Q2 2024 Parex Resources Inc Earnings Call

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Operator: Hello, and welcome to the Parex Resources Q2 2024 Operating and Financial Results Conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, please press star 1 on your telephone keypad. I will now turn the call over to Mike Kruchten, Senior Vice President of Capital Planning. You may begin.

Operator: Hello and welcome to the PAREX Resources Q2 2024 Operating and Financial Results Conference.

Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, please press star 1 on your telephone keypad.

Operator: I will now turn the call over to Mike Kruchten, Senior Vice President of Capital Planning. You may begin.

Mike Kruchten: Good morning, everyone, and welcome to PARCS' second quarter 2024 conference call and webcast. My name is Mike Kruchten. Senior Vice President at Parex and on the call with me today. Our President and Chief Executive Officer, Imad Mohsen, our Chief Financial Officer, Sanjay Bishnoi, and our Chief Operating Officer, Eric Furlan. Please note that at any time, telephone participants on the call can press star 1 to submit a question. As a reminder, this conference call includes forward-looking statements, as well as non-GAAP and other financial measures with the associated risks outlined in our news release and MD&A, which can be found on our website or at www.cedarplus.ca. Note that all amounts discussed today are in U.S. dollars, unless otherwise stated. I'll turn the call over to Imad. Please go ahead.

Mike Kruchten: Good morning, everyone, and welcome to Parks' second quarter 2024 conference call and webcast.

Mike Kruchten: My name is Mike Kruchten, Senior Vice President at Par-X, and on the call with me today are our President and Chief Executive Officer Imad Mohsen, our Chief Financial Officer Sanjay Bishnoi, and our Chief Operating Officer Eric Furlan.

Mike Kruchten: Please note that at any time, telephone participants on the call can press star 1 to submit a question.

Mike Kruchten: Note that all amounts discussed today are in U.S. dollars unless otherwise stated.

Imad Mohsen: Thank you, Mike, and good morning, everyone. The second quarter highlighted our portfolio's ability to deliver strong financial results. And return of capital for shareholders. I'm pleased to say that in 2024, we delivered an 80% increase year-on-year in free funds flow on strong pricing realizations, as well as reduced capital. Part of what's driving our strong financial results is the excellent performance from our base assets at Capisterra and Block 13. To date, results from water flooding have been encouraging, with generally flat production profiles and reduced capital requirements going forward. We are generating significant free funds flow from these core areas.

Imad Mohsen: I'll turn the call over to Imad. Please go ahead.

Imad Mohsen: Thank you, Mike, and good morning, everyone.

Imad Mohsen: to deliver strong financial results.

Imad Mohsen: and return of capital for shareholders. I'm pleased to say that in 24, we have delivered a 80% increase year on year in free funds flow on strong pricing realizations as well as reduced capital.

Imad Mohsen: Part of what's driving our strong financial results is the excellent performance from our base assets at Capisterra and Block 34.

Imad Mohsen: To date, results from water flooding have been encouraging, with generally flat production profiles and reduced capital requirements going forward.

Imad Mohsen: We are generating significant free funds flow from these core areas.

Imad Mohsen: This can be attributed not only to our quality but to the benefit derived from our pre-investment activity on drilling patterns and facility investment. At Cabastell, we are seeing encouraging results from our polymer injection pilot and are now in the process of designing a full field expansion and formalizing our plan. Building off the capacitor-enhanced oil recovery success, they are replicating this approach at Block 34. The initial water flood patterns are demonstrating strong performance, and post-water flooding implementation will expect polymer injection to be a viable option.

Imad Mohsen: This can be attributed not only to us quality, but to the benefits derived from our pre-investment activity on drilling, patterns, and facility investments.

Imad Mohsen: At Cabastell, we are seeing encouraging results from our polymer injection pilot and are now in the process of designing a full field expansion and formalizing our plan.

Imad Mohsen: Building off capacitor-enhanced oil recovery success, we are replicating this approach at Block 34.

Imad Mohsen: The initial water flood patterns are demonstrating strong performance, and post-water flooding implementation will expect polymer injection to be a viable option.

Imad Mohsen: Turning now to North Indianos, I'd like to provide some high-level comments on our performance and then hand it over to Eric to provide more specifics on our personal results and plans for the second half. In Arauca today.

Imad Mohsen: Turning now to Northern Llanos, I'd like to provide some high-level comments on our performance, and then hand it over to Eric to provide more specifics on our personal results and plans for the second half of the year.

Imad Mohsen: The results have underperformed compared to our initial expectations. While we are optimistic, and we were optimistic at the onset, we have since encountered operational and reservoir challenges as activity has progressed as a block. As a result, we have postponed our in-year drilling campaign to provide the team and our partner with time to reassess our results and develop a plan to optimize the field's potential over the longer term. With activity in Aroca Post, we have shifted capital to Archipelago's block, where we are now drilling a follow-up well to MD-9RT1, and at Block 32, where we have successfully drilled an extension to the field.

Imad Mohsen: At IRAWCA to date, results have underperformed compared to our initial expectations.

Imad Mohsen: While we were optimistic at the onset, we have since encountered operational and reservoir challenges as activity has progressed as a block.

Imad Mohsen: As a result, we have paused our in-year drilling campaign to provide the team and our partner with time to reassess our results and develop a plan to optimize the field's potential over the longer term.

Imad Mohsen: With activity in Aroca post, we have shifted capital to our capacitors block, where we are now drilling a follow-up well to MD-901, and at block 32, where we have successfully drilled an extension to the field.

Imad Mohsen: These two areas combined are positioning us to partially offset ARACA volumes and low-risk appraisal and development wealth to add production and potential reserves in the second half of 2020. While the third half of the year has certainly presented this challenge. We are targeting to grow production into year-end, look forward to initial results from our 24 high-impact big e-wells, and we'll continue to use our free farm flow to deliver share buybacks and regular deliveries. I'll now ask Eric to provide additional details on our operations performance.

Imad Mohsen: These two areas combined are positioning us to partially offset ARACA volumes and their low-risk appraisal and development wealth to add production and potential reserves in the second half of 2024.

Eric: Well, the third half of the year has certainly presented its challenges.

Imad Mohsen: We are targeting to grow production into year-end, look forward to initial results from our 24 high-impact big e-wells, and will continue to use our free funds flow to deliver share buybacks and regular dividends.

Eric Furlan: Thanks, Imad. In Q2 2024, production averaged 53,568 BOE per day, which was relatively flat when compared to Q1 2024. At Arauca, we saw a strong initial performance from Arauca 8 with extremely high natural flow rates that made us excited about the field's potential. However, since this strong initial performance, the block has performed below our expectations due to a multitude of factors, including wild boar conditions, water intrusion, asphaltenes, and tighter rock dynamic tissue. It is our view that these complexities can be worked through over time.

Eric Furlan: I'll now ask Eric to provide additional details on our operational performance.

Imad Mohsen: Thanks, Imad.

Eric Furlan: In Q2 2024, production averaged 53,568 BOE per day, which was relatively flat when compared to Q1 2024.

Eric Furlan: At Arauka, we saw a strong initial performance from Arauka 8 with extremely high natural flow rates that made us excited about the field's potential.

Eric Furlan: Since this strong initial performance, the block has performed below our expectations due to a multitude of factors including wild boar conditions, water intrusion, asphaltines and tighter rock than anticipated.

Eric Furlan: We're going to complete workovers on the wells we see potential in and are assessing the next steps to best restore and optimize production from the field in the short and long terms. As Imad mentioned, in the interim, we have reallocated one of the rigs to Capachos, and once we finish the necessary completions and workovers in Arauca, we plan to release the second rig. It is important to note that while we have resized ARAUCA, we still see long-term potential from the field.

Speaker Change: It is our view that these complexities can be worked through over time.

Eric Furlan: We're going to complete workovers on the wells where we see potential.

Eric Furlan: and are assessing the next steps to best restore and optimize production from the field in the short and long term. As Imad mentioned, in the interim, we have reallocated one of the rigs to Capachos, and once we finish the necessary completions and workovers in Arauca, we plan to release the second rig.

Eric Furlan: With development opportunities identified, we currently plan to return in 2025 following analysis and recalibration of the initial program's results. With Arauco Capital paused, we have reallocated capital to Block 32, where, as Imad mentioned, we successfully drilled the extension to the field. This is supporting a multi-wall appraisal and development campaign and is expected to add barrels to our second half production profile for 2024. The decision to go back to Block 32 was largely driven by the anticipated mapping size being larger than what was originally thought, which has since proven out by the first successful step-out well, as well as our logging on the follow-up well.

Eric Furlan: It is important to note that while we have resized Arauka, we still see long-term potential from the field. With development opportunities identified, we currently plan to return in 2025 following analysis and recalibration of the initial program's results.

Eric Furlan: With Arauco Capital paused, we have reallocated capital to Block 32 where, as Imad mentioned, we successfully drilled the extension to the field. This is supporting a multi-wall appraisal and development campaign and is expected to add barrels to our second half production profile for 2024.

Eric Furlan: The decision to go back to Block 32 was largely driven by the anticipated mapping size being larger than what was originally thought, which has since proven out by the first successful step out well, as well as our logging on the follow up well.

Eric Furlan: Turning to our 2024 Big E exploration plan, we continue to progress, including our near-term prospect, Orantis, at Block 122. To provide an update, the timing for this wall has been extended due to previous mechanical issues, as well as a revised target depth based on recalibrated seismic analysis. We're currently at roughly 16,500 feet and plan to reach total depth in late Q3 2024. Aligning our Big E strategy, we are planning to supply two further exploration walls in the second half of the year at VIM-1 as well as Capac. With that, I'd invite Sanjay to please go ahead.

Eric Furlan: Turning to our 2024 Big E exploration plan, we continue to progress, including our near-term prospect, Orantis, at Block 122.

Eric Furlan: To provide an update, the timing for this well has been extended due to previous mechanical issues, as well as a revised target depth based on recalibrated seismic analysis. We are currently at roughly 16,500 feet and plan to reach total depth in late Q3 2024.

Sanjay: Aligning our Big E strategy, we are planning to spud two further exploration walls in the second half of the year at VIM-1 as well as Capachos.

Sanjay Bishnoi: Thanks, Eric. Overall, despite production shortfalls, we had a strong quarter financially. Funds flow provided by operations was $181 million, supported by strong realizations, as well as a positive $21 million one-time foreign exchange gain related to the settlement of the company's 2023 Colombian tax payable. This one-time gain flowed through FFO and positively benefited netbacks during the quarter by over $4 per barrel. The company's net income was reduced due to an increase in deferred tax expense, which was also caused by a movement in the exchange rate.

Sanjay Bishnoi: With that, I'd invite Sanjay to please go ahead.

Sanjay Bishnoi: Funds flow provided by operations was $181 million supported by strong realizations as well as a positive $21 million one-time foreign exchange gain related to the settlement of the company's 2023 Colombian tax payable. This one-time gain flowed through FFO and positively benefited netbacks during the quarter by over $4 per barrel.

Sanjay Bishnoi: The company's net income was reduced due to the increase in deferred tax expense, which was also caused by movement in the exchange rate.

Sanjay Bishnoi: Currently, we continue to see elevated production expenses related to a strong Colombian peso, excuse me, increased well service costs, and one-time maintenance and facility costs. Despite electricity costs trending downward, our view today is that our production expenses will remain elevated and be between $12 to $13 per barrel for 2024. Offsetting this is strong pricing realizations and lower estimated tax, even at the top surtax band, leading us to a $31 to $33 per barrel FFO net back at $85 per barrel rent, as for our previously guided numbers.

Sanjay Bishnoi: Currently, we continue to see elevated production expenses related to a strong Colombian peso.

Sanjay Bishnoi: excuse me, increased well service costs and one-time maintenance and facility costs.

Sanjay Bishnoi: Despite electricity costs trending downward, our view today is that our production expense will remain elevated and be between $12 to $13 per barrel for 2024.

Sanjay Bishnoi: Offsetting this is strong pricing realizations and lower estimated tax, even at the top surtax band, leading us to a $31 to $33 per barrel FFO net back at $85 per barrel Brent, as per our previously guided numbers.

Sanjay Bishnoi: Quarterly capital expenditures were $98 million. This was lower than our forecast due to the pause in drilling and facility work in Arauca, as well as smaller adjustments such as seismic and contract amendments. Given the lower production profile that we see for 2024, management is hyper focused on capital discipline to drive the company's free cash flow profile. With the reallocation of capital that we are doing in-year, the timing of production growth has been extended into the back half of 2024.

Sanjay Bishnoi: Quarterly capital expenditures were 98 million dollars. This was lower than our forecast due to the pause of drilling and facility work in Arauca, as well as smaller adjustments such as seismic and contract amendments.

Sanjay Bishnoi: Given the lower production profile that we see for 2024, management is hyper-focused on capital discipline to drive the company's free funds flow profile.

Sanjay Bishnoi: With the reallocation of capital that we are doing in-year, the timing of production growth has been extended into the back half of 2024. As such, we are forecasting that our third quarter production volumes will remain generally in line with what we saw this quarter, with growth in the fourth quarter and into year-end.

Sanjay Bishnoi: As such, we are forecasting that our third quarter production volumes will remain generally in line with what we saw this quarter, with growth in the fourth quarter and into year end. At our current forecasting and today's commodity prices, we anticipate meeting our long-term capital allocation framework to return 33% of total FFO through the regular dividend and share buybacks while spending at or below the 66% threshold that we have. During the quarter, we repaid another $10 million of bank debt, so at point end, we had a working capital surplus of $34 million and cash of $119 million. With that, I will pass it over to Imad for some final remarks.

Sanjay Bishnoi: At our current forecasting and today's commodity prices, we anticipate meeting our long-term capital allocation framework to return 33% of total FFO.

Sanjay Bishnoi: through the regular dividend and share buybacks while spending at or below the 66% threshold that we have set.

Sanjay Bishnoi: During the quarter, we repaid another $10 million of bank debt, so at point end, we had a working capital surplus of $34 million and cash of $119 million.

Sanjay Bishnoi: With that, I will pass it over to Imad for some final remarks.

Imad Mohsen: Sanjay, while we have faced challenges and some disappointing subsurface results during the first half of the year, we have a portfolio that allows for flexibility when it comes to capital allocation. With stable reservoir performance from Capybara Stereo and Block 34 and the ability to quickly pivot to development opportunities at Block 32 and Capach. We are optimistic about our production forecast for the back half of 2024 and believe we have made the correct shift to deliver at the lower end of our annual production guidelines.

Speaker Change: Thank you Sanjay. While we have faced challenges and some disappointing subsurface results during the first half of the year, we have a portfolio that allows for flexibility when it comes to capital allocation.

Imad Mohsen: With stable reservoir performance from Capybara Stereo and Block 34, and the ability to quickly pivot to development opportunities at Block 32 and Capachos,

Imad Mohsen: We are optimistic on our production forecast for the back half of 2024 and believe we have made the correct shift to deliver to the lower end of our annual production guidance.

Imad Mohsen: As we have adjusted our production outlook, we are also having capital match that trend, as Sanjay mentioned. Even at the lower production profile at today's commodity prices, we can generate significant free cash flow to support future investment and shareholder return.

Imad Mohsen: As we have adjusted our production outlook, we are also having capital match that trend as Sanjay mentioned.

Imad Mohsen: Even at the lower production profile at today's commodity prices, we can generate significant free funds flow to support future investment and shareholder returns.

Imad Mohsen: I want to take a second to thank all of our employees for their commitment over the past few months; their ability to be adaptable and resilient as we adjust plans in support of our strategy is a reflection of the strong and dedicated team we have at Parex. Finally, I also want to thank our shareholders and partners for their ongoing support. This concludes our formal remarks. I would now like to turn the call back to the operator to start the Q&A session with the investment community. Thank you.

Speaker Change: I want to take a second to thank all of our employees for the commitment for the past few months, their ability to be adaptable and resilient as we adjust plans in support of our strategy, is a reflection of the strong and dedicated team we have at Parixx.

Imad Mohsen: To end, I also want to thank our shareholders and partners for their ongoing support.

Imad Mohsen: This concludes our formal remarks. I would now like to turn the call back to the operator to start Q&A session for the investment community. Thank you.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Your first question comes from the line of Alejandro Demichelis from Jeffreys.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon.

Operator: Your first question comes from the line of Alejandro de Michelis of Jeffreys. Your line is open.

Alejandro DeMichelis: Your line is open. Yes, good morning. Thank you.

unknown: Given the situation that you're mentioning in Arauca and production for this year, how are you thinking about production growth for 2025 and 2026? Because previously you told us you could be growing at about 5% per annum over the

Speaker Change: Yes, good morning. Thank you very much for taking my question. Just one question, please.

Alejandro DeMichelis: Given the situation that you're mentioning in Arauca and production for this year, how should we think or how are you thinking about production growth for 2025 and 2026? Because previously you told us you could be growing at about 5% per annum over there.

unknown: Good morning. Thanks for your question. As we think about the long-term plan, I'm going to pass this to Imad, and ask him how he sees the company evolving over the next couple of years.

Imad Mohsen: and many more.

unknown: Good morning. Thanks for your question. As we think about the long-term plan, I'm going to pass this to Imad, how he sees the company evolving over the next couple of years.

Imad Mohsen: So the way I look at this, Alejandro, is we will put the money where it makes sense, where it makes money. I'm not pursuing growth at any cost, and that's part of why we reallocated capital to workplaces where it makes sense. That would mean that our exit rate for this year will be lower than what was planned initially, I mean, when we issued the initial guidance. If I look at 25, 26 and beyond, I have confidence in the portfolio capability to withstand, withstand long-term growth. But we haven't done the work yet.

Imad Mohsen: So the way I look at this, Alejandro, is we will put the money where it makes sense, where it makes money. I'm not pursuing growth at any cost, and that's part of why we reallocated capital to places where it makes sense this year.

Imad Mohsen: That would mean that our exit rate for this year will be lower than what it was planned initially, I mean, when we issued the initial guidance.

Imad Mohsen: If I look at 25, 26 and beyond, I have confidence in the portfolio capability to withstand.

Imad Mohsen: We are now the budget for next year will start early by the end of this year; we'll announce it early on 25. And that will be driven by where we would allocate capital to bring more benefits for shareholders. And that's where you get your number. I don't. I think the fact that we could reallocate capital and stay within guidance and still reduce the capital overall is a tribute to the diversity of the portfolio and the optionality we have, but not to put exact numbers on it. The idea is still to try to have a thriving, growing company going forward.

Imad Mohsen: We stand a long-term growth, but we didn't do the work yet. We are now The budget for next year will start in early

Imad Mohsen: By the end of this year, we'll announce it to early 25.

Imad Mohsen: And that will be driven by where we would allocate capital to bring more benefits for shareholders. And that's where you get your number.

Imad Mohsen: I think the fact that we could reallocate capital and stay within guidance and still reduce the capital overall is a tribute to the

Imad Mohsen: diversity of the portfolio and the optionality we have. But to put exact numbers on it is hard at this stage. The idea is still to try to have a thriving, growing company going forward.

unknown: That's right, yeah. Thank you very much. Once again, ladies and gentlemen,

Operator: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. Your next question comes from the line of Daria Lima with Bloomberg. Your line is open.

Daria Lima: That's very clear. Thank you very much.

Speaker Change: Once again, ladies and gentlemen, if you have a question, it is star 1 on your telephone keypad.

Operator: and many more.

Speaker Change: Your next question comes from the line of Daria Lima with Bloomberg. Your line is open.

Daria Lima: Hi, thank you for taking my questions. I have a couple on the production. I wanted to know if there were any protests noted in January 34 in Q2?

Daria Lima: Hi, thank you for taking my questions. I have a couple on the production. I wanted to know, were there any protests noted in Janus 34 and Q2?

unknown: Sure. I'll pass that to Eric. No.

Eric Furlan: No, as far as I think the question is regarding protests or social disruptions, most of our disruptions have been in Block 34, but that was mainly associated with power disruptions and a flooding event which can happen in that area, but the social disruptions have not been material thus far.

Eric Furlan: Sure, I'll pop that to Eric.

Eric Furlan: No, as far as I think the question is regarding protests or social disruptions

Eric Furlan: Most of our disruptions, we did have disruptions in Block 34, but that was mainly associated with power disruptions and a flooding event, which can happen in that area, but the social disruptions have not been material thus far.

Daria Lima: Thank you. Very clear. And also, on production costs, I've noticed they have grown in Q2 versus Q1. Could you shed some light on that?

Speaker Change: Thank you, very clear. And also on the production costs, I've noticed they have grown in Q2 versus Q1. Could you shed some light on that?

Sanjay Bishnoi: Sanjay? Yeah, sure.

Sanjay Bishnoi: Yeah, we did see some one-time facility and road maintenance costs that were passed through our operating expenses in Q2, and I'd say that was the primary driver of the increase. I would also say that in previous discussions, we've talked about power prices being elevated. We've now seen power prices in the country normalized, so that's a positive indication for the business, and as I mentioned in prepared comments, we would expect that for the year, our production costs will be between $12 to $13 per barrel.

Sanjay Bishnoi: Sure, Sanjay.

Sanjay Bishnoi: Yeah, sure. Yeah, we did see some one-time facility and road maintenance costs that were passed through our operating expenses in Q2, and I'd say that was the primary driver of the increase.

Sanjay Bishnoi: I would say that in previous discussions, we've talked about power prices being elevated. We've now seen power prices in the country normalized.

Sanjay Bishnoi: So that's, you know, that's a positive indication for the business. And as I mentioned in prepared comments, we would expect that for the year, our production costs will be between $12 to $13 per barrel.

Daria Lima: Thank you. And just one last one for me. On the CapEx side, due to the pause in AROCA and focus on IANOS, do you see any increased capital expenditures in the second half of the year?

Speaker Change: Thank you. And just one last one for me. On the CAPEX side, due to the pause of AROCA and focus on IANOS, do you see any increasing capital expenditures in the second half of the year?

unknown: I'm going to pass that to Imad.

unknown: We will be back in a few minutes.

Imad Mohsen: I mean, if you look at our expectation to be on the lower side of the overall year guidance, you can do the math in terms of how much burn rate that will bring you. I don't know exactly the dollar amount, Mike. Is that higher or lower than the first half?

Imad Mohsen: I'm gonna pass that to Imad

Imad Mohsen: I mean, if you look at our expectation to be on the lower side of the overall year guidance, you can do the math in terms of how much burn rate that will bring you.

Imad Mohsen: I don't know exactly the dollar amount, Mike. Is that higher or lower than first half?

Mike Kruchten: We, I think we spent roughly $183 million in the first half of the year. And, you know, the midpoint of our guidance was around $410 million. So, we expect to be, you know, less than $410 million. So, if you just do the math on that, it will have slightly more CapEx in the second half of the year, but it'll be pretty close.

Mike Kruchten: I think we spent roughly $183 million in the first half.

Mike Kruchten: of the year and you know a midpoint of our guidance was around $410 million. So we expect to be you know less than $410 million. So you know the if you just do the math on that

Mike Kruchten: We'll have slightly more CapEx in the second half of the year, but relatively it'll be pretty close.

Imad Mohsen: I don't see a huge jump in capex in the second half of that. We're trying to be careful with how we deploy capital. It's not a measure of reaction.

Imad Mohsen: I don't see a huge jump in capex in the second half, that's the question.

Imad Mohsen: We are trying to be careful with how we deploy capital, it's not an easy reaction.

Daria Lima: Got it. Thank you. That is all for me.

Daria Lima: Got it. Thank you. That is all from me.

Operator: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. There are no further questions at this time. I would like to turn the call over to Mike Kruchten for closing remarks.

Operator: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad.

Operator: There are no further questions at this time. I would like to turn the call to Mike Kruchten for closing remarks.

Mike Kruchten: Thank you very much for joining our second quarter conference call. Please feel free to reach out to Parex, and we can answer any additional questions that you may have about Parex. Have a great day.

Mike Kruchten: Thank you very much for joining our second quarter conference call. Please feel free to reach out to PARX and we can take any additional questions that you may have.

Operator: This concludes today's conference call. We thank you for joining us. You may now disconnect your lines.

Operator: on both parts. Have a great day.

Operator: This concludes today's conference call. We thank you for joining. You may now disconnect your lines.