Q1 2020 Earnings Call

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At this time all participants are in a listen only mode. A brief question answer session will follow the formal presentation.

If anyone should require operator technical assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

And it's now my pleasure to introduce your Speaker Douglas Kris. Thank you Mr., Chris you may begin.

Thank you and good morning.

Thank you for joining us for the montage resources first quarter 2020, <unk> earnings Conference call.

With me today are John Reinhart, President and CEO, Michael Hodges Executive Vice President and CFO.

Well I called <unk> Executive Vice President and COO.

Matthew Walker Executive Vice President resource planning and development.

If you have not received a copy of last night's press release regarding our first quarter 2020 financial and operating results.

Finally copy on our website at montage resources Dot com.

Today's discussion will highlight the companys operational and financial performance in the quarter.

Before we start our comments I would like to point out our disclosures regarding cautionary statements in our press release.

To remind you that during this call montage management will make forward looking statements.

Such statements are based on our current judgments regarding factors that will impact the future performance of montage resources.

Our subject to a number of risks and uncertainties.

Many of which are beyond monetized resources control.

Actual outcomes that result could materially differ waters expressed or implied or forecasted in such statements.

Information concerning these risk factors can also be found in the company's filings with the FCC.

In addition, during this call we do make reference to certain non-GAAP financial measures.

Reconciliation to applicable GAAP measures can be found in our earnings release.

We expect to file our 10-Q later today, which will be accessible through our website, where the fccs Edgar system.

I will now turn the call over to John right Heart, our president and CEO.

Thank you Doug and thank you to everyone for listening tour call.

Before I address the first quarter results I want to touch briefly on the steps we had taken in response to the cobot 19 pandemic to protect the health and safety of our employees and our service providers as well as the efforts we have taken to provide for the continuity ever business.

The company's operations continue to run safely in smoothly in the field, while adhering to our own stepped up screening and does that seem procedures that were put in place Warner field work sites.

We greatly appreciate the leadership within our field operations as well as the cooperation hover numerous contractors and ensuring compliance with the additional safety protocols that had been enacted.

And our corporate office employees had been working remotely in accordance with the policies of local regulatory authorities.

As well as companywide restrictions on all non essential business travel.

We remain committed and taking the necessary steps to protect the safety and health of our employees contractors and stakeholders.

Montage is well positioned to navigate through the challenges other current commodity market and broader industry conditions. The balance sheet has remained at top financial priority for us.

And in this economic environment that remains a key focus.

Over the last year, we have continuously focused on reducing our cost structure, keeping our financial leverage low and maintaining capital discipline.

As a result, we're navigating this challenging operating environment with ample liquidity of approximately 328 million as are the end of the first quarter.

We are managing the business well they focus on free cash flow generation and believe the improving natural gas macro or father will farther allow the company to create significant shareholder value.

With the multiyear runway of ample liquidity no debt maturities for over three years development plan flexibility and efficient execution capabilities, our priority will be to deploy free cash flow from organic cash flow generation and noncore asset sales towards debt reduction rather than an acceleration of activity well.

The deleveraging process further enhancing the equity valuation.

We continue to demonstrate the highly commercial mindset of the management team all the company's operations, where the strategy that prioritizes capital efficiency cost reductions balance sheet protection and they focus on cash flows.

You'll recall in 2019, we announced the renegotiation of one of our legacy processing agreements that provided for an immediate production and processing fees along with the continuation of our ability to fully reject ethane in exchange for the dedication of our Ohio Marcellus acreage.

During the first quarter of 2020 montage announced the successful renegotiation of our existing gas gathering agreements that will provide incremental value to our business. Starting this year and will continue for years to come.

As part of this agreement montage received an immediate reduction and gathering fees in its Utica dry in Ohio, Marcellus areas that is expected to generate approximately $200 million of undiscounted gross cost savings over the life of the contract.

In addition, the new agreement eliminates any potential obligation for montage to incur a feature capital cost for gathering pipeline or related facilities construction, allowing us to focus our spending on developing our prolific oil and gas reserves rather than on capital intensive midstream assets.

We're very pleased to remain partner with our legacy gas gathering provider to ensure operational continuity and consistency as they commit to provide future gathering infrastructure to our Ohio, West, Virginia, Marcellus and Utica development in the months in years ahead.

Over the past year montage has delivered on its targeted production within the context of a significantly lower capital spend and lower operating cost structure, all while achieving or exceeding our respective guidance metrics and analysts consensus estimates.

The current operating environment reinforces the importance of being a low cost producer with high quality assets, maintaining a top performing execution team and possessing limited contractual commitments.

Our expectation going forward is for continued success as we pursue additional operational efficiencies commercial contract renegotiations and service cost reductions that will be incremental to the gains realized to date.

During the first quarter of 2020, the Companys average daily production was approximately 611 million cubic feet equivalent per day, which was 3% above the midpoint.

Cover guidance range and above the analyst consensus expectation.

This production mix was approximately 80% natural gas and 20% liquids.

We anticipate the production mix shifting more meaningfully to dry gas over the next several quarters with our strategic shift towards activity and capital spending in the dry gas Utica area, allowing us to capture upside from the improving natural gas pricing outlook.

Production cost for the quarter were $1.28 per Mcf fee, which was better than the midpoint of our guidance range for the quarter and analysts consensus expectations. We continue to work with our service providers and leveraging our volumes and remain activity in order to further drive operating expenses lower in 2020.

The company's total revenue was approximately 133 million for the first quarter and we were able to deliver an adjusted EBITDAX of approximately 62.7 million for the quarter, which slightly outpaced analysts' consensus expectations. In addition, during the first quarter, our cash operating margin came in at 44%.

Or $1.13 cents per Mcf fee, approximately 17% better than the reported peer average of many of our significantly larger producing Appalachian peers, which I believe is a substantial accomplishment for the company of our size.

During the first quarter of 2020, the company drilled four gross Utica dry gas wells and completed four gross Marcellus wells, all within our Monroe County stack pay area.

The execution team has been able to perform at a high level of efficiency, while completing an average of approximately 10.5 stages pump per day during the first quarter.

Also during the quarter, we turned to sales three gross wells all of which were Utica dry gas wells in Ohio.

As we continue to focus our 2020 plan on Utica dry gas activity to capture the dramatically improving natural gas macro we're extremely pleased by the strong operational results achieved that impact our development efficiencies.

The team continues to drive our spud to sales cycle times lower what's your now approximated 130 days in our 2020 plan. This represents a 10% improvement over the impressive 2019 corporate results as a reminder, the 2018 cycle times achieved or 220 days spud to sales.

With the current 2020 estimates realizing a 90 day improvement relative to the pre merger execution history of the company.

While our near term focus is on converting our Utica dry gas resources, we continued to be encouraged by the well results in our Ohio Marcellus development area.

Which are producing condensate yields above our type curve expectations.

These liquids rich Marcellus wells highlighted development advantage evercore stacked pay area in West, Virginia, and Ohio.

In addition, our flat castle area in Pennsylvania, which encompasses approximately 95 undeveloped dry gas locations continues to see production results from our pain or to each well that is trending at or above a highly economic 2.4 Bcf per thousand foot you are.

This dry gas inventory in northeast PA is beginning to compete for capital as we look forward into 2021 development.

Looking now at our revised 2020 plan, we have lowered the company's expected 2020 full year capital spend by an additional 10% since our latest downward revision in the quarter to a range of between $130 million to $150 million. Following the further optimization of development activity and additional costs.

Deficiencies realized during the first quarter.

This marks our second leg down in capital spending year to date and is now 30% below the initial plan laid out in early February and is 62% below our capital expenditures expenditures in 2019.

The drilling and completion capital will be allocated approximately 80% to 85% to the Utica dry gas area in 2020, and 65% weighted to the first half of this year.

As forecasted spin incorporates additional well cost savings that equate to an $853 per foot of cost in our Utica dry gas area.

And $665 per foot and our Marcellus area and represents a savings of approximately 10% compared to our 2019 prior plan.

Similar to monetize this actions in the first quarter of being an early mover and reducing capital expenditures and refocusing on natural gas given the lower commodity price environment and improving gas macro outlook. The company will continue to dynamically optimize the development of or high quality asset base in order to maximize the fundamentals.

Value of our company, while preserving balance sheet held in full year 2020 cash flow generation.

[noise] due to the recent downturn.

In oil price movement and demand destruction from the Cobot 19 pandemic in April the company shut in low margin production and its liquids rich producing area.

He shut ins primarily impacted the Utica condensate production.

In early made the company's subsequently begin increasing its condensate production with the improvement of oil prices and cash margins and expect some level of marginal shut ins to continue as industry conditions and cash margins improve which dictate the resuming production from the remain in effect of wells.

Based upon current oil prices the company expects to curtail production to have a negligible if any negative impact on its second quarter cash flows.

Given the expected increase in oil demand. This summer it is likely that the remaining deferred production will be brought back online over the next month or to.

The company is adjusting its full year 2020 production guidance to 555 to 575 million cubic feet today from the previous 570 to 590 million cubic feet today, approximately 3% lower based upon the midpoint of these guidance.

This adjustment accounts for the prudent second quarter cash flow preservation production deferments, while retaining the flush production from these curtail wells for production late in the second quarter. We're early in a third quarter in a much improved pricing environment.

In summary, the first quarter has been another very solid quarter from Antosh.

Team has been very responsive early in the second quarter and preserving value over high quality production base and continues to optimize the development playing geared towards full year cash flow generation balance sheet protection and liquidity position.

We remain in a relatively strong position to navigate the changes in the macroeconomic and industry environment and is situated well to realize value uplift in the improving gas pricing outlook.

With that I'll turn the call over to Mike.

Thanks, John.

During the first quarter. The company continues to achieve strong results in almost every area of the business.

Adjusted revenue for the first quarter was approximately 142 million and adjusted EBITDAX was approximately 63 million both of which have allowed montage to solidify its financial strength, despite a weakening commodity price environment.

Given adjusted EBITDAX for the quarter outpaced capital expenditures by more than $10 million. Despite a significantly front loaded Capex program for 2020, you can see that montage is well positioned to deliver on it stated plans for free cash flow generation in 2020.

During the first quarter, our all in realized price with $2.56 per Mcf, he including the impact of cash settled derivatives and excluding firm transportation.

I would remind you that only 60% of our growth marketed gas volumes are committed to long haul firm transportation agreement and that we have a diverse sales portfolio that access is multiple market along the Gulf coast in the Midwest and other premium locations with these agreements.

Said another way, we are mitigating basis risk, while maximizing flexibility through a combination of low commitment level and the variety of our sales locations a unique combination amongst the most of our peers in the Appalachian Basin.

We are continuing to reap the benefits of our unique ability to sell commitment free natural gas into underutilized firm transportation assets owned by others at prices were which were at a premium to in basin benchmarks.

Uncommitted volumes have underappreciated value as they provide solutions. The challenges others are facing we remain open to a variety of ways to capture this latent value as industry production levels trend lower in the near future.

On the liquid side, we realized a 15 dollar and 23 cents per barrel NGL price equating to 33% of WCS WTI, excluding cash settled derivatives.

Our production sales volumes at Mont Belvieu prices and without ethane recoveries should allow us to continue to realize better overall NGL economics going forward and we're looking forward to the opportunity to sell our recovered ethane at gas pricing in the near future once the shell Cracker comes online.

Given we currently receive a little or no value for any recovered ethane once transportation and fractionation costs are considered the value uplift provided by disagreement in 2021 will be immediately accretive to our EBITDAX with no capital requirements or take or pay obligations to montage.

Our realized oil price during the first quarter of $39.64 per barrel implies a negative fixed dollar 53 cents differential WCS WTI, which is inclusive of all transportation expenses, but excludes cash settled derivatives.

This differential was significantly better than our guidance and analyst consensus expectations simply as a function of the timing of sales volumes during the first quarter being weighted towards the early portion of the quarter at a higher price level as compared to the straight average of the monthly index prices for the quarter.

Going forward, we expect oil price differentials for the remaining nine months of 2020 to be largely consistent with our historical differential and average between $7.50 and $8 a 50 cents per barrel.

Our full year oil differential guidance range is lower than our forward quarterly outlook as a function of the lower average of the strip price for the remainder of the year as compared to montage is oil revenue in production being heavily weighted to the first quarter.

As John mentioned earlier, the company has curtailed low margin production in Q2 that lies in our Utica condensate area, which we forecasted as having a little or no impact on our upcoming quarterly cash flows at current strip prices.

As the oil market dynamic improve these wells, we'll continue to returned to production and realize value in excess of what would have been realized in the current pricing environment. In other words, we believe we're protecting and ultimately enhancing 2020 cash flows with this proactive decision to curtail this low margin production.

For the first quarter, our $52.4 million of capital expenditures, which was better than analyst consensus expectations consisted predominantly of $50.3 million in drilling and completion capital and $2.1 million inland and other capital our first quarter capital expenditures, which went almost entirely to the.

Drill bit were approximately 37% of our expected full year capital expenditures and we expect our second quarter capital spending will be about two thirds of the amount of our first quarter spending before the capex cadence slowed considerably in the second half of 2020.

With respect to our current hedge position. We're pleased that we have hedged approximately 66% of our 2020 natural gas production at prices well above the current strip price.

While we are encouraged by size of improving macro trends for natural gas supply and we believe the better days are ahead, we remain committed to a disciplined approach to hedging our cash flows and we will look to add to our 2021 and 2022 positions in the months ahead.

You will notice we have added significantly to our 2021 gas hedging position since our last update with our structure substantially weighted towards collars to capture pricing upside as we will continue to act opportunistically to layer in hedge position in this disciplined fashion going forward.

As a reminder, we have approximately 61% of our oil production hedged in 2020 at an average floor price at $57 in 13 cents per barrel.

Finally, and perhaps most importantly on the financial side of our business. We've recently concluded our spring borrowing base Redetermination and we're very pleased with the outcome from our lending group, which resulted in a fully committed borrowing base of $475 million.

Despite significantly lower bank price decks that resulted in a more than 12% average reduction of our Appalachian peers borrowing base level. This commitment from our bank group reinforces the strength of our asset and the underlying value of the expected future cash flows from our proved reserves.

We continue to maintain more than $300 million or liquidity and a leverage ratio of 2.1 times, which we believe positions montage as best in class amongst mid cap gas companies from a financial perspective.

In addition earlier in April our credit rating with reaffirmed by Moodys. Despite the decline in commodity prices. This is a stark contrast from nearly all of our Appalachian peers, who have seen their credit grade rating downgraded at least one and often multiple times over the last 12 month.

To summarize what the investment community beginning to recognize the improving gas macro for later this year in in 2021, we believe montage is well positioned to provide for significant share price appreciation.

I'm not aware of another company of similar size in the upstream space that can balance cash flows at current strip prices and modestly grow production well boasting a leverage profile of approximately two time and immediately available liquidity of more than 35% of its enterprise value.

Said another way I believe montage has a unique value opportunity that provides both tremendous upside through its assets an execution, while delivering downside protection through with low pro leverage profile and ample liquidity.

On that note John will wrap up the prepared remarks.

Thank you Michael overall, we remain thoroughly impressed with the montage team and their push to enhance the value of our asset base in our company as we distinguish ourselves through operational financial execution.

Our strong performance demonstrates our focus on capital efficiency and positions montage for shareholder value creation into the future. We thank everyone for joining US today. This concludes our prepared remarks operator, please open the lines for questions.

Thank you we will now be conducting a question answer session.

If you would like to ask a question. Please press star one on your telephone keypad a confirmation someone will indicate your line is and the question Q. You May also press star too if you would like to remove your question from the Q.

For any participants using speaker equipment, it may be necessary for him to pick up your handset before pressing the star keep one moment. Please while we now poll for questions.

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Our first question comes from Brad Heffern with RBC capital markets. Please proceed with your question.

Hey, good morning, everyone.

A question on the turn in line cadence can you just talked through.

No what that looks like for the rest of the here and it sounded like in the prepared comments that all the one Q turn in lines or dry gas where are the the remaining Marcellus turn in lines concentrated.

Hi, Brad This is Matt. So we did turn in line three dry gas wells in the first quarter.

Our cadence.

From there we if we have seven turn in lines here in the second quarter and that's a mixed between our Marcellus.

At our our dry gas as well and then kind of wrap it up the year into late Threeq you.

We have another four four well dry gas pad it will be turned in line, so that kind of wraps up the T O cadence for the year.

Okay great.

And then.

There was a reference to noncore asset sales and the prepared comments, but then you also talked about how the flat hassle asset is starting to compete for capital more. So can you talk about how you view that at this point and then maybe what you see falling into the noncore bucket. Thanks.

Yes, no a thanks for the question Brad This is John.

What I will tell you is similar to our approach to this since the merger and even just for some of US prior to that this team always looks for commercial opportunities to accelerate value whether its assets. It's not on the current near term drill schedule.

Or other assets.

Considering like midstream infrastructure or for instance, the fly cast. One particular is is a chunky block. So as we look forward to 2021 and the gas macro environment a much improved from a pricing perspective, we're looking certainly towards flat castle as being a potential area.

For us to employ capital and dry gas area.

Also along with that our position hasn't changed we feel like did given the current pace of development. This price environment accelerating value with some partial sell downs in some kind of a.

Traditional partnership up there makes a lot of sense. So what I'd tell you is that we are consistently looking for opportunities to to look at noncore assets or assets that aren't near term and extracting value from it which includes the flag castle, which also by the way to your point.

We're looking to so in that makes for 2020 development capital. So hopefully that answers your question and how we look at that.

Yeah, that's great. Thank you.

Appreciate the question. Thanks.

Thank you.

Our next question comes from done Mackintosh with Johnson Rice. Please proceed with your question.

Hi, Good morning, John This is actually comes associate Austin on on the call.

Just want to say can what happened recorded.

She said first question is.

Yes.

Downstream gallium gathering fashion marketing agreements.

Impact on cash production costs over to you and could you will see further reductions on that front.

Yes. This is Michael I'll take a shot at that and then certainly John can jump in I think.

The agreement that we announced in the first quarter is certainly a win for US I think you know as you look out with our guidance for 2020, we still in that dollar 25, Dollarsthirty five range. I think you know for this quarter were about $1.28 I think as we move out there some opportunity for us to Tobias ourselves a little bit lower there.

I think if you look back at last year 2019, we started the year I think our operating cost guidance was all the way up at $1.60. So made a number of improvements there whether it's been on commercial agreements or with the execution of the team out in the field and I think as we go out this year, we'll continue to see some ways to improve in addition to just those commercial agreements that you mentioned, so there's still some other midstream market.

Being type agreements that were working so hopefully we'll have some success with those later in the year as well, but at least for now I would say, we're comfortable with where the guidance. This it hopefully we'll be able to push toward the lower end of those numbers.

Thank you for the color and my follow up is on a unit called condensate shut ins at what point, the all which all considered bringing those volumes back on.

No I appreciate the question this is John.

Okay and to give you a high level perspective, there we add initially shut in these the bulk of the volumes in that April timeframe that were impacted by prices. It went down in those low teens air young condensate as it reminded everybody our oil prices are based off WCS minus a fixed differential.

So we're really following the differential in that being said as well as a WCS price as we kind of progress through April and into May we saw the index actually improve and subsequently we have been adding back volumes as pricing dictates you can think about this bucket in the Utica condensate area is a wide range maturity.

Maybe from a well perspective, so the margins very slightly but we have added significant production since the initial shut in back we anticipate production basically to be back fully online considering the current prices in the next month to month and a half.

So you can view that kind of mid Twentys is generally speaking where these become economic and positive margins I'll. Just finally comment on the fact that we're very pleased that we had the flexibility to be able to make very prudent economic decisions with regards to these these production these producing assets, meaning that we don't have a lot of.

Vcs are fts or other triggers it really makes us or forces us to produce that whenever oil prices tank, considering NGL prices and gas prices right now.

Became low or negative margin, we immediately went to preserve cash flow and that's what this team does.

So not only are we to Michael's comments in the script preserving our cash flow loss or leakage in Q2 actually whenever you run the iterations on the models and look out into flush production in Q3 in Q4, we're actually improving our cash flows for the full year. So very prudent actions by the team production is beginning.

To ramp up already since the low.

And we'll continue to ramp on production is said oil price kind of settles in that mid twentys to to high Twentys range. So hopefully that answers your follow up question.

Thank you very much for the color.

Yes.

Thank you.

Our next question comes from change I'd say go with Stifel. Please proceed with your question.

Hey, this is William and filling in for Jane My question is how should we think about second quarter production mix given that production is going to be down a little bit and it's like any different from four yard.

Actually mix and then.

What about condensate basis differentials.

Yeah, I think second quarter production makes this is likely to be largely similar. This is this is Michael I think to matts comments earlier, we've got we had some dry gas production come on in the first quarter that ultimate bleed over here into the second quarter it'd be pretty flush, though and they would get a couple more passes as Matt mentioned that are really a blend of the too. So I think I think that kind of mixture that you.

See you promise in the first quarter is probably similar I think as we move later in the year into 2020, and then also out into 2021 that starts to trend a little bit Gassier and you know as far as kind of the shut ins go I mean, certainly to the condensate is impacted by that I think I mentioned in his prepared comments the first quarter will be our largest quarter from a condensate.

Given really that was the case just based on the production mix from 2019, and so we go out in the year. The condensate numbers are a little bit less and certainly the value that we receive for condensate in the first quarter looks like it'll be some of the best value that we'll see for the rest of the year. So.

Hopefully that answers your question.

Great and then could you. Please provide some color on capex cadence for the remainder of the year and.

Are there still capex savings to be realized.

Yeah I'll take the first part of that question and then either John or OLED can can jump in on the second part so on the cadence side. We certainly spent well we think is the majority of our kind of the largest quarter I would call. It here in the first quarter about 37% of our Capex for the year. We think we spent here the first quarter. So I mentioned in his prepared remarks, but I think second quarter will still be.

Little bit higher than say third and fourth quarter will be so without getting too specific I think you'll see the number not down a little bit in second quarter, and then further slow as we get into the third and fourth quarter, but the cadence.

It will certainly be front half weighted I think about 65% has been our general guidance for the front half of the year I know John or will that you just want to comment on that yes. Sure. This is all that because we look at continuing throughout the year, we are continuing to squeeze recycled which translates into a lower capex spend on a pro will basis.

Frankly acceleration of production as well and we're continuing to see reduction in service calls across the board you know anything from drilling services to go which was services will probably dictated by overall broken activity nationwide. So we're very hopeful who will see continuing.

Service cost reductions and Capex reductions, even beyond what weve communicated.

Great. Thanks for the color.

Thank you.

Our next question comes from Irene Haas with Imperial Capital. Please proceed with your question.

Yeah, Hi.

Maybe give us a little color on these intimacy intermittent shut in.

How do you do it seems like you can bring it back pretty quickly without much damage. The reservoir and then also you know.

No liquid.

Condensate.

In basin end users or do you have a destination, that's my niece and my questions.

Yes, Irene Thanks for the question now I'll address your first question and then Michael can can hit on your second.

With regards the mechanics of the shut ins the teams can do this.

Very quickly and I guess to more directly in pointedly answer. Your question. There is no degradation to the overall reserves in the ground for US. This reservoir needs are fairly new develop well still there is sufficient pressure to kick off the these wells so for us, it's more or less as simple as going out prioritizing economically.

What you want to curtail you shut in those volumes and then as pricing dictates. The guys go back and literally opened the valves up and nominate the at the gas in the oil and start flowing again. So consequently, you know the the actual mechanics of it is pretty simple, we're very again focused on the X.

And omics of it and there is a bit of flush production to think about whenever you bring these wells back online you had the capability with the pin up pressure to produce a little bit more upfront in a false back one its natural decline. We look forward and we will continue to take advantages flush production in a much improved pricing environment as we moved into May and ended June and July.

So hopefully that answer your questions about how simple it is to kind of go out and toggle. These things on and off it truly is a simple is kind of turning some valves and Michael Yes, I think on the condensate question Irene I think it's a good question I have for montage.

Our condensate contracts I think John had mentioned earlier, there really call on mid term kind a six month 12 month type contracts, they're all fixed differentials to WT I, so as far as in basin differentials widening out that really hasn't had an impact on us you'll notice that from my first quarter results.

As far as where the end users users get I mean, we have two main counterparties theyre very large kind of well known counterparties that we sell to they take it from that point and move it downstream. So we really don't have any additional counterparty risk I do think as far as in the basin goes there's been some of our peers that it seems the basis why now.

Thank you you know if if you have any.

Issues with your your providers, taking your barrels there are other options.

Storage options and other markets that you can take the barrels to but you're going to see much higher differentials when you do that so.

So far anyway, the economic decision for montage has been to curtail.

Not pay those additional costs those can be you know three four or $5 to take advantage of some storage opportunities, but thats certainly community when you're looking at a pretty low WT I press anyway. So we're aware of those others I think for US It makes sense, given our low commitment levels with our lack of ft commitments and nbcs to just make the most prudent financial decision and preserve the cash.

Hello for later in the year when it actually to John's point earlier is incremental to our total year cash flow.

Great. Thank you.

Thank you.

Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

There are no further questions at this time I would now like turn the floor back over to management for closing comments.

Well. Thank you everybody. We appreciate your participation on the call today.

Into our first full results, we look forward to share with you.

Our second quarter results and our efforts in the upcoming calls so have a great day and appreciate your time.

Ladies and gentlemen, this concludes todays telecast you may now disconnect. Your lines at this time. Thank you for your participation and have a great day.

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