Kimbell Royalty Partners, LP
Q2 2019 Earnings Call Transcript

Published: 10 Aug 2019

[Operator:]

Greetings and welcome to the Kimbell Royalty Partners Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Rick Black, Investor Relations. Mr. Black, you may begin.

[Rick Black:]

Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the second quarter 2019. This call is also being webcast and can be accessed through the audio link on the Events and Presentation page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, August 8, 2019. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay.I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are forward-looking statements, made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which by their nature, are uncertain and outside the company's control. Actual results may differ materially.Please refer to today's press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings press release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements.I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer. Bob?

[Bob Ravnaas:]

Thank you, Rick, and good morning, everyone. I'm here with several other members of our senior management team including Davis Ravnaas, our President and Chief Financial Officer; Matt Daly, our Chief Operating Officer; and Blayne Rhynsburger, our Controller.I would like to begin by discussing our performance in the second quarter followed by our expectations going forward. Then I'll ask Davis to cover our financial performance in more detail. After that, we'll take your questions.We are very pleased with the cash flow generation, production stability and growth potential across our asset base, especially in a challenging time for many exploration and production companies operating in the U.S. Our rig count remained flat between Q1 and Q2 at 89 rigs and our market share of the entire Lower 48 drilling fleet increased to 9.5% from 9.1%, a testament to the quality of our acreage and operators.For the quarter, we achieved record high consolidated adjusted EBITDA of $21.6 million, up from $16.1 million in the first quarter and up from $7.7 million in the second quarter last year. Oil natural gas and NGL revenues were $27.9 million, up 22% sequentially, primarily due to a full quarter of Phillips revenue, improved differentials and the receipt of over $1 million in lease bonuses.Second quarter average daily production of 11,807 Boe per day was approximately flat compared to the first quarter and was composed of approximately 37% from liquids, 25% from oil and 12% from NGLs and 63% from natural gas on a 6

[Davis Ravnaas:]

Thanks, Bob, and good morning everyone. Total second quarter 2019 revenues increased 78% from the first quarter of 2019 to a new record of $31.9 million. Second quarter 2019 consolidated adjusted EBITDA was $21.6 million, also a new record and up 34% from Q1 2019.Second quarter 2019 net loss attributable to common units was $11.8 million compared to a net income attributable to common units of $1.4 million in the second quarter last year due to $28.1 million noncash impairment. This noncash accounting impairment expense is primarily attributable to the decline in the 12-month average price of oil and natural gas prices and does not impact our operations or our ability to pay distributions or fund acquisitions in the future or anything else.General and administrative expenses were $6.2 million in Q2, 2019 of which $4.1 million was cash G&A expense or $3.82 per Boe, down from $3.95 per Boe in Q1 2019. Noncash G&A in Q2, 2019 was $2.1 million or $1.97 per Boe. Excluding the effect of one-time severance costs incurred in Q2, 2019, cash G&A per Boe was $3.71 and noncash G&A per Boe was $1.67.Cash available for distribution attributable to the common units was $9.1 million or $0.39 per common unit. You will find a reconciliation of both adjusted EBITDA and cash available for distribution at the end of our news release. As Bob mentioned, our second quarter cash distribution was $0.39 per common unit, a 5.4% increase compared to the first quarter of 2019. This represents a highly compelling approximately 11% annualized yield. And because substantially all of this distribution will not be taxable dividend income and instead be a reduction in tax basis, the pretax equivalent yield is even higher. Assuming a 37% effective tax rate, the pretax equivalent yield is closer to 17%.In addition, as announced on our May 13, 2019 press release, we expect that for the next seven years 2019 to 2025, the company will pay no material federal income taxes. For the next four years, 2019 to 2022, substantially all distributions paid to common unit holders will not be taxable dividend income. And for 2023 through 2025, less than 25% of distributions paid to common unitholders will be taxable dividend income. This favorable tax treatment significantly enhances the after-tax returns for the distributions paid to our common unitholders for years to come.Turning now to realized pricing in the second quarter. Average realized price per barrel for oil was $57.55 natural gas per Mcf was $2.44, NGLs per barrel was $19.55 and combined was $25.98 per Boe. We experienced a significant improvement in differentials for both oil and natural gas in the quarter, primarily as a result of infrastructure developments in the Permian Basin.As of 06/30/2019 our hedges were approximately 20% of our daily oil and natural gas production for the next two years. We have provided a table at the end of our press release with additional detail on our hedges.Looking now at the balance sheet. On May 28, 2019 our borrowing base has increased from $200 million to $300 million. At June 30, we had cash on hand of $16.9 million, we had $87.3 million outstanding with $212.7 million under our revolving credit facility in terms of liquidity.As we've indicated before, our plan is to use the revolver to provide short-term financing for acquisitions and our total debt to adjusted EBITDA ratio is a conservative 1.0 times.Before turning the call over for questions, I'd like to provide some overview comments about the mineral space. As you've seen, we've maintained a very active investor engagement schedule this year by attending several conferences as well as meeting with many investors.We have also welcomed additional sell-side coverage on our company. Q2 was a profoundly differentiating quarter between the mineral names and the working interest E&Ps. Kimbell and our peers in the mineral space continue to do relatively well, generating robust cash flow and returns for their shareholders.In contrast, many E&Ps this quarter experienced significant financial and operational distress and modest, if any, free cash flow. We believe that more capital will soon find its way out of marginally successful working interest E&Ps and into the mineral space, as it continues to grow and increase its liquidity in the coming quarters and years.This in turn will increase the attention from generalist investors searching for yield particularly at 11% yield that is tax free. Just to provide a little more detail on regional production trends by basin, the Permian, Mid-Consolidation, Appalachia and Bakken were roughly flat quarter-over-quarter. And the Eagle Ford experienced a decline from strong Q1 production that was offset by significant activity in the Haynesville.As always basin-specific performance within our portfolio will vary from quarter-to-quarter and our strength is in our diversification throughout basins which helps to smooth our production trends over time rather than creating significant volatility from quarter-to-quarter.We believe we have a unique opportunity to continue to lead the way along with our peers in growing the public royalty sector. And with our proven business model and growth strategy, no required capital spending plan at a very robust distribution yield of 11%, we offer a compelling high-yield and tax-advantaged investment to our common unitholders.In addition, Kimbell offers one of the largest diversified royalty portfolios in the mineral space, a best-in-class PDP decline rate and continued record setting performance. This proven strategy enhances long-term value and reduces risk for our unitholders.Despite, a volatile time in the energy industry and in the financial markets at large our sector and our company remain undervalued. Compared to our peer group of mineral and royalty companies, we have been only one of two companies with positive production growth year-to-date and we have distributed the second largest combined dividend amount year-to-date.So while our company has had great performance so far this year, our stock has certainly not reflected it. In fact, as unbelievable as it is to us, our stock currently is being traded around its lowest point since we went public.In addition, we continue to expect that investors will increasingly focus on PDP declines for oil and gas companies which for most are typically in excess of 25% declines or more. We significantly stand out with an average PDP decline rate of only 12% which is the best in our sector.As Bob mentioned a core component to our business model is maintaining a low PDP decline rate, while generating cash flow in excess of that rate. Frankly, we are surprised this model hasn't been embraced by the overall E&P sector and that the market does not seem to fully recognize our competitive advantage.Make no mistake, it is a very tough time for the oil and gas market overall. The XOP Index of oil and gas producers is now at its lowest point since its inception in 2006, lower than even the 2008 financial crisis level. But we expect that our company, Kimbell, will operationally outperform in an environment like this.We have deliberately built the company so that it has the lowest PDP decline rate of 12%, not only of any mineral company, but of any upstream company we are aware of.We have 89 rigs operating on our properties nearly all of which are drilling horizontal wells and growing production. We have a very strong balance sheet with debt-to-EBITDA of only 1 times. We believe our dividend yield, which is over 11% and non-taxable offers an outstanding risk-adjusted return and presents investors with the unique opportunity to invest in the U.S. oil and gas market at its lowest point in the last decade.We are well-equipped to weather this storm and believe the coming months will present the company with attractive acquisition opportunities and that we will come out of this cyclical downturn at an even stronger position than we are today.With that operator, we are now ready for questions.

[Operator:]

[Operator Instructions] Our first question is from John Freeman, Raymond James. Please proceed with your question.

[John Freeman:]

Hi, guys.

[Davis Ravnaas:]

Good morning, John.

[Bob Ravnaas:]

Hey, John. How is it going?

[John Freeman:]

Good. Well. Congrats again on getting this creative joint venture structure done to pursue opportunities on the micro market side. Can you provide any additional details on kind of how, sort of, the structure and this kind of partnership works in terms of -- obviously you've committed the $15 million but does -- this partner. Do they get some sort of a -- just from a high-level perspective, they get some sort of a fee when they bring you a deal? Like just sort of how it works?

[Bob Ravnaas:]

Yes. Absolutely, John. Thank you for asking. It's -- frankly it's one of the things we're most excited about from our company's perspective. I think just one kind of macro comment on it. To the extent that we can finance royalty purchasers or aggregators directly rather than watching private equity folks back these guys and then paying a premium to acquire the assets that would be our preference.We think that strategic combinations like this or partnerships make a whole lot of sense and just kind of cut the middleman out so to speak. So in terms of the arrangement, we do pay them a small upfront fee, which is capitalized and then they have to return that cost back to us plus a healthy return that's consistent with kind of private equity returns.And then if they achieve certain return thresholds on the asset they get a back end that's consistent with how PE works. So rather than getting more specific, I'll just say it's basically a traditional private equity arrangement with an upfront fee with a back end like a PE model. But again kind of cutting out the middleman instead of having two layers of promote there's just one now. So...

[John Freeman:]

That makes sense. And then the partnership you have does -- again just from a high-level perspective does this partner tend to focus on a certain area or region? Or do they kind of pursue kind of a broad-based approach like you all do?

[Bob Ravnaas:]

Yes. Thanks for asking that too. So that was the toughest part about doing this. We've been trying to establish a ground game and find a partner like this for a long time. And as you probably know John there -- I mean look in the Fort Worth Club building that we're in today there's probably 50 guys right now downstairs working out to buy minerals.And the challenge is that they typically focus on one county or just one low area within a county and don't have kind of a Rolodex of relationships nationwide. So what's unique about this partner that we found and we've known them forever, which is kind of finding the right opportunity to partner with them is that they've bought successfully in every major basin in the U.S. And so we've sat down with them and really vetted their track record over the last decade or so and came away unbelievably impressed and have set up certain parameters under, which they're allowed to transact.So it's not -- just I just want to be clear it's not like we're just giving these guys $15 million and they're just going out and do whatever they want to do they have very strict parameters where we have weighting on upside locations, we have assumptions within every basin about spacing we have operator limitations in terms of who they're focusing on concentration limitations. So we put this together really over the course of about the last six months.And we're starting out conservatively with $15 million but we might expand that as you kind of look back at the success of the results. But the PV values that they're able to transact at would really make -- frankly just you blush and it's something that's very attractive to us in an increasingly competitive royalty acquisition market.

[John Freeman:]

Those details are really helpful. And if I was allowed to just sneak one extra question in on

[Bob Ravnaas:]

Sure.

[John Freeman:]

The lease bonus -- you had a very nice contribution from lease bonuses this quarter. And just quite frankly we're seeing kind of the opposite trend with others just given the general macro environment. Just any additional color on that?

[Bob Ravnaas:]

Yes. It's supporting. I would actually say if anything it's kind of, I mean this was a big quarter for lease bonus at $1.5 million. But I mean so far this quarter we have a good amount...

[Matt Daly:]

At least $500,000.

[Bob Ravnaas:]

Yes.

[Matt Daly:]

Yes. John, this is Matt Daly. Just some more detail on the lease bonuses, I mean, I'll call it $200,000 in the Eagle Ford from some of the Haymaker properties. We had about $140,000 in the Marcellus from some Haymaker properties. The biggest allocation was the Mid-Con from Haymaker against $700,000 in Stevens County in the Scoop area of private operator. We had some legacy properties in the Permian lease bonus area so pretty much diversified across our basins.

[Bob Ravnaas:]

Yes. And it's something we haven't talked about a lot historically, John. Because as you know when we went public we had more of the mature asset base that was all HBPed. And now that we've acquired Haymaker and Phillips, we do have kind of a component to our revenue story going forward that will be lease bonus based. And it's something that for obvious reason doesn't really be – we're not really getting credit for it so to speak. So there you are.

[John Freeman:]

That's great. I really appreciate it and well done guys.

[Bob Ravnaas:]

Thank you, John. Thanks for the question.

[Davis Ravnaas:]

Thanks, John.

[Operator:]

Our next question is from Jason Wangler, Imperial Capital. Please proceed with your question.

[Jason Wangler:]

Hi, good morning.

[Bob Ravnaas:]

Hey, Jason. Good morning.

[Davis Ravnaas:]

Hey, Jason. How you doing?

[Jason Wangler:]

Good. I actually wanted to follow-up on that lease bonus question, because I was kind of curious your thoughts with the commentary that you guys mentioned earlier in seeing a lot of rigs being dropped and things doesn't seem like it's really impacting you guys as much. But do you think that's going to be a bigger part of that – of the business as folks try to keep leases? Or how do you kind of see that going as you've got some uncertainty headed in the second half of the year?

[Bob Ravnaas:]

Jason, I'd hate to extrapolate too much based on a couple of quarters of lease bonus success. I think it's going to be more material for us going forward than it has been in the past. But I would hate to make any sort of forecast on lease activity just because it's so sporadic.

[Jason Wangler:]

Sure. That's helpful. And then I mean, you guys talked about the ground game piece in this $15 million commitment. I mean, how far into that are you? How much has been I guess spend? How do you kind of see that playing out? And then maybe just some commentary on some larger M&A kind of what you're seeing because of what we're seeing in the market would be helpful?

[Bob Ravnaas:]

Sure. Sure. Good question. So of the $15 million, I think they've drawn down $2 million to $3 million of it so far. We've funded $2 million to $3 million. So, good progress already, we're only like a month into this now. And we've got to look under the hood on what they bought and have been very impressed. And then on larger M&A opportunities we're looking at really kind of a record amount of deal flow. I know we say that, every quarter but it's just amazing. This space is just exploding. A lot of its PE guys looking to exit and we've touched on that multiple times in the past.But also just kind of some interesting M&A discussions we're having with other companies that frankly working interest companies, or companies in other sectors that just have minerals within their portfolio, and aren't getting credit for it, so trying to structure something creative with them where we can do an accretive deal that highlights the value of the minerals they have in their portfolio. So we're trying to be creative. And again, I've said this in the last couple of quarters. But I'd be disappointed, if we didn't announce another large M&A deal by the end of the year that's financed with units. So -

[Jason Wangler:]

I appreciate. Thanks, guys.

[Robert Ravnaas:]

Thanks, Jason.

[Operator:]

Our next question is from Welles Fitzpatrick, SunTrust. Please proceed with your question.

[Welles Fitzpatrick:]

Hey, good morning.

[Bob Ravnaas:]

Hey, good morning, Welles..

[Davis Ravnaas:]

Hey, good morning.

[Welles Fitzpatrick:]

Can you give a breakout on the lease bonuses this quarter? Is essentially all of that new leases or is some of that renewals? And if it is could you break that out?

[Matt Daly:]

Yeah. Yeah. They're going to be almost entirely on new leases new activity not renewals.

[Davis Ravnaas:]

The biggest one was actually a working interest conversion, right? So we have a bunch of – well I'm not sure if you're familiar with this. But in many cases if you go – if you're given the opportunity to drill you can deny it and then you back into a royalty payment after I think a payout typically of what three times or something to the operator. So we have a number of – and that's a legacy – that's a Haymaker thing that's been going on frankly, forever with those guys. So that's one component too within lease bonuses or these working interest conversions, but they're mostly new leases otherwise.

[Welles Fitzpatrick:]

Okay. Okay. Perfect. That makes sense. And then can you talk to what you're seeing in the markets for mineral prices? I mean, it's still holding up pretty well or are people anticipating maybe more of a drop in the rig count as these E&Ps move to that seems to be free cash flow positive as you noted in your comments?

[Davis Ravnaas:]

Yeah. Well, first of all thank you for picking up coverage on us excited that you did and we appreciate that. And as you kind of get to know us a little bit better I think one thing we'd say is the commentary you're going to hear from some of our peers about royalty acquisitions really doesn't apply to us, because we don't buy in the same way that any of them do. We really don't look at dollar per acre figures. And so while I agree with you, it's almost ridiculous.In the Delaware Basin, if you're paying $20,000 in net royalty acre, a year ago when oil was over $60 that figure doesn't change, when oil drops down to the $40s. And so we've never liked that approach. It seems to be kind of a simplistic land focused aggregation strategy that doesn't look at engineering and geology and just math, which is what we do. And so when we transact it's typically on or it's always on next 12 months forecasted cash flow assuming very reasonable development pace and DUC completion schedules and the like.So for us the transaction multiples are always – the price that we're willing to pay is going to change up and down with commodity price movements whereas for most of our peers it will not. So that's why I think that – again, that's why I think we've been successful in the past. And we're just not interested in playing that game of guaranteeing our investors 80% year-over-year production growth forever, because it's just not realistic. So we're just different in that respect. So –

[Welles Fitzpatrick:]

Perfect. Now – that makes sense. I appreciate it.

[Davis Ravnaas:]

Thank you.

[Operator:]

Our next question is from Betty Jiang, Credit Suisse. Please proceed with your question.

[Betty Jiang:]

Good morning.

[Bob Ravnaas:]

Good morning, Betty.

[Davis Ravnaas:]

Good morning.

[Betty Jiang:]

Can you give an update on the unconventional assets in the portfolio? How have they performed relative to expectations? The rig count that seems to be holding pretty flat, so just wondering the momentum there is showing up in production and cash flow?

[Davis Ravnaas:]

Sure. Sure. So we actually just did a look back on how performance has trended on our Phillips and Haymaker assets from when we underwrote them to present, and they're outperforming together by about 11% since we underwrote the acquisition. So I think that's a -- we always like to see that that we've been conservative in our underwriting forecast that they tend to outperform.General trends, I'd say that activity seems to be kind of bouncing around from basin-to-basin. Last quarter was very strong for us in the Eagle Ford. This quarter it was not as strong. It was down from last quarter, but the Haynesville was up. So over time, we do expect that unconventional volumes are going to continue to increase. They've more than offset the PDP decline on our assets year-to-date. Bob or Matt any other...

[Matt Daly:]

Hey, Betty, this is Matt. One comment on the Eagle Ford, we had about 165 Boe per day temporarily shut in as they fracked wells nearby. So pro forma for that and we're taking the production up to 11,972, which would have been all timely new record. So it's a temporary shutdown -- shut and hopefully this will come back online in Q3.We also have three new large net revenue interest wells can be aligned in the Hanesville right now, and they peaked out -- probably they'll peak out sometime in Q3 as well. So there is 10.5% net revenue interest wells, which is very big for us.

[Bob Ravnaas:]

Yes. Yes.

[Betty Jiang:]

Great. Now, that's helpful. And then just that $165 million is a net number net to you guys?

[Matt Daly:]

Net to us, yes.

[Bob Ravnaas:]

Yes, that was -- yeah and corns and content we'll see that kind of go down.

[Matt Daly:]

Yeah.

[Betty Jiang:]

Got it. And then on M&A, we do -- we are hearing more and more E&P operators highlighting in-house royalty assets. Do you see more competition from operators, who can arguably pay more for royalty assets under their own land?

[Bob Ravnaas:]

Yeah. Again, it gets back to what I said before. If we were a private equity back group that bought non-producing acreage ahead of the drill bit that would be a huge concern to us, because you're going to be competing against the operators that know where the drill bit is going. It's not -- I mean I don't think we ever had an operator compete with us ever in 20 -- maybe once in the last five years. We've had an operator...

[Matt Daly:]

And on that it would be a conventional asset, where they would just want to increase the net revenues. So yeah, on an unconventional...

[Bob Ravnaas:]

Yeah, exactly. So no, Betty that hasn't been a concern of ours. I would say that -- I think you're right though. I think that for some of our peers, that's going to be kind of a headwind they're going to face on acquisitions.

[Betty Jiang:]

Got it. That's helpful. And then one last thing, just on the second quarter, pricing realization is fairly strong across the board. You saw narrower oil differential and then NGL realization was flattish despite the Mont Belvieu pricing was weak during the second quarter. So just -- maybe help us understand what's driving that strong pricing? And would these pricing dynamics continue?

[Bob Ravnaas:]

Sure. I'll start and then Blayne and Matt you guys jump in. So, on the oil front, I think that's largely just a result of infrastructure improving in the Permian. So everything we've got there has dramatically improved in terms of differential improvement. Any other comments you guys have under that?

[Matt Daly:]

The main driver of the oil was for the Permian improvements.

[Bob Ravnaas:]

Okay. And then gas I guess just because the Haynesville got better depths than anywhere else. Yeah, so…

[Matt Daly:]

Yeah. So gas differentials were, I believe 5% versus 8% in Q1. If you go back and -- if I were you guys in terms of modeling this I wouldn't take -- and I guess oil was 4%. If you take a look at the last two or three quarters maybe use an average of those as your modeling forecast.

[Bob Ravnaas:]

For gas, for gas.

[Matt Daly:]

Yeah. The last three quarters for gas and maybe for oil 4% right at the bottom tick levels. So my point is that you're going to do this to be conservative. I'm looking maybe take that number and average out a couple of quarters and use that for forecasting. Differentials are very hard to predict quarter-to-quarter. So in NGL I mean really no comment there. That's -- we're so diversified. It's sort of we can't really pinpoint one particular area driving that differential.

[Betty Jiang:]

Got it, great. This is helpful. Thank you.

[Bob Ravnaas:]

Thank you, Betty.

[Operator:]

Our next question is from Tim Howard, Stifel. Please proceed with your question.

[Tim Howard:]

Hi, thanks for taking my question. I was just wondering if you can provide an update on any thoughts of the private equity ownership. We received a lot of questions on potential sales given the lockups and fully understand this is tough question to answer. But given kind of how KRP has traded recently, the volatility it's surprising to us as well. So I don't know if there's anything that you could provide feedback that you're hearing from them just maybe a piece of the market a little bit? Thanks.

[Bob Ravnaas:]

Yes sure. Thanks for the question Tim. Yeah. It's funny we get questions about our private equity ownership but it's only about, what 25% of our total company, whereas, any of our peers that were private equity-backed or 80% or 90% owned by private equity sponsors. So we actually have a lot less of an overhang than some of our peers do.But on that front we look at it as a positive longer term for the company in terms of improving float and liquidity. So -- and this last -- Kayne Anderson I think it's been publicly announced sold out 3.2 million of their 3.6 million shares I think last quarter. And they were able to do it at a 6% discount, which on a smaller more liquid stock like ours is amazing.So I think that that -- and some of that stock went to some very prominent investors that we're very pleased and flatter to now have as long-term holders. So I think that speaks to the fact that there is a market for our stock. People want our stock and we don't have a whole lot of float. But when they have opportunities to get their hands on some of the stock they tend to take it at tight discounts. So we're not super concerned about overhang. We certainly haven't heard anything that makes us think that there's some huge share dump that's imminent. I think it will be kind of an orderly process over the next couple of years. And again it's not a huge amount of our stock relative to some of our peers, so.

[Tim Howard:]

Appreciate that. Thanks.

[Bob Ravnaas:]

Thank you.

[Operator:]

Mr. Ravnaas, there are no further questions at this time. And I would like to turn the floor back over to you for closing comments.

[Bob Ravnaas:]

Thank you. I'd like to reiterate that we are very bullish on our company and the royalty sector overall. We'll be on the road quite a bit more this year at a number of investor conferences, telling the Kimbell story and broadening the outreach along with our peers in the mineral sector.We look forward to the second half of 2019 and the opportunities that lie ahead. We thank you all for joining us this morning and look forward to speaking with you again when we report third quarter results. This completes today's call.

[Operator:]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.