CLSA]. Please go ahead.

[Unidentified Analyst:]

Couple of broad, general questions here. Can you tell us how much the installation of ESPs hit the P&L in the quarter versus how much was capitalized?

[Greg Hullinger:]

The total cost of ESP work is expensed and we had about $1.5 million recorded in the first quarter net of.

[Unidentified Analyst:]

One of that equipment is capitalized?

[Greg Hullinger:]

No, it’s all replacement in totally an expense recompletion.

[Unidentified Analyst:]

And then you characterized the well (inaudible) response pretty well and you kind of touched on the identified partners already operating in Angola but can you characterize that partner little bit better, are they world class operator?

[Robert Gerry:]

No, I don't think we can get into that, it’s a large company and we are going to leave it that.

[Unidentified Analyst:]

Just moving onto two platforms that you have discussed $35 million each net to VAALCO I believe and 7 million net per well at VAALCO. I mean you mentioned the $500 million total cost, is that a gross number?

[Greg Hullinger:]

Yeah, that is a gross number. So our share our net share of that would be 140ish. So the cost of the platform and then the cost of six wells are six or seven wells are almost the same.

[Unidentified Analyst:]

And I guess we are sitting here at some fairly depressed prices in the market. We’ve got a fair chunk of the total value of the company to sitting in cash on the balance sheet which looks like you have some pretty good plans for it. At what point does the company's best risk adjusted investment be the company's own stock rather than some of these arguably risky drilling programs. When you look at the capital allocations decision where does that range at this point?

[Greg Hullinger:]

We have a Board meeting next month on the agenda. There will certainly be a discussion on potentially buybacks some stock. I can't tell you how that will go. We've always had a fair amount of cash in the balance sheet, once upon a time I guess five to six years ago we did buyback some stock, so its not out of the question that we won't do it again and certainly our stock is depressed and it maybe a good time to reexamine the issue. I'll leave it there too, but it’s certainly my opinion not a bad idea certainly the Board should discuss so we will see what happens.

[Unidentified Analyst:]

And then have you disclosed on the Equatorial Guinea wells how much each of those might cost.

[Greg Hullinger:]

Yeah we have. They are $30 million to $35 million depending on which channel we drill; gross, and we have 31% of that, probably $10 million to VAALCO.

[Operator:]

We do have a question from the line of (inaudible).

[Unidentified Analyst:]

I just want to follow up on the last question about (inaudible) capital allocation and stock buy back. When you look back at the history of the company and you look at how much we spent trying to find things in the North Sea, etcetera, if we could have used a good bit on that capital to buyback stock we would be in a wonderful position right now and the certainty of returns of buying back stock even if we had to issue some low cost debt-to-buyback stock to rearrange the capital structure, just spreads the level of opportunity around fewer shares and makes them all much more worthwhile if we are successful in what we are endeavoring to do in the future. So I would hope we would see a large scale not token buyback program and indeed beyond that I wonder why the officers of the company have not bought any stock back of recent [vintage] or in many years given these low prices why a good bid of our compensation is not being used to buyback stock by the officers.

[Robert Gerry:]

Well I'll take that on. I can't speak for the others. I speak for myself. I own close to 5% already. Most of my net worth is tied up in VAALCO. I agree with you I think that the prices are at very low level. We tend to maybe add some stock, but I am pretty fully committed of what my financial situation is. I think the more broader scope on your comment about buying back stock; we've always been in a position of not knowing when we're going to need the cash. Here we are again, I think we've been in Angola for five years, we've been trying to drill for five years and we always think it's going to happen day after tomorrow and it doesn’t, and couldn't agree with you more. Would have been wonderful if we bought back our stock, and we’d still have some cash on the balance sheet. Once it happens, today is we're looking forward to platforms that are now in progress of being here in Louisiana. We have a large scale drilling program scheduled for Equatorial Guinea and for Angola. When we have, or given the all clear signal to commence it's frustrating, probably for you, its frustrating for us, not knowing how to balance out all of our cash because both Angola and Equatorial Guinea could hit simultaneously. We haven't talked about some other exploration opportunities that we have in Gabon. We're certainly pushing hard on trying to drill [Lilly] which is in deeper waters, that’s probably a $50 million well also. So we can consume a lot of cash and hopefully we are going to be successful in some of these exploration undertakings and the infrastructure we are going to have to put together to develop all of those is going to cost us a lot more money. So we are examining some financing at the current time to help support our platform construction. I think if that goes through or if we pursue it, it will put us in even better cash situation, and what you are suggesting could very well occur about finding stock.

[Unidentified Analyst:]

But it’s nice time to be out borrow money rather inexpensively into adjust the capital structure which might be optimizing it more for current shareholders. Thanks.

[Robert Gerry:]

Okay. Thank you. We agree with you by the way. It's good time to borrow money.

[Greg Hullinger:]

I will just answer a little bit on your point about offers buying stock. One thing I would like to point out is that is a small company, whenever we have exploration activities underway, which over the past few years has been fairly often, we are in black out, where we are not allow to purchase stock and then certainly any time we get into the period when we are doing our financials, we put the entire the company on black out again for that. If I would go the last couple of years, probably about 75% of the years, we are not in a position to be able to purchase or sale stock. In addition being a small company, we are constantly evaluating opportunities for with that cash we have had that possibly acquiring other entities. And as we move forward on some of those, we’ve to impose, self imposed limitations there because we have got knowledge that could be material to the market, that is not disclosed. So on the safety side, there is a large portion of the year where we are just not in the position where we can hit the market.

[Operator:]

We do have a follow-up from Leo Mariani [RBC]. Please go ahead.

[Leo Mariani:]

I just wanted to further explore your comment about examining financing to help support your platform infrastructure. I guess this sounds like you might be looking to do some product debt based, project finance or something on that, can you give us any more color on that?

[Greg Hullinger:]

I think that it is fair enough, Leo. We haven't basically taken it from market yet, we are still fine-tuning our needs for that money, but it would be debt financing.

[Leo Mariani:]

Okay. And I guess can you give us a little more color around the thinking behind that that you just, maybe you have some hard assets there in the platforms and were deferred to future cash and your debt to fund it, is that what you are thinking?

[Greg Hullinger:]

Yeah, but in a fairly moderate fashion maybe get half or something of the total cost of that project something along those lines. I mean we are not looking to way leverage -- lever the thing up, but if we get alone from the right entity and get it approved by the Japanese government the interest is cost recoverable and so there is some good reason to be looking at it right now.

[Operator:]

Neil Nelson [DERS Group], your line is open.

[Neil Nelson:]

Could you give us some color on the new prospect and could -- if successful, could it be developed with the subsea connection rather than a platform?

[Russell Scheirman:]

It could be, but I don't think we would. We pretty much run the math that if we are going to have two wells or more, it makes more sense to go ahead and set a platform and tie it back. Believe it or not the long lead time for flexible flow lines in subsea trees puts you in the same 18 to two year window as a building and installing a platform. So there's not a lot of time savings involved there. So [MEU] is close enough to the FPSO. I think it’s 7 or 8 miles away that it would make all the sense. It’s in shallower water. It would be pretty simple platform and so I think that's the route we most likely go.

[Neil Nelson:]

And in Block P, wasn’t there a second discovery by Devon in addition to the original discovery that was made there?

[Russell Scheirman:]

Yeah there was, I think they call it Europa and it was thin sands, so it wasn't as exciting as this big blocky channel that they found with Venus. It would be one of those things where you look at if you could ever get the critical mass of an atom like situation going and gets your production started, it would be something you could look at perhaps tie in at a later date, but I think it was on the order of 4 or 5 million barrels kind of thing. So it just wasn't big enough compared to Venus which is 18 to 30 depending on who you talk to.

[Operator:]

(Inaudible) your line is open.

[Unidentified Analyst:]

On the last call you mentioned the strike I believe with Schlumberger, they do not only affected you in Gabon, what has happened with that in the GM Gabon effect?

[Robert Gerry:]

Things remain quiet at the moment. Nobody is on strike to the best of our knowledge and considerably will stay that way. I'm not sure how Schlumberger really resolved the issue but it’s not affecting us.

[Operator:]

There are no additional questions at this time. Please continue.

[Robert Gerry:]

We have nothing more here and I thank you all for joining the conference call and we will see you the end of next quarter. Thank you all very much.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.