Genie Energy Ltd.
Q4 2012 Earnings Call Transcript

Published: 13 Mar 2013

[Operator:]

Good morning, and welcome to the Genie Energy’s Fourth Quarter and Full Year 2012 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation by Genie Energy’s management, there will be an opportunity to ask questions. In this presentation, Genie Energy’s management team will discuss financial and operational results for the three months and 12 months ended December 31, 2012. Any forward-looking statements made during this conference call either in the prepared remarks or in the Q&A session, either general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to specific risks and uncertainties discussed in the report that Genie Energy files periodically with the SEC. Genie Energy assumes no obligations either to update any forward-looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. Please note that the Genie Energy earnings release is available on the Investor Relations page of the Genie Corporation website, www.genie.com. The earnings release has also been filed on the Form 8-K with the SEC. Please note this event is being recorded. I would now like to turn the conference over to Claude Pupkin, Genie Energy’s Chief Executive Officer in the Genie management team. Please go ahead, Mr. Pupkin.

[Claude Pupkin:]

Thank you, operator. I would like to welcome investors to the Genie Energy’s fourth quarter and full year 2012 earnings conference call. I am very pleased to be able to report that Genie Energy ended its first full year as an independent public company with a strong quarter. During our call today, our team will review the quarter and full year financial and operational results, and I will be discussing some significant milestones that we have already achieved early in 2013. Because of weather-related issues, IDT Energy operated under challenging conditions for much of the year. You will recall that we lost much of the 2011-2012 heating season because of unseasonably warm weather. True to form, during the final quarter of 2012, Hurricane Sandy struck. Sandy impact was primarily felt in terms of its negative impact in customer acquisitions and to a lesser extent in terms of reduced demand from customers who lost power for extended periods. But IDT Energy’s strong execution and resilient business model more than compensated for the hurricane’s impact on our revenues, gross profit, and gross margin. Geoff and Avi will provide more details on the quarter and full year operational and financial results of IDT Energy for you. So, I will focus on several recent important developments at Genie Oil and Gas. During previous quarters, we said that Genie Oil and Gas continued to pursue additional resource-based opportunities around the globe to further leverage our technical expertise and personnel and to gain project diversification with the potential for significant upside. Well, our efforts have begun to reap rewards. On February 20, the Israeli Ministry of Energy and Water Resources awarded a new subsidiary of ours, Genie Israel Oil and Gas Limited, an exclusive petroleum exploration license covering 396 square kilometers in the southern portion of the Golan Heights. We believe based on available geological information, including logs from previously drilled wells, 2D seismic work, and some other evidence that has been available for sometime, and our team’s analysis and interpretation of this data that there are significant quantities of conventional oil in relatively tight formations in this license area. To validate our hypothesis, we will be undertaking our exploration and evaluation work over the next three years. We are optimistic and enthusiastic about the potential in this new license. But having said that, there is a lot that we do not yet know, including the seismic strength of the resource, whether it is commercially producible the cost to produce it, and the quality of any oil that we would extract. Therefore, we cannot yet offer a quantitative opinion as to the potential magnitude of this opportunity. By way of background, three years ago, we were lead to this area as part of our work analyzing the oil shale on the IEI license. When our geologists obtained the well logs from the Golan Heights as a point of comparison, they ran into interesting data from existing wells and carried out some inspired detective work. Putting together the pieces of the puzzle in a new and different way, they developed what they think is a compelling case for the resource. We subsequently had a team of outside experts to look at our theory and the available evidence and they too were intrigued and agreed that our theory fits the available data nicely. As I speak, we are preparing to conduct an initial exploration program in our license area to test the validity of our thesis. That program will include geophysical and drilling exploration and evaluation work and will require up to 36 months to carryout depending on the speed of licensing by the regulatory authorities. In an ideal scenario, our exploration program will validate the commercial potential of the resource. And Genie Israel would then be able to apply for a commercial lease. However, there is significant work to be done and uncertainties to overcome before we get to that point. If our theory reproves out, however, and we are able to prove in discovery then the timeline to development and projections should likely be significantly shorter than that of our oil shale development project in Israel, and we expect that we will be able to efficiently leverage much of our existing human and financial resources. In addition to the significant geological unknowns associated with the nature of the resource in the Golan and its potential commercial viability, we also faced political risks associated with working in this region, which should be considered in any analysis of this opportunity. Also in Israel IEI, our oil shale project in the Shfela region won two significant legal victories during the fourth quarter. The Supreme Court of Israel rejected both lawsuits filed by the Israel Union for Environmental Defense aimed at stopping oil shale development in the country. The court rejected the Union’s attempt to invalidate both the regulations governing the issues of our license and the grant of an exploratory license to IEI. Despite winning these important cases, we have not yet been able to obtain the necessary permits for our pilot test. The government of Israel still has not issued the final regulations required for preparation and submission of an environmental impact statement. The EIS is an essential component of our application to construct and operate an in-situ oil shale pilot facility. We continued to hope that the regulations will be forthcoming very soon. Now, let me fill you in on our progress at AMSO, our oil shale project in Western Colorado. AMSO completed construction of its pilot test over a year ago, but problems with our down-hole heater and other equipment delayed startup. Since then, we have been busy not only working with the manufacturer to modify the heater, but also to test and upgrade all of our systems above and below ground and make sure we have backups for key components. A couple of days ago, we completed that work and initiated operation of our pilot test, including turning on the heater. It will likely take a few weeks to reach steady state operations such that we can say with some degree of confidence that the project is operating as planned. Genie Energy achieved another important milestone on February 15th when we made our first dividend payment on our preferred stock. Our next quarterly distribution is scheduled for May 15th. Holders of our preferred stock on the record date will be entitled to a distribution of just under $0.16 per share. Last week, we also completed the renewed exchange offer for our Series A 2012 preferred shares and we now have approximately 1.9 million shares of Genie preferred outstanding. All-in-all, we had a strong finish to 2012 and so far 2013 is off to a great start. My colleagues and I here at Genie Energy and especially the man seating next to me, IDT Energy’s CEO and Genie Vice Chairman, Geoff Rochwarger are especially pleased that it has been a reasonably normal winter so far this year. Now, to discuss IDT Energy’s strong operational results for the quarter, I will turn the call over to Geoff.

[Geoff Rochwarger:]

Thank you, Claude. As you mentioned, this has been a strong year for IDT Energy, despite some wild weather. The most significant development this year is the remarkable growth of the electricity side of our business. Over the past year, we added 77,000 net electric meters and comparing to fourth quarter of this year to the fourth quarter of 2011, we increased kilowatt hours sold by 77%, increased electric revenues by 75% and increased gross profit on our electricity sales by 65%. In light of these results no pun intended, I want to take a moment to thank the IDT Energy team and congratulate my colleagues on a job well done. Now, let’s look under the hood at the fourth quarter and the full year 2012 results, keeping in mind that the three months of the fourth quarter October through December is somewhat of a shoulder period for us beginning well after the summer cooling season and ending before the peak of the winter heating season, quite alluded to the fact that our door-to-door and other customer acquisition operations were significantly impacted by Hurricane Sandy. We suspended customer acquisition activities during the storm and ended to meeting it aftermath and fourth quarter gross meter additions fell to 79,000 compared to 118,000 in the prior quarter and 89,000 in the year ago quarter. However, for the full year, we acquired 403,000 gross meters compared to 302,000 in 2011. The majority of our newly acquired meters this quarter and for the full year were electric reflecting the fact that much of our recent geographic expansion has been in electricity only territories. Of the 7 utility territories in Pennsylvania, Maryland we entered during 2012, 6 were electric only. The seventh territory was Baltimore Gas & Electric which is the dual meter territory. Generally, we pursued dual and electric meter territories first when entering a new state as they typically provide shorter payback periods on new meter acquisitions. The 7 territories we added in 2012 represents an addressable market of approximately 3.5 million meters in aggregate. In 2011, we grew our addressable market by 5.1 million meters adding 6 new territories in New Jersey and Pennsylvania. The size of the addressable market does not translate directly into new meter uptake which depends in part on the regulatory and competitive climates among other factors. For example, we entered Pennsylvania during early stage of deregulation and our meter acquisition programs have performed exceedingly well so far. On the other hand, Maryland has had some degree of deregulation for years. There, our customer acquisition experience has been more in line with our experience in states where the deregulated markets are much more mature. In order to maintain that aggressive growth, we are continuing to build a large pipeline of potential new markets. We are currently in the process of obtaining licenses in many new territories and states including Washington DC, Illinois, and Connecticut. The regulatory environment in many of these markets is improving and we hope to initiate marketing in some of them during the latter part of 2013. We will enter those markets as the relevant regulatory authorities and utilities, adopt deregulation programs compatible with our operational and risk management approach. In the nearer term, we have applied for licenses to operate in additional natural gas utilities in both Maryland and Pennsylvania. Of course, geographic expansion in gross meter adds are only part of our growth story. The other side of the net meter add equation is the rate of churn in our existing customer base. Our churn rate in the fourth quarter was 6.8% the same as the year ago quarter, but an increase compared to the 6.6% in the third quarter. For all of 2012, monthly churn averaged 6.6% compared to 5.6% in 2011 driven primarily by 2012’s higher meter acquisition rate. In general, our experience shows that churn is highest among newly acquired customers. As our rates of customer acquisition increased, so does our churn rates. That said we recognized that other factors, including the competitive environment and the structure of our incentive programs also impact churn rates. Deploying new approaches to reduce churn remains one of our top priorities. As of December 31, IDT Energy had 502,000 meters enrolled, of which 331,000 were electric. Net of churn, we added a total of 64,000 new meters in 2012, a gain of 77,000 electric meters netted against a loss of 13,000 gas meters. Sequentially, meters enrolled declined by 21,000, including 12,000 electric meters and 9,000 gas meters. This is where we felt the impact of Hurricane Sandy most strongly. As measured by residential customer equivalents or our RCEs, the year-over-year growth in our customer base was very impressive. At the close of business on December 31st of 2011, our customer base consisted of 312,000 RCEs comprised of 238,000 electric and 74,000 gas RCEs. In 2012, we added 85,000 electric RCEs, an increase of 55.5%, while gas RCEs decreased by 21,000 or 22.1%. The outsized gain in electric RCEs reflects the acquisition of not only new electric meters, but also the impact of the relatively higher consumption meters we are acquiring in new territories as we continued to expand our geographic footprint outside of the New York metropolitan area. We expect that this positive trend will continue as we continued to deepen our market penetration in Maryland and Pennsylvania. The increase in our electric meters and RCEs served resulted in a 77% increase in kilowatt hours sold in the fourth quarter compared to the year ago quarter. During that same period, our gross margin per kilowatt hours sold decreased slightly reflecting a slight increase in per kilowatt hour cost and a slight decrease in revenue per kilowatt hour sold as we lowered our margin to facilitate customer acquisition in Hurricane Sandy’s aftermath. On the natural gas side of our business, we sold 8.4% more therms in the fourth quarter than in the year ago quarter. The return of more normalized weather earlier in the winter compared to the year ago period more than offset the declines in meters and RCEs served. The price per therm we paid for natural gas declined significantly in the fourth quarter of 2012 compared to the year ago period, while our margin per therm sold increased significantly. Before turning over the call to Avi to detail our financial performance, I mentioned last quarter that developing new capabilities and services to strengthen our customer relationships is another key to future growth and to dampening churn. One of those new initiatives, our green energy offering provides power source from a 100% renewable resources. It allows our customers the option to reduce their carbon footprint in a meaningful way and appeals with a growing number of environmentally conscious customers. At year end, we had approximately 30,000 green energy customers enrolled compared to a year ago where we had almost none. By delivering 100% green solution to our customers, we have contributed to the growth of clean energy, deepen our customer relationships with a valuable service that our customers want, enhance our image, and improve our bottom line. We are working hard to make our green offering and even larger part of our financial story in future quarters. In addition, we hope to rollout other meaningful products and programs throughout the year that will help us to further solidify relationships with our customers. To summarize the quarter, we achieved strong electricity customer growth and increased consumption to slowing of our customer acquisition engine during Sandy and our aftermath slowed our gross adds and decreased our customer acquisition costs. As a result, SG&A expense decreased sequentially and increased relatively moderately year-over-year given the comparable increase in the size of our customer base over that time. That benefit dropped to our bottom line and turned a good shoulder quarter into a very strong one. Now, to review our financial results in detail, here is Genie Energy’s Chief Financial Officer, Avi Goldin.

[Avi Goldin:]

Thank you, Geoff and thanks to everyone on the call for joining us this morning. My remarks will cover our financial results for the fourth quarter and full year of 2012 the three and 12 months respectively ended December 31st. Except or I indicate otherwise, all comparisons in my remarks are to the results for the comparable year ago period the three and 12 months ended December 31, 2011. As in prior periods, Genie Energy’s revenue direct costs and gross profit are generated entirely by IDT Energy. Geoff just provided a summary of IDT Energy’s operational results during this quarter. So, I will begin by addressing IDT Energy’s financial performance which is very strong and continued to build on the solid performances of recent quarters. Revenues for the fourth quarter increased year-over-year to $65.4 million from $43.6 million in the fourth quarter of 2011 and for the full year increased to $229.5 million from a $197.9 million in 2011. Continued growth in IDT Energy’s electric revenues was the key driver powered by the growth in our electric meters served. This more than offset the impact of lower revenues per unit for both electricity and natural gas. Electric revenues increased 74.6% to $48.2 million from $27.6 million in the year ago quarter reflecting both the continued expansion of our customer base and growth in average consumption per meter. Kilowatt hours sold increased 77.1% compared to the year ago, which more than compensated for 1.4% decline in revenue per kilowatt hour. For the full year, electric revenues were $174.3 million compared to $134.4 million in 2011. Gas revenues increased to $17.2 million in the fourth quarter of 2012 from $16 million in the year ago quarter and accounted for 26% of total revenues. The fourth quarter typically shows a significant increase in gas consumption compared to the second and third quarters reflecting the onset of colder weather. We sold 8.4% mark therms in the fourth quarter than in the year ago in part due to the migration of our customer base to higher consumption meters in Pennsylvania during 2012 as well as return to more normal weather. This more than offset a 0.9% decrease in average revenue per therm. For all of 2012, gas revenues were $55.2 million compared to $63.6 million in 2011 largely reflecting the abnormally warm weather last winter and lower natural gas prices. Gross profit was a robust $18.5 million in the fourth quarter compared to $10.7 million in the year ago quarter. The increase in kilowatt hours sold more than compensated for a slight decline in electric gross profit per kilowatt hour and reduced our electric prices slightly including the implementation of various incentive programs and rebates even if the cost of underlying commodity trended higher. On the gas side, gross profit per therm sold increased as you lagged our price decrease compared to the decline in the cost of our natural gas supply. Overall, our gross profit margin increased to 28.2%, a 360 basis point improvement compared to the year ago quarter. For the full year 2012, gross profit increased to $69.6 million from $56.7 million in 2011. Gross margin increased 160 basis points to 30.3% compared to 2011. Moving on to the financial items for consolidated G&A. Consolidated SG&A increased to $13.4 million in the fourth quarter of 2012 and $10.8 million in the fourth quarter of 2011 reflecting increases in corporate SG&A post spin-off, increased SG&A cost at Genie Oil and Gas related to the pursuit of resources in Israel and Asia and an IDT Energy cost related to the growth in the customer base. On a consolidated basis, SG&A in the fourth quarter included $800,000 in non-cash compensation. For the full year 2012, SG&A increased to $54 million from $40.4 million in 2011 primarily reflecting the added costs of operating as a public company and in IDT Energy, the impact of the company’s strong customer growth. Research and development expense in the fourth quarter, all of which was incurred by Genie Oil and Gas increased to $2.2 million from $1.6 million in the year ago. For the full year, R&D expense totaled $9.4 million compared to $7.4 million in 2011. As in prior periods, we account for a 50% stake in AMSO utilizing the equity method. In the fourth quarter, equity and the net loss of AMSO was $900,000 compared to $1.2 million in the year ago quarter. The decline reflects low rate of expense associated with completion of the power test facilities partially offset by the increase in Genie’s share of the overall project costs. Genie’s share in the cost increased from 20% in the year ago period to 35% after the joint venture investment path of $50 million threshold earlier in 2012. We expect that the increased operational cost resulting from operations of the pilot will drive a corresponding increase in our share of the project’s net loss in 2013. Consistent with our results in prior quarters, Genie did not incur significant depreciation and amortization expenses during the quarter. For the full year 2012, depreciation and amortization expense is $124,000. On a consolidated basis, Genie’s income from operations and EBITDA were $1.9 million in the fourth quarter compared to negative EBITDA and a loss from operations of $2.9 million in the year ago quarter. IDT Energy’s EBITDA and the income from operations increased to $7.9 million compared to EBITDA of $1.5 million and income from operations of $1.4 million in the year ago quarter on the strength of increased electric revenues and improved margins. At Genie Oil and Gas, the loss from operations increased to $3.9 million from $3.2 million in the year ago quarter. And the loss from operations as a result of corporate overhead was $2.1 million compared to $1.2 million in the fourth quarter of 2011. For the full year 2012, consolidated EBITDA totaled $3.2 million unchanged from 2011 and the income from operations totaled $3 million compared to $3.1 million in 2011. Interest expense and financing fees net was $700,000 compared to $1.3 million in the year ago quarter. The prior year included interest associated with tax audit settlements. Additionally, the current year quarter includes a gain on the recovery of funds associated with the MF Global bankruptcy and an increase in interest income generated by our marketable securities and CDs offset by additional volumetric fees for electricity charged under our preferred supplier agreement with BP. The provision for income taxes was $100,000 in the fourth quarter compared to a benefit from income taxes of $2.1 million in the year ago quarter. Adjusting for non-controlling interest, the net income attributable to Genie after preferred stock dividends was $1.8 million compared to a loss of $1.2 million in the year ago period. Net cash used by operating activities in the fourth quarter was $2.2 million versus net cash generated by operating activities of $800,000 in the year ago period. This quarter’s operating cash flow was impacted by the payment of $5.5 million to settle the New York City gross receipts tax audit. Our balance sheet remained strong and liquid with $92.9 million in cash, cash equivalents, restricted cash, certificates of deposit, and marketable securities with no long-term debt and a positive working capital balance of $109 million. Overall, Genie had very good operational and financial results. And our balance sheet remains solid and liquid. We continue to be in a strong position with the ability to fund our near-term needs in all of our projects and initiatives. Now, Terry Stronz, IDT Energy’s CFO will join us for Q&A. And I will turn the call back to the operator to take your questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Okay. Our first question will come from James Hopkins, a Private Investor. Please go ahead.

[James Hopkins:]

Gentlemen, I have a few questions for you. First question, will Genie form a partnership with any other companies to explore the drilling opportunities in the Golan Heights area or are they expecting to do all of it themselves?

[Claude Pupkin:]

Hi, this is Claude Pupkin. We have shown a track record of bringing in strategic or financial partners to different opportunities, where it makes sense particularly if we can find partners that bring a combination of operational expertise and financial resources. So, the answer is we are very open to that although in the exploration program, we are more than comfortable that we have the right team in place to undertake it in our own (should be operating) in anyway.

[James Hopkins:]

Okay. Next question, regarding the Golan Heights area again does Genie have kind of any current data as to the possible oil reserves or gas reserves in the area?

[Claude Pupkin:]

We have some data. And what we have shared publicly is what we are willing to say at this point. We reviewed historical data going back to 1981 just for your information, the Golan Heights was closed to oil exploration for the last 20 years and it was just recently opened up something like six months ago. So, there isn’t a lot of data out there. The data that exists that we got a hold of goes back to some seismic lines, 2D seismic lines, hundreds of kilometers of seismic lines that were short back then, as well as we obtained well logs from a couple of different wells. And by way of background for people on the call, it’s important to note that what happened was we were actually doing work on our oil shale project for IEI down in the Shfela basin in the southern part of the country. And as a point of comparison, our team decided to obtain well logs from other wells around the country and selected a couple from the Golan Heights. And it was by selecting those well logs and finding information there and interpreting it in a different way that had historically been interpreted that we came to the conclusion that we think that there are potentially very attractive commercial quantities of oil in there, in this resource, but there is a lot of work to be done. We haven’t drilled our own wells. We are going to shoot additional seismic lines and do other geophysical testing, which is why we need three years for an exploration program. So, it’s too early to put quantities on it. Having said that, we wouldn’t be spending money and be excited about the opportunity if we didn’t think it was material to both Genie and to the country of Israel.

[James Hopkins:]

Next question, regarding the IEI website, there is a timeframe as far as each phase of the project for testing in demo and commercialization and all that, there is a mention of something about, but maybe by 2015 that there might be up to essentially about 2,000 barrels a day. Given the fact that there has been delays with all of the core systems and the filings and whatnot to get all the right paperwork done, the company still believe that all of the projections on the IEI website are still current?

[Claude Pupkin:]

This is Claude again. We’ll need to look at the IEI’s website. Quite frankly, I haven’t looked at it recently. I do not know what’s on there. I didn’t hear the date that it said that you just…

[James Hopkins:]

By 2015?

[Claude Pupkin:]

2015, no, I would say definitively no we do not think we are going to be producing 2,000 barrels a day in 2015 at this point. You are right that, that’s outdated information and we will address that. In terms of, there have obviously been delays in permitting I talked about this during my remarks. Our goal right now is to get the pilot permitted this year and then constructed and operated. So, I would say that in the best of scenarios, we would be operating the pilot in sometime in – sometime late 2014/2015 which is going to be in the order to hundreds of barrels total per day. Then we would move forward to permitting and constructing this larger scale demonstration program, which we would hope would produce in the order of 2000 barrels a day. So, that’s quite a few years out and you are correct and I thank you for pointing out that the website is out of date.

[James Hopkins:]

Okay. Question regarding IDT, you guys mentioned that you maybe looking to extend to DC, Illinois, and Connecticut this year, were there any plans to move off the East Coast and maybe further inland or even to the West Coast?

[Geoff Rochwarger:]

Hi, this is Geoff. So, the answer is we are constantly looking at the deregulated map and looking at territories and utilities that are deregulated. And it’s not only deregulated, but deregulated in a particular way that, that matches our risk averse model so that it offers a full site of what we call, the ESCO-friendly programs. So, what we have seen thus far in Illinois, which is probably certainly the farthest that thus far that we have looked at, we have commenced and are finalizing our licensing in the ComEd territory in Illinois that will be probably – that would be the first utility, and by far the most deregulated utility in Illinois, it’s quite a large area there. For now, that’s really what we see on the short-term horizon, but there are some movements in some other areas, some other states, but not anywhere near where we believe that we can comfortably acquire meters and generate the returns and the paybacks that we look for as targets.

[James Hopkins:]

Okay. Question regarding the Colorado side and I guess it would apply to the Israel side as well. So, basically the question is that once you guys begin the pilot testing, is there anything specific or maybe not even specific, but is there anything that would happen during testing that would lead you to say okay, instead of saying it’s the two-year test period or a one year test period, you got X amount of data that came back in a positive way or whichever. And you said okay, we believe that we can now move on to the next phase. Is there anything like that or is it essentially once you begin the tests, you know you are going to spend this amount of time on it and so you are just taking timeframe regardless?

[Geoff Rochwarger:]

So, a couple of things, the lengths, the planned length of the pilot test for the AMSO process is actually faster than for the shorter than for the IEI process. They are both pursuing down-hole in-situ heating technologies, but the details, the engineering of the wells under the ground are actually somewhat different and the reporting happens faster in AMSO than in AMSO’s process than in IEI’s process. So, the planned length of the AMSO pilot is in the order of six months could be a couple of months shorter, could be couple of months longer. The planned length of IEI’s pilot is probably closer to about a year. Now, I am going to talk about the AMSO pilot, because that’s the one we are actively operating at this moment. Depending on the results of the pilot, how much of the data we are looking to obtain we do obtain and how positive or not that data is we could on the best case say it’s a very successful pilot and proceed then to the next step, which is a larger scale test. While we are evaluating whether we have enough data from this first pilot to apply for convergent of our research and development lease to a commercial lease or whether we are going to need additional data from the larger scale test to apply or if the pilot test results are not so positive or certain things didn’t proceed exactly as we planned we may need to do another test, another pilot, or just really modify certain aspects of this pilot and run it again. So, it’s a little early to say what the next steps will be, but there are many different paths that we can pursue depending on how good results we obtain, how much of data we obtain to figure out what’s the information that we still need both to convince ourselves and eventually convince regulators that this is a viable process.

[James Hopkins:]

One last question, regarding the in-situ method, most of the information you guys put out is in relation to the number of barrels of oil available. I am wondering once project gets to, and again this is essentially probably years down the road, once it gets to the production and commercialization, do you guys have any data regarding the amount of gas or natural resource whatever. You are essentially using the method to create the oil, but you are also a byproduct I believe was also natural gas if I remember correctly watching the video. Did you guys have any estimates on the amount of gas that’s going to be produced as well?

[Claude Pupkin:]

Yes, at a high level and this gas applies to both the Colorado and the Israeli projects. You can expect a total, whatever total of volume produced in any given time period whether it’s on a daily, monthly, or annual basis will come roughly two-thirds in the form of coil and one-third in the form of gas. And some of that gas depending on our eventual heating methods could be used and is likely to be used for heating the resource effectively to create a self-generating process effectively in energy independent process and any excess that we have we would then sell into the markets.

[James Hopkins:]

Okay, that’s all I got, guys.

[Claude Pupkin:]

Okay, thank you very much for your thoughtful questions.

[Operator:]

Our next question comes from Robert (indiscernible). Please go ahead.

[Unidentified Analyst:]

Alright, good morning. I have had two questions. First one, IDT Energy, you saw a sequential net decline in customers by meters in the fourth quarter, are you seeing resumption of growth now on a sequential basis in the first quarter now that we are coming towards the end of the first quarter?

[Claude Pupkin:]

Geoff?

[Geoff Rochwarger:]

Hi, this is Geoff. To respond to that, as I said in my comments, the predominant driver of the drop in growth during the fourth quarter was directly due to Sandy, where not only did we stop all acquisition efforts, obviously during the hurricane, but actually for a period, some period of time thereafter and then only slowly started to re-ramp up the acquisition efforts. And that’s certainly because we are on the East Coast and the hurricane hit the core territory that we sell in. So, I can’t tell you that number one is yes, we have since the beginning of the year we have completely re-ramped up in terms of the gross meter adds to a similar level that we were doing pre-Sandy. We also and this is something that I have mentioned on some prior calls, the nature of our acquisition engine is such that periodically during the year, probably once every couple of quarters we also take the opportunity to retool the engine. And we have enough vendors and products that we tried to mix it up a little bit and make it more efficient. So, that has been done as well. So, you are – the growth numbers are up, we do feel very optimistic about what we will see in the future months and we are looking for this year, for this calendar year to be once again net growth after churn.

[Unidentified Analyst:]

You actually also are reducing the incentives that you gave to customers as a result of Sandy, is that still being sort of turned down now?

[Geoff Rochwarger:]

Yes. We actually, those incentives were very simply time-specific. They lasted for approximately a month. Those have all been stopped and we have now gone back to our regular programs and regular incentives and offers.

[Unidentified Analyst:]

Alright. Moving on to Genie Oil and Gas, what are sort of the all sort of budgets your capital expenditures should be three-year projects now for AMSO and strata and also for the Golan in terms of exploration expenditures for the current year?

[Avi Goldin:]

Sure. This is Avi. We don’t provide specific guidance for each of the projects individually, but sort of looking at Genie Oil and Gas as a whole, so as you are talking about IEI’s LNG initiatives of the project in the Golan, AMSO, as well as our other sort of development projects. We are looking at that as for 2013 to be sort of in the $20 million range for all the projects.

[Unidentified Analyst:]

That compares to last year?

[Avi Goldin:]

It’s a slight pickup, but specifically driven by what we are looking to do in the Golan.

[Unidentified Analyst:]

Alright. And also a question on do you have the number of the corporate costs ahead of these costs I think in the first nine months it was about $5.7 million?

[Avi Goldin:]

You are looking for corporate for the full year?

[Unidentified Analyst:]

Yeah.

[Avi Goldin:]

So, corporate for the full year 2012 was $7.9 million.

[Unidentified Analyst:]

And is that turning to these normalized levels, I know this is being the first full year as an independent company in that?

[Avi Goldin:]

Yeah, that’s what we are expecting to see on a go-forward basis with sort of standard inflation or modest as things start to grow. As we discussed in the past, the comparable period when we were part of a private subsidiary within public company is not always an apples-to-apples comparison. And it’s also important to remember that, that number includes non-cash compensation.

[Unidentified Analyst:]

Alright. So, how much of that is made up by non-cash compensation from (indiscernible)?

[Avi Goldin:]

For the full year 2012, non-cash compensation was about $2.6 million.

[Unidentified Analyst:]

Alright.

[Avi Goldin:]

I am sorry, you know what I was doing the wrong lines $3.4 million.

[Unidentified Analyst:]

$3.4 million. So, basically reading your underlying corporate costs are somewhere around $2.5 million something like that?

[Avi Goldin:]

Yes, correct.

[Unidentified Analyst:]

And that’s going to be sort of more or less the number going forward?

[Avi Goldin:]

That’s what we are expecting.

[Unidentified Analyst:]

Okay, thanks very much. That’s it from me.

[Avi Goldin:]

Thank you.

[Operator:]

Having no further questions, this will conclude our question-and-answer session and conference call. Thank you for attending today’s presentation. You may now disconnect.

[Claude Pupkin:]

Thank you, everybody.